EU Files Antitrust Charges Against Google's Android Business Practices

Google rivals said they aren't surprised. Google said it takes the EC's concerns seriously but believes its business model benefits consumers. Representatives of the high-tech sector agreed, saying there's little evidence Google's contracts are anticompetitive, with one competition lawyer saying Google has strong arguments in its favor.

After a yearlong probe into Google's business practices (see 1504150002), the EC sent a statement of objections to the company laying out its concerns. It found preliminarily that Google's efforts to protect and grow its dominance in search means Google Search is installed and set as the default or exclusive search service on most Android devices sold in Europe, the EC said. Another concern is that the practices seem to close off ways for rival search engines to access the market via competing mobile browsers and operating systems, and to harm consumers by hampering competition and slowing innovation in the wider mobile space, it said. Around 80 percent of smart mobile devices in Europe and worldwide run on Android, it said.

Google is dominant in the markets for general Internet search devices, licensable smart mobile operating systems and app stores for the Android operating system, the EC said. It holds about 90 percent market share in each market in the European economic area, it said. The EC alleged the company violated EU antitrust rules by: (1) Requiring manufacturers to install Google Search and Google's Chrome browser and to set Google Search as default service on their devices in order to license certain Google proprietary apps. (2) Preventing device makers from selling smart mobile devices running on competing operating systems that are based on the Android open source code; and (3) Giving manufacturers and mobile network operators financial sweeteners if they exclusively install Google Search on their devices. Google has 12 weeks to respond to the objections and can request an oral hearing to present its case, Vestager said.

Android "has empowered hundreds of manufacturers to build great phones, tablets, and other devices," Google General Counsel Kent Walker blogged Wednesday. It has let developers of all sizes reach huge audiences, with the result that users "enjoy extraordinary choices of apps and devices at ever-lower prices," he said. Partner agreements are voluntary, but manufacturers that want to take part in the Android ecosystem must test and certify that their devices support Android apps, he said. They're then free to choose to load the suite of Google apps to their devices as well as other apps, and users are free to download Google and competing apps, he said.

FairSearch, the lead complainant in the Android case, praised the EC action. As competition cases go, this is a "relatively easy one to remedy" because it's entirely contractual, said FairSearch Legal Counsel Thomas Vinje at a news briefing. Google would need only to modify its agreements, he said. FairSearch members -- adMarketplace.com, Allegro, Buscapé, CEPIC, Expedia, Foundem, Nokia, Oracle, TripAdvisor and Twenga -- are only interested in changes to Google's conduct, he said.

The Computer & Communications Industry Association criticized the EC move, saying the market for apps and services "is extremely competitive." At first blush, said CCIA Vice President James Waterworth, "it is difficult to see the contracts identified by the Commission as being competition problems. In fact, they have clear procompetitive motivations" and don't prevent device makers and mobile operators from installing whatever non-Google apps they choose. As a result, he said, consumers have more, not less, choice. The EC "needs to be careful as challenging the contractual provision that allow open source operating systems to compete against proprietary software can backfire," Waterworth said. CCIA members include Google and Microsoft.

Google has good arguments in its favor, said Garrigues (Brussels) competition attorney Alfonso Lamadrid de Pablo at a CCIA briefing, saying he isn't working for any of the companies involved in the antitrust matter. If the company can show it faces significant competition from others, such as Apple and Microsoft, the case will fall, he said. Similar allegations have been dismissed by other antitrust authorities, he said. The EC case rests on the "debatable assumption" that Android apps aren't interoperable with other apps and operating systems, he said. The best defense, he said, may be that the accusations involve conduct that's also being done by all of Google's accusers. Google is likely to respond that its system is the most open one in the market, but it's the only company facing antitrust charges, he said.

The great majority of abuse of dominance cases end with commitments from the companies under investigation, Lamadrid de Pablo told us. Google may offer some concessions, but it already has a negative experience of doing that in the context of the ongoing online search matter where its commitments weren't accepted by the EC, he said. Google has a strong hand in this new fight, he added.

Another issue is that the Android case involves multisided markets that bring together different kinds of users, said Diego Zuluaga, Institute of Economic Affairs financial services research fellow, at the CCIA briefing. By intervening and judging the contractual arrangements between the various users, the EC could also affect the position of other end-users, he said. What might seem anticompetitive in one area may actually benefit other users, such as consumers, he said. Zuluaga said he's "skeptical" that EC intervention will improve the outcome.

The EC "holds a misguided view of how competition law should be used to protect consumers in the era of digital platforms," said the Information Technology and Innovation Foundation. Operating systems like Android benefit from economies of scale and network effect that naturally limit the number of competitors, which often gives consumers better features, lower prices and better interoperability, it said. It accused the EC of failing to provide "concrete details" about how consumers have been harmed by Google's alleged offenses. But the European Consumer Organisation said the EC should act to prevent Google from being "the gatekeeper of how millions of European consumers access and experience the digital world" and from using Android to "hoover up enormous amounts of data which extends its overall internet dominance.”