On Wednesday, the European Union’s (EU) antitrust watchdog is expected to take action against Alphabet Inc.’s Google (GOOGL) for forcing makers of Android-equipped smartphones and other devices to use its search and web-browsing applications.
The Wall Street Journal, citing an anonymous source, said the regulator will hit the firm with a record $5 billion fine. The report noted that the fine accounts for around 40% of Google’s 2017 net profit of $12.62 billion.
An earlier report from the paper said that Google will be ordered to change to its business practices and possibly be forced to change the contracts it signs with companies that make Android phones. (See also: Google Slapped With $2.7 Billion EU Antitrust Fine.)
During its investigation, the EU Commission reportedly concluded that Google pressures smartphone and tablet manufacturers that want to use the company’s Android operating system into pre-installing its apps, forcing them to use Google Search and Google Chrome as the default search engine and browser. Competition chiefs argue that this arrangement has been imposed to ensure that Google continues to dominate the internet ecosystem.
The EU has reportedly also taken issue with Google’s alleged ploy to ban device makers from selling official versions of Android if they also market devices that run unofficial versions, called forks.
Google said it is within its rights to impose such requirements, arguing that its ecosystem could be threatened if lots of companies offer incompatible versions of Android. In the past, the company has also claimed that device makers pre-install rival services as well, and that Android has benefited consumers by increasing competition.
Analysts responded to the Journal’s report by warning that any potential remedial actions could impact Google’s lucrative advertising business. Should the EU decide to interfere with the company’s policy encouraging device manufacturers to pre-install Google apps on Android-powered phones, analysts claimed that the tech giant’s revenues will likely take a hit.
EU regulators are also in the process of investigating Google’s AdSense for search advertising service. (See also: Alphabet Stock Could Break Out to New Highs.)