“Googleplex,” Google headquarters, Mountain View, California. Photo credit: Shutterstock

Google said today it will appeal the astronomical $5 billion fine levied against it by the European Union for violating antitrust laws with its Android system. The company also angrily accused the EU of attacking its open source business model.

The Android operates on a free, open platform for smartphones, so critics said the decision could have dire ramifications for other open source systems.

The EU said that to obtain the free system, phone manufacturers had to include a bundle of Google services, such as its search bar and Chrome browser.

“Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general Internet search,” the EU said in its statement announcing the fine.

The $5 billion fine dwarfs the EU's previous record $2.7 billion penalty, also against Google, in 2017. That ruling is still being fought in EU courts.

The monetary penalty revealed Wednesday could grow.

“Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5 percent of the average daily worldwide [revenue] of Alphabet, Google's parent company,” the EU said.

“It's a huge fine and it's an important aspect of their business,” said Jay Himes, co-chairman of the antitrust group at Labaton Sucharow and a former antitrust bureau chief in the New York Attorney General's Office. “I don't imagine that's going to be resolved easily. They are set for another lengthy proceeding in the EU court system.”

Himes said he has never seen a fine as large as this one, for any violation in any country. “The huge fine alone might have resonance with the EU courts,” he said.

He acknowledged that the EU Commission has substantial fining authority in such matters. “But even so, this is big, particularly [as] it is not for hard-core conduct, like price-fixing,” Himes said.

Reaction to the ruling from Mountain View was swift. Google CEO Sundar Pichai wrote in his blog that the EU is threatening its Android business model, which he said has enabled rapid innovation, wide choice, and falling prices, normally considered hallmarks of robust competition.

“Today's decision rejects the business model that supports Android, which has created more choice for everyone, not less,” Pichal said in announcing Google's intention to appeal.

The Consumer Technology Association, an Arlington, Virginia, trade group representing consumer electronics manufacturers, tweeted: “Today's decision by the European Council on #androidworks case threatens innovation that's enabling the concept of software everywhere & has ramifications far beyond a single company. This will hurt app devs, content creators, marketing firms & more.”

The Information Technology and Innovation Foundation, a leading science and technology policy think tank, released a statement from ITIF Vice President Daniel Castro calling the ruling “misguided and shortsighted.”

The Android mobile operating system has created “enormous value for consumers, developers, and device makers,” the statement said. “The commission's ruling is a blow to innovative, open-source business models; and other companies will likely think twice before trying to develop anything other than a proprietary, closed system.”

The EU also accuses Google of making payments to some large manufacturers and mobile network operators on the condition that they exclusively pre-install the Google Search app on their devices.

Additionally, the EU said Google prevented manufacturers who wished to pre-install Google apps from selling any smart mobile device running on alternative versions of Android not approved by Google, or so-called Android forks.

In the EU's statement, Commissioner Margrethe Vestager, who is in charge of competition policy, said, “Today, mobile internet makes up more than half of global internet traffic. … Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere.”