Google Enhances Mobile App Distribution in EU

Alphabet Inc’s Google on Tuesday revamped the way it distributes its mobile apps in the European Union, introducing a licensing fee for device makers to access its app marketplace in a response to regulators’ findings that it had broker antritrust law.

The new arrangement paves the way for Google’s web search and browser rivals such as Microsoft Corp but essentially leaves the US tech giant’s lucrative mobile business intact, analysts said.

The European Commission in July fined Google a record 4.34 billion euro ($5 billion) for using the market dominance of its mobile software to hinder rivals in areas such as internet search.

Google is appealing the ruling but said that it is complying with the new licensing scheme for the devices that were launched after October 29 in the European Economic Area, which comprises the 28 EU countries plus  Iceland, Liechtenstein, and Norway.

Samsung Electronics Co, Huawei Technologies Co, and other device makers will have to pay Google an undisclosed amount for access to the Google Play app store. In exchange, the hardware companies no longer have to install Google search and the Google Chrome browser, although they can do so for free if they want to.

Android smartphone makers will have increased flexibility to distribute search and browser apps from Google’s rivals such as Microsoft, Opera Ltd, and Mozilla to create devices with the operating system heavily customized.

“The new arrangement simply changes the implicit exchange of value - access to the Play store in return for preinstalling Google Search and Chrome – into an explicit one” of license fees, stated James Cordwell, who is a financial analyst at Atlantic Equities.

Geoff Blaber, who is a technology analyst at CCS Insight, said that “Google has found a way to make sure Android continues to work in its favor.”

Shares of Alphabet closed up 2.9 percent on Tuesday.

Mobile industry executives have generally believed that Europeans have little interest in devices and handsets that don’t have the Google apps. However, data breaches and privacy scandals involving US tech companies such as Google and Facebook Inc have prompted some users to search for alternatives.

Android device makers could switch to other search engines, including lesser-known ones such as Qwant and DuckDuckGo, which tout their strict privacy practices. Both have said that they were prevented from signing distribution agreements with smartphone vendors in recent years due to Google’s restrictions.

Google’s hardware partners also will be free to market devices in Europe that operate rival versions of Android, including Amazon.com Inc’s Fire OS. These devices will not have access to the Play store, however.

“We’ll be working closely with our Android partners in the coming weeks and months to transitions to the new agreements,”said Hiroshi Lockheimer, who is Google’s senior vice president, in a blog post.

Amazon, Huawei, and Samsung  did not immediately respond to requests for comments on the matter.

The European Commission said that it is up to Google to decide how to comply with the July ruling and that the regulator will carefully monitor the changes.

The commission usually lets companies tweak compliance efforts as feedback comes in from customers and rivals. Failure to halt the illegal business practices can result in additional fines.

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