Internet giant Google has been ordered to pay a $55 million fine after entering anti-competitive agreements with Australia’s two largest telecommunications companies that prevented the pre-installation of rival search engines on smartphones.

Federal Court Justice Mark Moshinsky approved the penalty proposed by the Australian Competition and Consumer Commission (ACCC), stating that the fine must be substantial enough to deter similar conduct in the future.

This penalty is one of the largest imposed on Google in Australia, second only to the $60 million fine issued in 2022 for secretly collecting location data from some Android users.

The ACCC initiated legal action against Google Asia Pacific in August, over agreements with Telstra and Optus between December 2019 and March 2021. These contracts required the telcos to pre-install Google’s Search app on Android devices, set it as the default search engine, and prohibit the installation of competing search apps.

In return, Telstra and Optus received a share of advertising revenue generated from Google search results on those devices.

Google admitted to the arrangements and agreed with the ACCC that the deals were “likely to have the effect of hindering competition within the Australian market,” Justice Moshinsky noted.

He found that the proposed $55 million penalty was appropriate under the law and would serve as a sufficient deterrent against similar anti-competitive conduct.

“The primary, if not sole, purpose of civil penalties is deterrence,” Justice Moshinsky said. “I am satisfied that the proposed total penalty is significant enough to achieve both general and specific deterrence.”

Telstra, Optus, and TPG have since entered into court-enforceable undertakings not to engage in similar anti-competitive arrangements with Google in the future. The ACCC also confirmed it would not pursue further action against the telcos.

ACCC deputy chair Mick Keogh said eliminating anti-competitive behaviour in digital markets is essential to ensuring consumers have access to the best and most innovative technologies, especially as AI-powered search tools become more prevalent.

“This penalty sends a strong message that anti-competitive conduct carries serious and costly consequences,” he said. “In a rapidly evolving digital landscape, it is crucial that competitors to Google have a genuine opportunity to reach Australian consumers.”

The ruling follows the ACCC’s five-year Digital Platform Services Inquiry, which concluded nine months ago and recommended mandatory competition codes and stronger safeguards against unfair trading practices.

Google currently dominates Australia’s search market, providing around 91% of all search results, far ahead of Bing at 6.2% and Yahoo at 1.35%, according to Statcounter.