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China to Open Antitrust Probe Into Google's Android OS

By Rich Duprey – Sep 30, 2020 at 9:25AM

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Investigation is seen as a response to the U.S.'s crackdown on Chinese tech companies.

China is preparing to strike back at U.S. sanctions on Chinese tech companies by opening an antitrust probe into Alphabet's (GOOG -1.26%) (GOOGL -1.30%) Google and its Android operating system, according to reports Wednesday.

The investigation will center on whether Chinese companies could suffer "extreme damage" as a result of Google's market position following tech businesses like Huawei, Semiconductor Manufacturing International (SMIC), and even TikTok and WeChat being sanctioned by the U.S. government, Reuters reports.

Computer chip on a motherboard

Image source: Getty Images.

Tit for tat targeting

Last week, the Commerce Dept. banned exports to SMIC because there was an "unacceptable risk" of their being diverted for "military end use" by Beijing. SMIC is China's biggest chipmaker and was already hurt by sanctions imposed against Huawei, its biggest customer.

Also hurt could be Qualcomm (QCOM 3.00%), which is SMIC's second largest customer. SMIC stated that the company "has no relationship with the Chinese military, and does not manufacture for any military end users or end uses."

It's unknown exactly what sanctions Beijing's antitrust probe might pursue, since most Chinese smartphone makers use an open source version of Android and many of Google's other services such as search and email are already blocked in China. Many U.S. tech companies are banned from operating in China to protect local companies from competition.

The Chinese government will likely pursue the antitrust process used by regulators in Europe and India and begin with questioning Google executives, reports Reuters. The EU fined Google $5.1 billion for its anticompetitive practices in 2018, and India is investigating whether the tech giant used its market power to unfairly promote its mobile payments service.

The U.S. is also investigating Google for antitrusts violations in its search engine, while state attorneys general are looking into its digital advertising policies.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Qualcomm. The Motley Fool has a disclosure policy.

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