BRUSSELS—The European Union hit Alphabet Inc.’s Google with a record antitrust fine of €4.34 billion ($5.06 billion) on Wednesday, according to an official familiar with the matter, a decision that could loosen the company’s grip on its biggest growth engine: mobile phones.
EU commissioners agreed on the fine in a Wednesday morning meeting, according to the person, marking Brussels’ sharpest rebuke yet to the power of a handful of tech giants. Details of the decision are expected later Wednesday.
The EU’s antitrust regulator has been looking into whether Google had abused the dominance of its Android operating system, which runs more than 80% of the world’s smartphones, to promote and entrench its own mobile apps and services—particularly the company’s search engine.
Android phones come preloaded with Google apps, including Search. Competitors have long complained that Android’s dominance gives Google an unfair advantage in attracting users to those apps—and then using data from them to devise and target advertising. The preloaded apps can stifle competing apps, critics say.
The EU’s case centers on whether Google behaved illegally in trying to encourage handset makers to pre-install those apps and services on their devices. At issue are several types of agreements that Google imposes on phone makers and telecommunications companies if they want to sell Android-based devices to their users—strings that applied to handset makers even though Google provides the operating system to manufacturers free of charge.
Google, which can appeal any decision, has rejected the EU’s case since the bloc issued formal charges over two years ago. Google says Android, which is free for manufacturers to use, has increased competition among smartphone makers, lowering the prices for consumers. Google also says the allegation that it stymied competing apps is false because manufacturers typically install many rival apps on Android devices—and consumers can download others.
“Android hasn’t hurt competition, it’s expanded it,” Kent Walker, Google’s general counsel, wrote in a 2016 blog post rebutting the EU’s initial charges.
The fine, which was reported earlier by Bloomberg, is the latest in a series of decisions in which the EU has cast itself in the vanguard of a backlash against U.S. tech superpowers, on issues ranging from competition to taxes to privacy. EU competition chief Margrethe Vestager has become the face of that battle, arguing that regulators must do more to restore fairness to the digital market.
The EU’s executive said that Ms. Vestager would give a press conference early afternoon Brussels time.
Google owner Alphabet’s shares were down 1.1% in premarket trading Wednesday.
The EU has also ordered the recovery of alleged unpaid taxes from Apple Inc. and Amazon.com Inc., and is considering potential new rules for internet platforms on topics ranging from hate speech to copyright liability. In May, the bloc began enforcing a strict new privacy law that imposes new requirements on companies that, like Google, collect and use large amounts of personal data.
The amount tops the EU’s previous record fine of €2.42 billion, when the bloc last year ordered Google to stop abusing its search engine to favor its own product-advertising service over others. Google appealed that decision, but it was required to implement it at the same time. Earlier this year, shopping rivals complained that Google’s remedy has done little or nothing to improve their lot. Google says it has followed letter and spirit of the EU decision.
Wednesday’s fine accounts for around 40% of Google’s 2017 net profit of $12.62 billion.