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The EU is Bad for American Business

By Perry Burton | July 31, 2018

Earlier this month the EU fined Google a record $5.1 billion for engaging in competitive market practices. This is one of the most aggressive actions the EU has taken against the US technology industry. 

So, what did Google supposedly do wrong? 

The European Commission argues that Google—which owns and develops the Android operating system—has been pushing consumers to use Google Chrome. 

Google requires their browser to be installed on android devices to have access to the Google Play Store and other Google services. Also, the company allegedly restricts access to their apps if a device manufacturer utilizes an Android fork—a version of Android that utilizes the open-source code without using Google's proprietary systems, for example Fire OS developed by Amazon. Fire OS utilizes its own app store and web browser, effectively cutting it off from the Google ecosystem. Device manufacturers can use an Android fork—like Fire OS—they simply won’t have access to the Google Play Store. Google has used this as an initiative to maintain cohesion across devices. 

So, what’s the big deal? 

According to the commission the Google Play Store is too important to Android devices. They assert that the store accounts for more than 90% of downloaded apps in the EU, therefore—from the commission’s perspective—a manufacturer must have the Google Play Store to remain competitive. At the same time the other mobile developers, namely Apple, do not offer third-party manufacturers utilization of their operating systems. The commission argues that this puts Google on an island of its own, not having to compete with rival services. 

This argument is fundamentally flawed and has massive ramifications for consumers. 

Android is part of a project called the Android Open Source Project (AOSP). This project is developed by Google and supported by a mix of manufacturers and software developers including Samsung, HTC, LG and many more through the Open Handset Alliance (OHA). Members of the OHA are contractually obligated to not develop devices using an Android fork to create a unified Android ecosystem. 

Alliance manufacturers can build upon the AOSP to distinguish themselves from competitors—like Samsung's TouchWiz or HTC's Touch UI which are simple user-interface changes—and still use Google services like the Play Store. These changes don't affect how users interact with Google services like Gmail, they simply change how a user interfaces with the device itself. 

Amazon developed their Fire OS based on the AOSP but decided not to adopt Google services and instead made their own web browser and app store. This is a true fork. 

The OHA have created an open platform that has allowed for massive development and innovation within the mobile industry. The ecosystem they created has lowered both prices and consumer confusion. There are still debates about which interface is better—stock v.s. TouchWiz v.s. LG UI and on and on it goes—but these changes are simply cosmetic in nature and don't affect a consumer's fundamental interaction with the Google ecosystem. 

This adoption of the Google ecosystem was not strong-armed by a tyrannical tech giant, it was sanctioned by a litany of manufacturers and developers to better a confusing industry. 

The European Commission has essentially declared that they do not want consumer, or manufacturer, choice within said industry. Google CEO Sundar Pichai in a blog post argues that these proposed changes could lead to the death of an open platform: 

“We’ve always agreed that with size comes responsibility. A healthy, thriving Android ecosystem is in everyone’s interest, and we’ve shown we’re willing to make changes. But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.  Rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition and Android has enabled all of them. Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less. We intend to appeal.” 

Consumers want consistency. 

Manufacturers utilize the Android operating system because it is easy to use, transparent and has the small operating cost of utilizing Google services. What the commission fails to understand is that users don’t turn to the android operating system for Google’s browser or search functionality. Google’s platform has created a market that drives consumer choice. HTC, LG, Samsung, Google itself and many more companies all compete on the platform that Google created and the reason they can do so is because they have a framework to work within that does not confuse consumers. 

The commission even used as reasoning in its decision, “Android device users face switching costs when switching to Apple devices, such as losing their apps, data and contacts, and having to learn how to use a new operating system...” This is the exact reason why Google’s Android is a good thing for competition. Consumers choose the operating system and manufacturer based upon their personal needs and preferences. It seems as if the commission is playing both sides of the field. On one end they want consumers to have more choice and on the other they want to save consumers confusion. This makes very little sense. 

Why should consumers be punished for an effective system? 

European authorities also argued, “Apple devices are typically priced higher than Android devices and may therefore not be accessible to a large part of the Android device user base.” 

The commission asserts that because Android devices are cheaper, it makes it harder for users to switch to Apple products. 

Apple is a direct competitor to other handset manufacturers, yet the commission thinks this isn't the case. Through the commission's eyes you have two companies, Google and Apple. 

There are a myriad of manufacturers directly competing against each other using the Android operating system and they're equally competing against Apple. 

Apple has its own app store, browser and many other services. Google should not be punished because its services are more readily available. 

It is the duty of the consumer to determine what a phone is worth to them. If a consumer determines that an iPhone is too expensive then it is the prerogative of Apple to lower the price of their handsets. It is not the duty of the commission to regulate pricing, especially when that pricing is favorable to the consumer. 

This move by the EU is a marked shift against American business. 

The EU has led a campaign against successful American enterprise. Demanding taxes and treating digital firms as revenue coffers as opposed to drivers of innovation and job creation. The EU is attempting to curtail success and stifle development. 

Built to develop inter-state relations and provide a consistent framework for states to work within, the EU wants to isolate companies and tear down the consistent framework that Google has built to develop market competition between manufacturers. 

Seems counter-intuitive to the basic principles on which the EU was founded.