European Commission Accuses Google Of Anti-Competitive Behavior
May 2, 2016 (Mimesis Law) — The European Commission (EC) antitrust team and Google are continually at loggerheads. The latest: a formal antitrust complaint over Android and another separate complaint on prioritization of shopping search results. This investigation is the second major case between the two frenemies.
What’s going on? The EC is claiming that Google has abused its dominant position by imposing restrictions on Android device manufacturers and mobile operators and by promoting its services and apps. To be in a dominant position in Europe is not in itself illegal, but the company has a special responsibility to ensure that its conduct does not distort competition (Article 102 TFEU).
What kind of business practices the EC is objecting to? As explained in the complaint, Google breaches EU antitrust rules by:
“Requiring manufacturers to pre-install Google Search and Google’s Chrome browser and requiring them to set Google Search as default search service on their devices, as a condition to license certain Google proprietary apps.”
In other words, Google is forcing companies to install its Play Store and products (such as Google Maps, YouTube, Chrome, etc.). Indeed, in its contracts with phone manufacturers, Google has made the licensing of the Play Store on Android smartphones conditional on Google Search being pre-installed. The same goes with the pre-installation of its Chrome mobile browser. As a result, rival search engines are not able to become the default search service on most Android devices sold in Europe. By doing so, the Commission claims competition has been negatively affected.
Android is a free and open-source system; in theory, anyone can develop their own version of Android. In practice, however, Android manufacturers are “not allowed” to create a modified mobile operating system (Android fork). Indeed, phone manufacturers are invited required to sign a non-exclusive Anti-Fragmentation Agreement that “commits [the manufacturer] to not sell devices running on Android forks” says the EC. Google’s conduct therefore prevents manufacturers from selling devices based on a competing Android fork which had the potential of becoming a better alternative to Android; and, more importantly, Google gives “financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices”.
Google has therefore reduced the incentives of phone manufacturers to pre-install competing search services on the devices they market. The EC takes issue not with financial incentives in general but with the:
“conditions associated with Google’s financial incentives, in particular with the condition that the financial incentive is not paid if any other search provider than Google Search is pre-installed on smart mobile devices” (see factsheet of the EC).
What’s next? Google has three months to respond to the EC’s Statement of Objections. Kent Walker, Google SVP & General Counsel, already commented on this new investigation stressing that “the partner agreements are entirely voluntary” and that it is “simple and easy for users to personalize their devices and download apps on their own — including apps that directly compete with ours”. It will be worth keeping a keen eye on how this investigation unfolds and the precedent it will set for other businesses.