Google is facing a $55 million fine after admitting to entering into exclusive agreements with Telstra and Optus that limited consumer choice in mobile search engines for Android users.

In the Federal Court on Monday, Google Asia Pacific admitted to anti-competitive understandings with Telstra and Optus between December 2019 and March 2021 which involved restricting pre-installed search engines on Android devices to Google search only.

Google owns Android.

The tech giant jointly submitted with the Australian Competition and Consumer Commission (ACCC) that they should pay a total penalty of $55 million.

The Federal Court is yet to determine whether the penalty and other orders are appropriate.

Google tie up with Telstra and Optus

Google admitted in the proceedings its agreements with Telstra and Optus was likely to have had the effect of substantially reducing competition.

In return, Telstra and Optus received a share of the revenue Google generated from ads displayed to consumers when they used Google search on their Android phones.

Telstra and Optus, as well as TPG, have already agreed not to renew or make new arrangements with Google on the pre-installation of Google search on their Android phones.

These court-enforceable undertakings were submitted to the ACCC between June and August last year.

A spokesperson for Google said the company was pleased to resolve the ACCC’s concerns, but highlighted the provisions raised have not been in their “commercial agreements for some time”.

“We are committed to providing Android device makers more flexibility to preload browsers and search apps, while preserving the offerings and features that help them innovate, compete with Apple, and keep costs low," the spokesperson said.

In addition to the fine, Google has also signed a court-enforceable undertaking addressing broader competition concerns.

It has committed to removing exclusivity clauses and default search engine restrictions from future contracts.

ACCC chair Gina-Cass Gottlieb said the outcome, along with Telstra, Optus and TPG’s undertakings have created the potential for millions of Australians to have greater search choice in the future.

“Importantly, these changes come at a time when AI search tools are revolutionising how we search for information, creating new competition,” Ms Cass-Gottlieb said.

“With AI search tools becoming increasingly available, consumers can experiment with search services on their mobiles.”

Digital competition shake-up needed

Australia’s peak communications consumer body, the Australian Communications Consumer Action Network (ACCAN) said in a statement they welcomed Federal Court proceedings against Google for anti-competitive conduct.

ACCAN chief executive officer Carol Bennett said the case is a clear signal that digital competition reforms are urgently needed.

"Google already has a virtual monopoly on search – and now we have confirmation that they were providing kickbacks to telcos to further entrench their market power," she said.

Last week in Information Age, the Federal Court found Google and Apple had engaged in uncompetitive conduct related to their app stores.

The finding was part of action brought by Epic Games in 2020 after the company’s game Fortnite, was removed from Apple’s App Store and Google's Play Store for offering its own in-app payment system.

The ACCC’s action in the Federal Court against Google follows finding from the ACCC’s Digital Platform Services Inquiry.

The ACCC’s Digital Platform Services Inquiry is a multi-year on-going investigation into the practices of digital platforms such as Google, Apple, Meta (Facebook) and Amazon in Australia.

It began in 2019 and focuses on whether these companies engage in practices that harm competition, consumer choice, pricing transparency, or data privacy.

The inquiry has led to several reports and regulatory actions, including addressing issues such as default search engine settings, app store policies, and the impact of emerging technologies like AI and voice assistants on market fairness.