Google Hit With Antitrust Charges Over Android Apps

This has potential to change the way Google does business in Europe.

— -- Google has been slapped with antitrust charges that could change the way the company does business in Europe.

The European Commission today alleged that Google, which runs the open-source Android operating system, abused its market dominance by placing restrictions on Android manufacturers and mobile network operators regarding the core suite of Google apps the company requires to be loaded on all devices and one swipe away at most from the home screen.

The stakes are high for Google. If the company unsuccessfully argues the charges, they could be subject to a fine as high as 10 percent of its annual global sales, which comes out to a steep $7 billion.

"Based on our investigation thus far, we believe that Google's behavior denies consumers a wider choice of mobile apps and services and stands in the way of innovation by other players, in breach of EU antitrust rules," Margrethe Vestager, the head of competition policy at the European Commission, said in a statement today.

The <a href="http://abcnews.go.com/topics/business/european-union.htm" id="ramplink_European Union_" target="_blank">European Union</a>'s Issue

As many as 80 percent of the smartphones in Europe run on Android, according to the commission, giving Google a huge market share. At issue are a suite of Google's proprietary apps the company requires all Android device manufacturers to pre-install on smartphones.

European Commission investigators allege this is anti-competitive and prevents manufacturers from selling smartphones running on competing operating systems based on Android's open source code.

Apps such as Google Search, Gmail, YouTube and others help drive traffic and advertising revenue to Google. Google provides Android for free and offsets the costs through Google services it distributes via the operating system.

While these apps can't be deleted, it's worth noting manufacturers can install their own apps in addition to Google's apps.

Google's Response

In a response issued this morning, Kent Walker, Google's general counsel, said Android is good for competition and fosters a model of "open innovation."

"The European Commission has been investigating our approach, and today issued a Statement of Objections, raising questions about its impact on competition," Walker said. "We take these concerns seriously, but we also believe that our business model keeps manufacturers’ costs low and their flexibility high, while giving consumers unprecedented control of their mobile devices."

The company's partner agreements are entirely voluntary, according to Walker. More than 50 billion apps have been downloaded to Android devices, he said, adding that many of them are even in direct competition to Google's suite of services.

"Our partner agreements have helped foster a remarkable -- and, importantly, sustainable -- ecosystem, based on open-source software and open innovation," he said. "We look forward to working with the European Commission to demonstrate the careful way we’ve designed the Android model in a way that’s good for competition and for consumers."

Google's Other Case

Google is also fighting separate charges issued last year alleging the company abused its dominance in search to serve its own Google Shopping advertisements in a more prominent position ahead of other search results.

The European Commission said this could drive away traffic from competitors and hinder them from competing. Consumers are also hurt, the commission alleged, because they do not always see the most relevant results to their searches.

Google's response is that consumers today have more choices than ever for where and how they search for goods.