NEW YORK (Reuters Breakingviews) - Alphabet has cleared the deck for a huge antitrust fight. The holding company of Google is separating its European shopping unit and allowing rivals to bid for ads. That frees up Google to battle the EU over claims it uses its Android operating system to dominate online search.
The European Commission fined Google $2.8 billion this summer after determining that Google acted abusively in shopping. It also added the prospect of a fine of 5 percent of its daily revenue each day if the company didn’t fix the problem by this Thursday.
Rival shopping comparison sites can now buy space on top of Google search pages and display a photo of a relevant good and a link to a retailer. Competitors complain this forces them to pay money to the search monopoly, thus violating the spirit of competitive markets. But the fix appears to solve the complaint that Google was unfairly promoting its own services.
Alphabet will also continue its appeal. That is important, as the idea that a dominant company cannot favor its own services at the expense of rivals is contentious and could lead to future suits against Amazon, Facebook and others.
But the real action is over Android. A majority of the world’s smartphones are powered by the operating system devised by Google. The company doesn’t charge manufacturers for it, but consumers value these phones because they can download apps. The Commission says Alphabet is acting abusively by giving financial incentives to manufacturers to exclusively use Google search and forcing them to set it as the default if they want access to the app store.
Close to 90 percent of Alphabet’s top line comes from advertising. And mobile will probably account for about two-thirds of its net digital advertising revenue this year, estimates eMarketer. Considering the existential threat if it were to lose its grip on mobile search, it’s little wonder Google wants as few distractions as possible to focus on this fight.
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