Google Search faces A$55m fine in Australia, Federal Court to decide
Tech giant Google has run into another hurdle in Australia over anti-competitive arrangements. The company, along with the Australian Competition and Consumer Commission (ACCC), has submitted a joint proposal before the court to pay a fine of A$55 million (around US$36 million). The allegation is that Google paid the country’s two largest telecom operators—Telstra and Optus—to ensure that Android smartphones sold through them came with Google Search pre-installed and set as the default. This, regulators argue, restricted the reach of rival search engines. The ACCC stated that such conduct had the potential to “substantially lessen” competition, making financial penalties and corrective measures essential. The Federal Court will now decide on the matter.
How the Investigation Began and What the Deals Involved
The ACCC’s probe focused on commercial agreements under which selected Android devices came with Google Search both pre-installed and set as the default, while users were shown limited options to access or switch to alternative search engines. The regulator argued that when default settings are locked in—especially on devices used by millions of consumers—it leverages network effects and user inertia, reducing discoverability of rival services. This meant smaller or emerging search engines were deprived of equal opportunities to reach users, regardless of product quality.
The arrangements between Google and the telcos allegedly included revenue-sharing models, under which telecom operators received a portion of advertising income in return for enforcing pre-installation and default settings. According to the ACCC, such financially incentivised defaults effectively excluded rival search engines, since consumers typically continue with whatever search option comes preloaded and set as default. The probe also revealed that from 2024, Telstra and Optus stopped renewing such privileged agreements and pledged full cooperation with the regulator. In the meantime, Google admitted that certain earlier contracts had wide-ranging effects on competition and confirmed that those practices had been discontinued.
Proposed Penalty and Court-Enforceable Changes
The ACCC and Google have jointly proposed a civil penalty of A$55 million, an amount set with the intention of having a “deterrent effect” under Australian competition law. Alongside, Google has agreed to modify contract clauses relating to pre-installation, default settings, and restrictions on visibility or access to alternative search engines. Under a court-enforceable undertaking, the company will give Android device makers and telecom partners more flexibility—ensuring that consumer choice is real and accessible, rather than hidden in deeper settings.
A crucial point here is that a court-enforceable undertaking goes beyond merely paying a fine—it binds future behaviour contractually. If the company fails to adhere, it could amount to contempt of court or lead to further regulatory claims. This means the move is not just a remedy for one incident but a structural change with potential long-term effects on competition.
Potential Impact on Consumers and the Market
The effect of default settings is often invisible but powerful. Most users stick to the search engine preloaded on their new phones, regardless of available alternatives. This behavioural tendency raises barriers to entry in the search market and allows dominant players to maintain their hold. The ACCC’s intervention is expected to bring direct outcomes such as:
- Improved visibility and accessibility for alternative search engines on new Android devices.
- Easier, clearer options for users to switch defaults, enabling genuine choice.
- Opportunities for smaller and emerging providers to compete on the basis of innovation and product quality.
In the longer run, this may influence the dynamics of the advertising market as well, with search advertising revenues spreading across more platforms. This could open up new channels for publishers and small businesses, creating relatively balanced negotiating conditions compared to dealing with dominant platforms alone.
Role of Telstra and Optus and Industry Signals
Both Telstra and Optus have expressed their cooperation with the regulator and confirmed that they stopped renewing such agreements from 2024 onwards. This signals a broader industry shift away from “exclusive default privileges” toward a “user-choice driven” model. For telecom operators, this marks a strategic repositioning—they are expected to focus competition on hardware, 5G/fibre services and value-added offers, rather than leveraging search default restrictions. Analysts note that while this change could initially reduce ad-sharing revenues for telcos, in the longer term it will boost trust and regulatory clarity, making the ecosystem more stable.
Google’s Response and Strategic Rebalancing
Google has said it welcomes the resolution and is committed to introducing more flexibility in the Android ecosystem. Practically, this means device OEMs and telecom partners will have greater independence in presenting default settings, onboarding screens, and alternative search options. The company’s broader strategy may now emphasise “product excellence” and “user experience”—aiming to ensure that users prefer Google Search without being bound by contractual exclusivity. On the other hand, its marketing and partnership models will need to be transparent and competition-neutral, a more sustainable path amid growing regulatory scrutiny worldwide.
Echoes of App Store Disputes
This development comes shortly after Australia’s Federal Court made critical observations in a separate case—Epic Games vs Apple/Google—over market power in app stores and in-app payments. That ruling signalled growing judicial scrutiny of the “gatekeeper” role of digital platforms. While not all claims went against the companies, the message was clear: creating “switching friction” through distribution channels, defaults, or payment systems now carries serious legal risks. The proposed fine and undertakings against Google align with this broader global trend, where companies must rely more on user choice and interoperability than on contractual walls to protect dominance.
Next Steps: Court Approval and Compliance
At present, the A$55 million penalty is only a joint proposal—the final decision rests with the Federal Court. The court typically assesses whether a proposed penalty is proportionate to the nature, duration, and impact of the violation, while sending a strong deterrent signal for the future. If approved:
- The financial penalty against Google will become formal.
- The court-enforceable undertaking will come into effect, requiring timely contractual changes with OEMs and telecom partners.
- The ACCC will monitor compliance, with any deviations open to further action.
If the court finds the penalty inadequate or the undertaking vague, it may order revisions or impose a higher fine. This is why industry attention remains firmly on the outcome—especially from search engine and browser providers aiming to carve out space in Australia beyond the shadow of dominant players.
What Will Change for Consumers
The most visible change may be in the setup experience of new Android devices—clearer options to choose a search engine during onboarding, easier settings to switch defaults, and more prominent display of alternatives. This is not only about the “right to choose” but also about the “ease of choice”—since options in technology matter only if they are easily accessible to users.
For media publishers and small businesses too, subtle shifts may follow. As search traffic spreads across more platforms, new patterns of discoverability will emerge, influencing advertising strategies and SEO priorities. The change will not happen overnight, but regulatory direction is clear: the dominance of defaults will weaken, and real competition will grow.
Conclusion
The proposed A$55 million penalty against Google in Australia is not merely a punishment for one company—it is a policy signal against “default-driven dominance” in digital markets. Once the court gives its final approval, this case may serve as a reference point for other jurisdictions debating platform power, pre-installation practices and distribution control. The cooperative stance taken by Google, Telstra and Optus highlights an industry transition toward a choice-based framework—where success is determined not by contractual barriers, but by better products, transparency, and empowered consumer choice.
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