Google to appeal after EC fines it €4.34bn over Android competition breach - as it happened
All the day's economic and financial news, as the EC fines Google for competition breaches
- Latest: Google vows to appeal
- Google fined a4.34bn by EC
- EC: Google unfairly used its Android operating system
- Google forced phonemakers to install its search app and browser
- Vestager denies 'hating' America
5.58pm BST
With Wall Street lifted by financial stocks after Morgan Stanley's results, offsetting a dip in technology shares in the wake of the Google fine, European markets have ended the day in positive territory.
In the UK, the FTSE 100 benefitted from a drop in the pound following the unexpectedly static inflation figures. The final scores showed:
5.47pm BST
Federal Reserve chair Jerome Powell gave his second day of testimony to Congress, including a discussion on the current trade situation following President Trump's tariffs. Reuters reports:
Powell, questioned by members of a House congressional committee, repeated on Wednesday that rising world protectionism would over time pose a risk to a U.S. and global expansion that appears largely on track to continue.
"If this process leads to a world of higher tariffs on a wide range of goods and services that are traded and those are sustained for a longer period of time, if it results in a more protectionist world, that would be bad for our economy," Powell told the House Financial Services Committee. "It isn't up to us to criticise (administration) policies. But the evidence is clear that countries that remain open to trade have higher productivity. They have higher incomes."
5.23pm BST
Troubled UK outsourcer Capita has seen its shares fall around 2.5% after it said its finance director is stepping down.
It said Nick Greatorex would stay with the company for the next few months as it searched for a replacement. Capita, which is cutting costs as it attempts to cut its debt levels, appointed a new chief executive, Jon Lewis, in December.
4.51pm BST
The pound has pulled back from its lowest levels but is still down on the day.
Immediately following the unchanged UK inflation figures, which cast doubt on whether the Bank of England would indeed raise interest rates next month, sterling slid to a 10 month low against the dollar of $1.3011.
The pound tumbled to a 10-month low versus the dollar after inflation in June failed to tick high...
These figures could give the BoE reasons to pause for thought over an August rate hike. With inflation steady at a one year low and average wages slipping, the central bank could have problems justifying the need for a rate hike. Policy makers could use the argument of recovering economic growth over the last few months, however the inflation figures show that growth is not at levels where it is starting to push up inflation. From whichever angle you look at this the data so far this week has not been supportive of an interest rate rise. Instead we are in danger of seeing a repeat of May, where weak data leading up to the MPC meeting prevented the widely expected rate hike. The market expectations of a rate hike slipped to 72% from 77% prior to the release.
3.51pm BST
Back with Google, and Michael Hewson, chief market analyst at CMC Markets UK, said:
In a way Google has become a victim of its own success in terms of its search and marketing capabilities, with little in the way of alternative search and browser options available. In terms of browsing there is Firefox, Opera and Microsoft Edge, however search options are more limited, with Yahoo and Bing the more well-known names.
The solution is likely to be something similar to the solution which Microsoft implemented a few years ago when it had to unbundle Internet Explorer from its operating system to comply with similar EU antitrust rules, allowing the user to choose their own search and browse options.
3.22pm BST
With Donald Trump's visit to Nato and Russia hogging the headlines, his trade battle with China seemed to have gone a bit quiet. Now one of his advisors has been talking trade again. Reuters reports:
U.S. President Donald Trump's top economic adviser said on Wednesday that Chinese President Xi Jinping was "holding up" a deal to resolve a "significant trade dispute" between the United States and China.
Larry Kudlow, head of the White House Economic Council, also said that he expects European Commission President Jean-Claude Juncker to bring a "significant" trade offer to Trump when he visits Washington next week.
"This guy, President Trump, has the biggest backbone," Larry Kudlow says of trade tensions with China. "He will not let go of this point... nor should he... China's going to have to come around." Follow all our #DeliveringAlpha coverage here: https://t.co/gcJmBKek9Z pic.twitter.com/KFzAZ1sgAF
"A lot of discussions are being held with the individual countries... right now," Larry Kudlow says of trade negotiations. Says Jean-Claude Juncker may bring "a very important free trade offer" to DC next week. #DeliveringAlpha https://t.co/gcJmBKek9Z pic.twitter.com/CvzSTCzcl4
3.00pm BST
Federal Reserve chair Jerome Powell gave his latest testimony to the US Senate yesterday, and shortly he will be up before the House of Representatives. His testimony is the same to both committees and can be found here.
On yesterday's comments Jasper Lawler, head of research at London Capital Group, said:
In his appearance in front of the Senate Banking Committee Federal Reserve Chair Jerome Powell was unequivocal in his upbeat assessment of the US economy.
[He] continued with the Fed's message to continue raising rates gradually as he sees several years of the jobs market remaining strong and inflation steady around 2%. This was music to the ears of the dollar, providing the greenback a welcome distraction from the trade war noise over recent weeks.
2.51pm BST
Overall US markets have edged ahead in early trading. The Dow Jones Industrial Average is up 19 points or 0.06%, while the S&P 500 and the Nasdaq Composite are both showing similar percentage gains.
Positive results from United Airlines and Morgan Stanley are helping to support industrial and banking shares.
2.46pm BST
The EC ruling on Google is "a bit misguided" but is likely to be a minor inconvenience in the short and medium term, says Colin Sebastian, senior analyst at investment bank Baird.
(Given the muted reaction from the company's share price, the market seems to agree).
Longer term, we see modest (but not unexpected) added risk from requirements to support forked versions of Android, and secondly, from the direct and/or indirect benefits of this ruling for Apple and Amazon.
Overall, this ruling should have a limited direct impact on Google since it ostensibly does not force a change to the Google search algorithm, and it also seems relatively straight-forward for Google to comply. The bigger issue here may be the obvious benefits to Amazon (and potentially Apple) from the ruling; first, even though Amazon already generates ~50% of commerce and product-related searches, the EC will require Android users to take another step before they can access an alternative product search engine. Secondly, to force Google to support distribution of forked-versions of Android (which Google does not control) could directly benefit Amazon's Fire devices. To use the example cited by Margrethe Vestager in the press conference, the EC argues that Fire smartphones were not commercially successful because Google did not allow manufacturers to pre-install Google apps on those devices (forget the fact that the apps wouldn't work as well, or at all, on a modified OS.)
2.39pm BST
Google parent Alphabet has said it will accrue the EC fine in the second quarter of 2018, in a filing to the Securities and Exchange Commission.
Meanwhile its shares have edged marginally higher - up 0.18% - after an initial dip.
2.25pm BST
Investors will be watching shares in Google parent Alphabet when Wall Street opens shortly. At the moment the pre-market price is showing limited damage from the EC fine, down just 0.25%.
2.12pm BST
Sundar Pichai, Google's CEO, has issued a statement decrying the EC's decision, and confirming that the company plans to appeal against its fine.
Today, because of Android, a typical phone comes preloaded with as many as 40 apps from multiple developers, not just the company you bought the phone from. If you prefer other apps-or browsers, or search engines-to the preloaded ones, you can easily disable or delete them, and choose other apps instead, including apps made by some of the 1.6 million Europeans who make a living as app developers.
In fact, a typical Android phone user will install around 50 apps themselves. Last year, over 94 billion apps were downloaded globally from our Play app store; browsers such as Opera Mini and Firefox have been downloaded more than 100 million times, UC Browser more than 500 million times.
1.58pm BST
The EC have created this graphic to explain how Google has been unfairly keeping a grip on its Android operating system, hurting rival search engine and browser makers.
1.42pm BST
The French government has welcomed the EC's move.
Government spokesman Benjamin Griveaux told reporters in Paris that it was a 'excellent decision', adding:
"No-one is above the laws that have been laid down in common for all....Not Google, nor any other entity."
1.36pm BST
US tech entrepreneur Jason Kint has calculated that the EC has basically fined Google 4% of its annual revenues.
That happens to be the maximum penalty available under Europe's new data privacy rules (even though this isn't a data violation).
No idea how @EU_Commission @vestager calculated $5 billion as Alphabet's fine but I can see a warning sign to Google for its abusive data practices in my math:
2018 Q1 revenues = $31.2B
x 4% (maximum fine under new GDPR rules) = $1.25B
x 4 quarters = $5 Billion.
1.19pm BST
Here's a video clip of Margrethe Vestager denying she has a vendetta against America during today's press conference:
European Commissioner for Competition, Margrethe Vestager: "I very much like the US. I'm from Denmark, and that's what we tend to do. We like the US."https://t.co/KJAMhr5nyz pic.twitter.com/3FYZff80yo
1.17pm BST
Our news story about Google's record fine for breaking Europe's competition rules is now live.
Our Brussels correspondent Jennifer Rankin writes:
Google has been hit with a record a4.34bn (3.8bn) fine by the European Union for abusing its market dominance in mobile phone operating systems.
The EU imposed the multibillion-euro penalty after finding that the US tech firm required smartphone manufacturers to pre-instal Google's search and browser apps devices using its Android operating system, otherwise they would not be allowed to use its Google Play online store and streaming service.
Related: Google fined 3.8bn by EU over Android antitrust violations
1.14pm BST
Today's ruling comes too late to affect the mobile phone market, my colleague Sam Gibbs says:
Here's a flavour of his analysis:
The EC is demanding that Google cede some control over Android in its licensing. The EC is demanding that manufacturers should be free to use Android and include the Google Play Store without having to pre-install the Google Search app and Chrome.
It's a similar strategy to that employed by the EC in 2004, when it forced Microsoft to release a version of Windows without Windows Media Player and later offer a browser choice screen, which allowed users to select a web browser other than Internet Explorer.
Related: The EU fining Google over Android is too little, too late, say experts
1.11pm BST
Q: Why does Google get fined in Europe, but not in the US and Canada?
Commissioner Vestager insists that the EC has been fair - it has investigated complaints and taken evidence in order to reach its decisions.
1.02pm BST
Q: Currently, the mobile phone operating system is dominated either by Android or Apple. Do you really think that is going to change?
Commissioner Vestager says she isn't going to guess how the mobile sector will develop.
1.00pm BST
Q: This is the biggest fine ever for antitrust violations, so is Google guilty of the biggest ever antitrust breach?
Vestager jokes that she loves all her children equally, so it's not fair to make her choose which company has been the worst sinner against competition in the EU.
12.58pm BST
Q: Wouldn't breaking up Google address these antitrust concerns?
Vestager denies that breaking up a company would be a 'silver bullet' to deliver competition.
12.56pm BST
Q: Was Donald Trump right when he told Jean-Claude Juncker last week that "Your tax lady really hates the US"?
12.53pm BST
Q: Why is today's fine twice as big as the one imposed on Google in 2017?
The fine reflects the scale of Google's "very serious illegal behaviour", Vestager replies.
12.51pm BST
Q: Do you think Google needs to be broken up to improve competition?
Vestager says she doesn't know whether that would improve the situation. The EC really wants Google to allow proper competition at the mobile phone operating system level.
12.47pm BST
Q: What remedies will be available to existing Android phone users? Could Google be forced to send out a notification to customers, telling them they can change their search engine or browser?
Vestager says the EC is making a classical 'cease and desist' decision. It's now up to Google to decide how to make amends in the future.
12.45pm BST
Q: Google now has an entrenched position in the mobile sector (with four-fifths of devices), so how can you enforce changes now?
Vestager says Google needs to take away the contractual restrictions that have held back competition on Android.
12.43pm BST
Q: Did you examine whether Google blocked rivals from collecting data on Android users?
Vestager says that rival search engines "never really" got a foothold on Android, due to Google's restrictions (ie, the company didn't have to actively block its rivals, as they weren't there in the first place).
12.40pm BST
Q: Could your decision drive up the cost of mobile phone handsets?
Vestager says there are still various ways in which Google can monetising the Android operating system, rather than simply hiking prices.
12.37pm BST
Q: What will happen to the money (assuming Google pays up).
Vestager says that the fine will be returned to EU member states, based on how much each country pays into the EU budget. But that could take a while, if Google files an appeal.
12.34pm BST
Commissioner Vestager is taking questions about the Google fine now.
Q: Could this decision affect next week's meeting between EC president Juncker and US president Trump?
12.30pm BST
The size of Google's fine reflects the "seriousness" and sustained natures of its violation of the EC's antitrust rules, commissioner Margrethe Vestager tells reporters in Brussels.
The company must end its 'illegal conduct' within 90 days, by ending the restrictions it has imposed on mobile phone makers (as outlined here), Vestager explains.
12.25pm BST
Newsflash: Google says it will appeal against the EC's fine.
Google spokesman Al Verney argues that its Android operating system [which is used on 80% of phones worldwide] has been good for consumers.
Android has created more choice for everyone, not less.
A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust consequences.
.@Android has created more choice for everyone, not less. #AndroidWorks pic.twitter.com/FAWpvnpj2G
12.20pm BST
The EC says that Google has been abusing its market position for seven years.
Today's ruling states:
Google has prevented device manufacturers from using any alternative version of Android that was not approved by Google (Android forks).
In order to be able to pre-install on their devices Google's proprietary apps, including the Play Store and Google Search, manufacturers had to commit not to develop or sell even a single device running on an Android fork.
12.19pm BST
Commissioner Vestager is now outlining how Google restricts manufacturers from creating rival 'forks' of its Android operating system.
In theory, a manufacturer can used the Android source code to create their own platform, as Google makes it openly accessible.
12.12pm BST
Commissioner Margrethe Vestager adds:
Google has used Android as a vehicle to cement its dominance as a search engine.
These practices have denied rivals a chance to innovate and to compete on the merits.
12.09pm BST
Vestager is outlining the case against Google.
She says:
12.06pm BST
Commissioner Vestager says Google must make amends within 90 days, or the company will incur penalty payments.
12.04pm BST
NEWSFLASH: The European Commission has fined Google a4.34bn for breaching EU antitrust rules.
The tech giant is being sanctioned for abusing its dominant position in the Android operating system for mobile phones.
11.58am BST
Margrethe Vestager, the EC's Competition Commissioner for Competition, is about to give a press conference in Brussels.
Presumably this is to announce the Google fine.
11.53am BST
Over in Brussels, antitrust regulators are preparing to hit Google with a multi-billion euro fine.
My colleague Jennifer Rankin explains:
Google could be hit with a record fine by the European Union's competition authorities on Wednesday for abusing its market dominance in mobile phone operating systems.
The company risks a multibillion-euro penalty for making the Google search engine the default on most phones using its Android operating system.
11.43am BST
Britain's retail sector has suffered another blow - meaty restaurant chain Gaucho is expected to file for administration today.
The move will threaten around 1,500 jobs, adding to the thousands being cut at high street chains such as House of Fraser, Poundworld, Marks & Spencer and Mothercare.
Related: Gaucho to file for administration, with 1,500 jobs at risk
11.06am BST
UK house price inflation has hit a five-year low.
House prices across the UK rose by 3.0% in the year to May, which is the slowest growth since August 2013.
The lowest annual growth was in London, where prices decreased by 0.4% over the year. London has shown a general slowdown in its annual growth rate since mid-2016.
This is the fourth consecutive month that London house prices have fallen over the year.
"As annual growth in the UK has continued to decline to the lowest rate we have seen since August 2013, it is unsurprising to see the London market has also followed suit.
We were never expecting to see a particularly buoyant market this year, with political uncertainty and stamp duty continuing to dampen sales. The 'Spring Bounce' is undeniably modest in comparison to previous years and whilst this may be due to the poor weather we encountered late into the year this may very well be setting the scene for the summer market.
11.04am BST
Here's our economics correspondent Richard Partington on today's inflation figures:
The chances of a rise in interest rates in August have dipped after British inflation remained at a one-year low last month.
Confounding expectations for the return of higher rates of inflation in June fuelled by the rising price of petrol, the Office for National Statistics said the consumer price index remained unchanged at 2.4% from the previous month.
Related: UK interest rate rise in doubt as inflation stays at 2.4%
11.03am BST
The Resolution Foundation has warned that inflation could overtake earnings growth soon, which would mean real wages would start falling again:
Thread: Today's inflation stats: CPIH 2.3% CPI 2.4%. Unchanged from last month but drivers of inflation are shifting. pic.twitter.com/kubqQKwzwc
Imported (oil) inflation is driving price rises, as are rising utility costs. On the other hand the prices of imported goods (clothing, food) are dragging pic.twitter.com/rrmb97ZzdF
All this means that living standards are more closely tied to the price of imported goods. Key metric to watch going forward is price of imported materials and fuels pic.twitter.com/y5cmcxrB5O
Taking yesterday's pay stats and these inflation numbers together: it may not take much for prices to overtake wages again. Earnings growing at 2.7%, prices (CPIH) at 2.3% pic.twitter.com/jLwcNRk1ZO
10.58am BST
Here's the government's response to today's inflation data, from Financial Secretary to the Treasury and Paymaster General, Mel Stride:
"Inflation has fallen from its peak last year but we recognise the cost of living is still a challenge for some families.
That is why we are freezing fuel duty saving drivers 160 a year, cutting income taxes for 31 million people and increasing the National Living Wage to 7.83 an hour."
10.49am BST
The pound is acting more like the 'Great British Peso' right now, as it is buffeted by political tensions as well as economic data.
So says Bart Hordijk, Market Analyst at Monex Europe, who believes sterling is behaving increasingly like an emerging market currency.
"As the dust settles on yesterday's 'Wild West' style standoff in Parliament, UK macroeconomic data comes back into the spotlight ahead of the Bank of England rate decision in August.....
Sterling's knee jerk reaction [to the inflation data], carving lows not seen since September 2017, evidences how over-inflated expectations were on the Bank of England's upcoming decision.
10.45am BST
Professor Costas Milas of the University of Liverpool predicts that the Bank of England will hike borrowing next month, even though inflationary pressures are less intense than feared.
He thinks the BoE will be keen to get an interest rate rise through before Brexit becomes even more tense.
Despite inflation getting stuck at 2.4%, I sense that early August is a very convenient time for the MPC members to hike.
Why? UK inflation, at 2.4% in the second quarter of 2018, is fully in line with their 2.43% forecast recorded in the May Inflation report. So no surprises there.
10.23am BST
Inflation is still taking a big chunk out of UK workers' pay cheques.
At 2.4% in June, consumer prices are rising nearly as fast as earnings, meaning real wages are only up around 0.3%.
"UK CPI inflation remains steady at 2.4%, but it is still above the 2% target and is likely to be stuck close to 2.5% over the summer. The gap between wage growth (2.7%) and inflation remains narrow - just 0.3%.
So consumers are likely to remain cautious while their living standards are still rising very slowly.
"The unchanged inflation rate offers some reprieve for households at a time when wage growth remains uninspiring.
"Despite higher utility bills and petrol costs, consumers may have benefitted from offsetting seasonal discounts, particularly on clothing. The good news should however be taken with a pinch of salt. With the recent weak performance in pay packets, and high street bargains only temporary, the cost of living still remains high.
10.12am BST
UK inflation is still over the Bank of England's target of 2%, meaning prices are rising much faster than the saving rates on offer from the banks.
Kate Smith, head of pensions at life insurance firm Aegon, says household budgets are still being squeezed.
"Financial pressure created by rising prices will continue to hit people on fixed incomes, such as pensioners, the hardest. As people live longer, with more years spent in retirement, it's vital they protect their savings from the erosive effects of inflation.
Even at relatively low levels of inflation the spending power of 100 in today's money could be halved in 20 years' time.
10.08am BST
June's unchanged inflation rate is a huge surprise, says Tom Stevenson, investment director for Personal Investing at Fidelity International.
Inflation had been expected to bounce back up to 2.6% or even 2.7% on the back of higher fuel and energy prices. While these came through, they were offset by falling prices for clothes and games. Inflation remained at 2.4% for the third month in a row. Faster rising prices would have given the Bank of England cover for an interest rate hike next month.
Now it looks odds-on that the MPC will hold fire yet again. That's particularly the case after yesterday's wage growth data emerged weaker than expected at 2.5% including bonuses.
10.05am BST
Economist Philip Shaw of City firm Investec says the pound is suffering from 'political trauma', as well as today's weaker-than-expected inflation data.
Economic data join political trauma in hitting pound. Unch CPI reading at 2.4% weaker than consensus, pushing sterling close to $1.30. Note though that this was close to BoE estimates at 2.5%, so unlikely to derail August rate hike prospects. UK currency now recovering a little. pic.twitter.com/TvI4ShmEhU
UK inflation much softer than expected.
Annual CPI +2.4% (exp. +2.6%)
Monthly CPI 0.0% (exp. +0.2%)
Core CPI +1.9% (exp. +2.2%)
Monthly core -0.1% (exp. +0.3%)
Sterling tanking, now at a 10-month low and a break below $1.30 seems likely. pic.twitter.com/9vowbZrhYb
UK inflation rate flat in June at 2.4%. August rate hike chances having a bad 24hrs with wages & prices coming in below expectations. The lack of core inflation the most telling part - weak worker bargaining power & little retailer pricing power the most plausible explanation
9.49am BST
The pound has hit its lowest level in 10 months, as traders react to this morning's unexpectedly weak inflation data.
Sterling has dropped to $1.3011, its weakest level since September 2017.
9.44am BST
This chart shows how Britain's household heating bills, and petrol costs, drove the cost of living up last month.
Clothing, toys and computer games got cheaper, though, meaning inflation was flat month-on-month (rising by 2.4% year-on-year).
9.42am BST
Men's clothing prices fell sharply last month, also helped to keep inflation pegged last month.
Prices of clothing fell by 2.3% between May and June this year compared with a fall of 1.1% between the same two months a year ago.
Prices usually fall between May and June as the summer sales season begins, but the fall in 2018 is the largest since 2012. The effect came mainly from men's clothing.
9.36am BST
9.35am BST
At just 2.4%, UK inflation remains at its joint-lowest level in 14 months.
9.31am BST
Newsflash: Britain's inflation rate remained at 2.4% in June, defying expectations that it would rise to 2.6%.
That's good news for households, given the slowdown in wage growth in the last quarter.
9.28am BST
UK engineering group Smiths is having a bad morning.
Smiths shares are down 7%, after it told the City that some of its medical products have lost certification under the EU's new Medical Device Regulations.
9.15am BST
In London, the FTSE 100 has gained 35 points in early trading, partly thanks to easyJet.
The demise of competitors such as Monarch, Air Berlin and Alitalia has opened up the field, ancillary revenue has increased due to a change in passenger behaviour (increasingly paying for additional baggage and allocated seating) and load factors remain high.
8.58am BST
European stock markets have hit a one-month high this morning, led by technology stocks.
The Stoxx 600 has risen by 0.6% today, with the tech sector gaining over 2%.
8.33am BST
The pound has dipped below $1.31 against the US dollar this morning, close to its lowest level of 2018.
Sterling slumped yesterday when the unemployment figures showed wages growth slowing, potentially making an August interest rate rise less likely.
Related: May sees off rebellion on customs union as amendment is defeated
Once again, the Brexiteers have laid bare how difficult it is for UK Prime Minister Theresa May to hold her Conservative government together.
Although May had turned her plan for a semi-soft Brexit into the official line of her Cabinet last week, causing prominent dissenters to quit, Brexiteers led by MP Jacob Rees-Mogg forced her on Monday to accept an amendment that would make it even more difficult for the EU to endorse her proposed customs arrangement.
7.44am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain may be facing a new cost of living squeeze. Inflation figures due out this morning are expected to show that prices rose at a faster rate in June, hitting consumers in the pocket.
The rise in petrol prices in June should ensure that the transport category continued to make a strong positive contribution to UK inflation.
Added to that, a number of pre-announced utility price increases kicked in last month, including a 5.5% rise from the largest energy provider British Gas which came into effect at the end of May.
Related: UK wage growth slides to lowest rate in six months
If you want a longer view, here's UK unemployment, wage growth and real earnings over past 15 years (TL;DR - unemployment lower than pre-crisis, wages haven't caught up, higher inflation after Brexit vote almost as bad as crisis for real pay) pic.twitter.com/Sb8mg9oMur
"The unemployment rate is low and expected to fall further. Americans who want jobs have a good chance of finding them."
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