Google to pay 7 million fine after Yandex’s antitrust claims

YandexBy the means of a settlement agreement submitted before the Moscow District Court of Arbitration by Google Inc and Google Ireland Ltd into whom FAS entered on April 17th 2017, whereas on September 2015 FAS issued the decision holding Google liable of abuse of dominance

pursuant to Article 10 of the “On Protection of Competition” Federal Law, on March 2017 the Court of First Instance and the 9th Arbitration Appeal Court confirmed FAS decision, and on April 2017 FAS opened an administrative proceeding against Google for failure to execute FAS injunction under violation of Article 19.5 of the Code of Russian Federation on Administrative Violations for omission to undertake prescribed measures, Google will pay 7,8 m dollars (438.067,400 RB) in fines and will be committed to ensure specific prescriptions.

Within the settlement agreement term of six years and nine months, Google will have to sign new contracts with manufacturers to make pre-installation of competing search engines enabled on Android devices’ home screen.

Second, Google will have to set a search widget on Chrome further versions to allow users to choose and switch among different search engines: this faculty will come as default on new Android phones and as an update on previous versions.

Titans’ War in Russian mobile search market

These two rivals have one point in common: both their domains were registered in 1997. Here stops the similarity, indeed, even if they are two among the most influent search engines in the world. Suffice to say, Google uses to settle on top of search engines’ world ranking and Yandex is well-adjusted at 8th place. The rivalry between Google and Yandex is several years old, to be precise a never-ending challenge to conquer web users.

Yandex is for Yet Another Index

Until mid-2000s, Yandex – for Yet Another Index - was the Russia’s favorite search engine.

Launched after several years of technologic research, soon it results to be the first search engine among Russian users, thanks to an algorithm that allows Yandex to index an impressive high number of web pages compared to other search engines, and thanks to the search by date option.

Under the slogan of “Everything is findable”, Yandex keeps establishing its leadership in the Russian online search market, while Google is just moving its first steps in the same geographic market. But, when Google in 2006 launches a Russian language based version of itself, it’s turning tables time.

Yandex’s market share drops within two years and the end seems near. Nonetheless, Yandex reacts and invests in improvements to show more relevant results, focusing on a more accurate differentiation in regional search parameters and enhancing its crawling system.

From 2008 on, Yandex starts regaining market share while Google’s average of users decreases. Time after time, Yandex adds new features like maps, mails, cloud storage, ads, translator, as well as Google does, whit the US giant stealing Yandex’s primacy of monthly audience and the latter withstanding in terms of daily audience leadership, as market analysis repeatedly report.

In the Russian market of online search where the Titans war seems on a level playing field, a fact may come to assign a point.

A wrong policy about Android-based devices

Yandex notices that devices manufacturers refuse to pre-install its apps on Android-based devices. Clarifications are needed and it turns out that the refusal is due to a Google policy, requiring them to ship devices running Android OS only with Google as default search engine and to pre-install only the Google Mobile Services suite of apps on their default home screen. The rest is antitrust history.

More proceedings for a single case

After Yandex’s claim, FAS holds Google liable of violation of Part 1 Article 10 of the Russian federal law “On Protection of Competition” imposing a 438,067,400 roubles fine and several prescriptions to restore market competition.

Two Courts of Appeal confirm the decision and FAS fines again Google for failure to execute imposed injunctions following administrative proceedings. Google appeals the decision before the Moscow District Court of Arbitration, where FAS accepts Google’s settlement agreement to pay the fine and observe prescriptions.

How Google argued against Yandex’s claim

In the Yandex’s cause of action come to light two elements concerning antitrust issues against Google.

The premise is that Google is the owner of Android operating system and that, although it is considered an open platform, Google locks manufacturers of smartphones and tablets into its proprietary services excluding competitors from the market of devices running Android Operating System, through a bivalent conduct.

Claims under “On Protection of Competition”

The first anticompetitive practice is the alleged bundling of Google’s search engine and apps into Android OS. According to the claim, manufacturers are required by Google to pre-install the whole suite of Google Mobile Services in order to install Google Play, the proprietary app store.

By the second practice, Google prevents manufacturers from pre-install rival apps onto devices as a result of specific contractual clauses imposing to pre-install Google as the default search engine. Yandex claims that at least three partner smartphone sellers of its could not pre-install Yandex apps on Android-based devices.

The Android Open Source Project

As regards defendant’s arguments, without counterclaiming, Google limits its defence to the deny of every allegation of anticompetitive practices. Google argues how end-users have always been free to choose and control their apps.

The defendant outlines that, as a matter of fact, there is an Android Open Source Project deprived of Google, that could be easily run by manufacturers on the devices they are selling so to pre-install a third-party app store.

Russian courts setting a high fine for Google

After two years of investigation, on September 2015 Russia’s Federal Antimonopoly Service approves Yandex’s claim, holding Google liable of two different violations of the antimonopoly law for abuse of dominance pursuant to article 10 of the competition federal law.

The first is the prohibition to pre-install competing applications to ensure exclusive distribution for Google apps, the second concerning agreements provisions for manufacturers as mandatory pre-installation of Google Play and other proprietary apps on home screen and mandatory installment of Google search engine by default.

FAS issues order and fine against Google

The FAS issues a prescription by which Google is committed to ensure a procompetitive conduct.

The first order is to remove anticompetitive restrictions from its agreements with manufacturers. The second one, is to secure the rights of other search providers to include their search engines in the devices running Android SO by the means of a commercial agreement they would enter into with Google.

By this order, FAS imposes a fine on Google amounting of 438.067,400 roubles. On March 2017, the Court of First Instance and the 9th Arbitration Appeal Court on their turn confirmed the decision and the amount of the fine.

The failure to execute FAS injunction

FAS sues Google opening administrative proceeding due to failure to execute FAS injunction under violation of Article 19.5 of the Code of Russian Federation on Administrative Violations for omission to undertake prescribed measures, and fines again Google for 500.000 roubles each Google Inc and Google Ireland Ltd.

Google then submits a voluntary settlement before the Moscow District Court of Arbitration that FAS accepted on April 17th 2017, upon the basis of a forthcoming competition on the market of mobile search and in view of eliminating the addressed violations of Russian antitrust law.

Google settles the hard way

By the settlement agreement, Android-based devices in Russia will no longer be bundled to Google apps, the pre-installation of competing search engines and apps will no longer be restricted, Google will no longer be the default search engine, manufacturers will no longer be enforced should the terms of previous settlement be contradicted, third-parties will be enabled to include their search engines into the choice window.

As for this last point, Google is committed to develop a Chrome widget whose first launch will show a choice screen to allow the user set his favorite search engine among those that would have signed a commercial agreement and the existing device will be appositely updated too.

At least, Google could be addressed within 60 days after the approval by Russian search engines to discuss conditions of inclusion agreements.

By the effect of agreement, Google accepts to pay the 438.067,400 RB fine.

Difference between Russian and EU antitrust proceedings against Google

As a legal case involving a party under antitrust investigations in other countries, uppermost before EU antitrust ruling authorities, the Google vs Yandex settlement agreement could influence ongoing situations concerning Google’s policy into device running Android OS.

After sending out a questionnaire to manufacturers looking for exclusivity deals traces in their agreements with Google regarding pre-installation of Android OS into mobile devices, Eu Commission issued a formal complaint against Google for violation of competitive law. Allegedly Google locked manufacturers to pre-install Google Search as default search engine onto devices prohibiting them to install or to sell rivals’ search engines on devices running Android.

The fundamental antithesis opposed by Google to the antitrust issues in the Yandex’s Android OS claims was that its high share into Android OS based devices market should be looked as the result of a free choice of users and not a forced one by the means of anticompetitive agreements with manufacturers, to the extent that is available an Android Google free open platform, where every mobile search engine is enabled to run.

EU antitrust regulation

That could not actually persuade Russian Courts while EU’s decision is still pending and it could reasonably lay upon the differences between each country’s competitive law.

Russian anticompetitive law against dominance is regulated by Federal Law “On the Protection of Competition” pursuant to which, dominance is presumed by defining thresholds and its provision about anticompetitive practices are enforced through high rates fines for undertakings that can even be sentenced up to 7 years’ prison.

European competitive law against dominance, pursuant to Art. 102 of TEU is not against dominance per se but aims to prevent abuse of this position.

Antitrust situations for Microsoft’s search engine

Similarly, US authorities are investigating upon individual claims filed against Google for allegedly it forces manufacturers to set Google apps as default on Android OS running devices, as well as EU Commission happened to investigate against Microsoft, in one of the first antitrust case related to pre-installation of proprietary software.

Microsoft was charged with tying Windows PC operating systems with its proprietary Windows Media Player and refusing to supply competitors with information to enable others’ product to interoperate with Windows as anticompetitive practices under EU antitrust law.

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