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Google may have to make major changes to Android in response to a forthcoming fine in Europe

E.U. Commissioner for Competition Margrethe Vestager is expected to fine Google. (Olivier Hoslet/EPA-EFE/Shutterstock) (Olivier Hoslet/Epa-Efe/Rex/Shutterstock)

Google could face a record penalty this month from European regulators for forcing its search and Web-browsing tools on the makers of Android-equipped smartphones and other devices, potentially resulting in major changes to the world’s most widely deployed mobile operating system.

The punishment from Margrethe Vestager, the European Union’s competition chief, is expected to include a fine ranging into the billions of dollars, according to people familiar with her thinking, marking the second time in as many years that the region’s antitrust authorities have found that Google threatens corporate rivals and consumers.

At the heart of the E.U.’s looming decision are Google’s policies that pressure smartphone and tablet manufacturers that use Google’s Android operating system to pre-install the tech giant’s own apps. In the E.U.’s eyes, device makers such as HTC and Samsung face an anti-competitive choice: Set Google Search as the default search service and offer Google’s Chrome browser, or lose access to Android’s popular app store. Lacking that portal, owners of Android smartphones or tablets can’t easily download games or other apps — or services from Google’s competitors — offered by third-party developers.

Vestager has argued the arrangements ensure Google’s continued dominance of the Internet ecosystem. As a result, her forthcoming ruling could prohibit Google from striking such app-installation deals with device makers, experts have said. Alternatively, the E.U. could force the company to give consumers an easier way to switch services, like search engines, on their phones or tablets.

A spokesman for Vestager declined to comment. Google also declined to comment. A Google spokeswoman pointed to comments from general counsel Kent Walker when the E.U. announced its probe in 2016.

“Android has unleashed a new generation of innovation and inter-platform competition,” he said at the time. “By any measure, it is the most open, flexible, and differentiated of the mobile computing platforms.”

For Google, the consequences could prove vast. Packaging tools like search, and including them on Android devices, offers the company a way to capture data about users — and show them more ads. Eliminating that pathway for profits and insight could prompt Google to rethink the entire ecosystem for Android, which it licenses to device makers free in a bid to ensure its wide-scale adoption while warding off such competitors as Apple.

“Nobody is forced to take Google’s apps, but if you want to have certain apps you have to have the whole suite,” said Jakob Kucharczyk, the vice president for competition and E.U. regulatory policy for the Computer & Communications Industry Association, a trade group that represents Google. That helps Google “make sure they can fund the open source in first place,” he said.

The potential fine highlights how Europe has become the world’s most aggressive regulator of American technology giants. After about a decade of scrutiny, Europe last year slapped Google with a $2.7 billion fine for allegedly ranking its own comparison-shopping service higher in search results than similar tools offered by its rivals.

The penalties and probes stand in stark contrast to the United States, where federal regulators concluded a more limited investigation of Google in 2013 without requiring the company to make major changes. Armed with more expansive competition and consumer-protection laws, Vestager and her peers in the E.U. also have handed down large fines and other punishments recently against Apple for alleged tax evasion and Facebook for breaking its previous privacy promises. Apple doesn’t face similar scrutiny over the apps it pre-loads on its phones, partly because it makes its own devices. (Google’s own Pixel phones have a small share of the Android market.)

"We’re now encountering a situation where European consumers are poised to enjoy better protections than U.S. consumers,” said Luther Lowe, the senior vice president for public policy at Yelp, one of the companies that has lobbied for strong antitrust regulation of Google.

If the E.U. cracks down on Google for Android, the decision could once again reignite political pressure on U.S. antitrust enforcers, including the Federal Trade Commission, to open their own inquiries. Some members of Congress recently have urged the FTC to take another look at Google.

In the E.U.’s formal list of allegations, first announced in 2016, Vestager took issue with the way Google manages Android. For example, device manufacturers that pre-install Google’s own apps are barred in legal agreements from selling Android smartphones or tablets that run modified versions of the operating system.

Google maintains that it’s to ensure Android, an open-source operating system, is a consistent experience for users even if they change devices. But Vestager contended that it prevents consumers from purchasing “innovative smart mobile devices based on alternative, potentially superior, versions of the Android operating system,” she said in 2016.

Ultimately, the E.U.'s decision may not be the final word on the matter: Google would be able to appeal, even though in the meantime it would need to alter its business practices or risk additional financial penalties for each day it fails to comply.

Complicating Vestager’s timeline, however, is President Trump, who is set to visit Brussels this week. Her announcement is still expected before much of the E.U.’s government departs for summer break.