Google's main antitrust case for Android before EU Commission

Android logoIn the matter of Google investigation n. 40099 European Commission issued an Opening of Proceedings.

By means of this statement, the Commission intends to inform that formal antitrust proceedings initiated on April 15th 2015 against Google under Article 11 of the Antitrust Regulation No 1/2003 and Article 2 of its implementing Regulation No 773/2004, to establish whether Google’s business practices related to Android may have breached Articles 101 and 102 of the Treaty on the Functioning of the European Union about anti-competitive agreements and abuse of dominant position.

Practices under investigation are the alleged hindering of development and market access of rival mobile operating systems, applications or services for smartphone and tablets. Descending from investigation n. 40099, with second Opening of Proceedings issued on April 20th 2016, the Commission initiates formal antitrust proceedings against Google’s parent company Alphabet under the same subject matter.

The little green robot’s sugary world

One of the worst enemies of many websites comes in the form of a little green robot and was born in 2010 from a designer who used to work for Google. Inspired by the restroom door drawings, easy and recognizable, the green robot was meant to be a customizable and open sourced logo.

Assuming users could make fun of this green robot with imagination and little web design ability, it would become popular. And it was, indeed.

This tiny mascot, that lives in a sugary world made of Nougat, Marshmallow, Lollipop, Cupcake and Gingerbread, soon happened to be found in wallpapers, printed on ties, dangling from keychains, even its peculiar shade of yellow-greenish was named after it, as “Android green”.

Yes, because this cuteness, at first glance inoffensive, is actually the logo of Android operating system, as a matter of fact a subject of a large number of lawsuits.

In 2007, the US search engine unveils Android, just bought from its developers, mainly thinking about mobile touchscreens devices. It evolves in Android TV, Android Auto, Android Wear and in amounts of easygoing variants for electronics.

Released with a combination of open source and proprietary software license, Android comes also with a total open source license that entitles any developer to add new features and apps within the Android Open Source Project.

The magic gear

Android was run on a lot of devices since 2007, when HTC, Motorola, Samsung and other manufacturers cheered at him as “the first truly open and comprehensive platform for mobile devices”.Thanks to a complex internal hardware, Android’s interface is geared with proximity sensors, gyroscopes, vibration capabilities and even with a virtual reality platform just released.

An Android-based device can transform touch inputs in real world actions: users can manipulate on-screen objects, games are experienced with improved simulation controls, the screen is self-adjusting.

Needless to say, Android becomes so popular that on April 2017, it is reported to be the world most widespread mobile OS by default, with a market share of 62,94% almost doubling the Apple’s iOS’ one.

NO surprise that, launching KitKat OS, Google’s staff revealed that since devices make our lives so sweet, and Android powers over 1 billion them, so much sugaryness spreads from Android OS versions names.

With success comes scrutiny

Celebrity means problems, you know, or to use Google’s words “with success comes scrutiny”, as long as the offensive against Google’s anticompetitive strategy to dominate the mobile marketplace through its Android OS can be considered a problem.

FairSearch.org is an organization whose declared purpose is fostering and defending competition in online and mobile search through law enforcement on defence of costumers.

As staff states on their website, since they have growing evidence that Google is abusing its search monopoly to thwart competition, they feel entitled to prosecute against it.

Fairsearch.org gathers before EU Commission companies, individuals, rival search engines and mobile OS developers supposedly harmed by Android. Among them, big undertakings like Microsoft, Expedia, Nokia, TripAdvisor. The little green robot is revealed as the symbol of a “trojan horse”.

In the words of Fairsearch.org, the Android mobile operating system is in fact identified with a malware, a malicious entity that looks like a perfect tech product while setting the task to deceive partners, monopolize market and control data.

Toward the Opening of Proceedings

After the March 25th 2015 complaints of FairSearch.org and following an initiative of its own, EU Commission on April 15th 2015 issues an Opening of Proceedings initiating formal antitrust proceedings under the abuse of dominant position.

The investigation about comparison shopping service is separated from the one regarding Android OS. Google is presenting its own commitments that leave unsatisfied the Commission’s concerns.

EU Commission released the Statement of Objections against Google and on April 24th 2016 issues an Opening of Proceedings against Google's parent company Alphabet, to assess whether its business practices related to Android are in breach of EU antitrust rules on the same subject matter of Google.

From FairSearch.org to Google’s arguments

Complainants assume that Google’s practices are anticompetitive under abuse of dominant position.

They argument that Google’s agreements associated with the use of Android and Google’s proprietary applications and services may have breached EU antitrust rules under provisions of Article 101 and Article 102 of the Treaty on the Functioning of the European Union.

Hindering development of market access

Complainants allege that Google hinders the development and market access of rival mobile operating systems, mobile communication applications and services in the European Economic Area by requiring mobile manufacturers to exclusively preinstall Google’s own applications or services; by impeding development of competing version of Android; by tying or bundling certain Google apps and services with other of Google distributed on Android devices.

Should these practices be assessed, they would prove that Google enters in anticompetitive agreements and is abusing a dominant position.

They assume in premises that Android is the leading Operating System for mobile devices in the European Economic Area, with major shares above Apple and Microsoft; that being Android an open-source OS, it should be freely used and developed; that Google grants the right to install its own apps on Android-based devices only if manufacturers enter in certain agreements with it.

Android is like an “ecosystem based on open-source software and open innovation”

Google disputes claims and outlines in its own defence that manufacturers enter into agreement with Google on voluntary basis only, since Android can be downloaded, modified, used without Google intervention.

They are only required to submit a certification that their devices are currently supporting Android apps, to make users sure they can switch from an Android based device to another without lose their apps.

Since Android system is for free, Google covers the costs for its implementation through the revenues generated on Google apps and services distributed via Android.

Google remarks how Android, since its appearance in the market, has been good for competition and for consumers to the extent that over 50 billion apps are downloaded from Android.

EU Commission conclusions about abuse of dominance

With Statement of Objections on April 20th 2016, the EU Commission has informed Google that it has opened proceedings under antitrust allegations.

The alleged violations are assessed under provisions of the Treaty on the Functioning of the European Union, whereas Article 101 prohibits practices by associations of undertakings which may affect trade between Member States and which “have as their object or effect the prevention, restriction or distortion of competition within the internal market” and Article 102 prohibits “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it” as incompatible with internal market and which may affect trade between Member States.

First premise: high market share

Commission considers Google as a dominant undertaking in the market for search online detaining over the 90% of market share in the EEA; it is dominant in the market of mobile operating systems too, because devices associated to Android OS are low price products, the majority of costumers is inclined to buy them thereby Android’s market share in EEA for licensable mobile OS is exceeding 90%.

It brings valuable network effects, since more costumers bound to Android means more app developers for Android, and unavoidably barriers to entry. Google is eventually dominant in the market of Android mobile OS app stores, as over 90% of apps for Android are downloaded from Google Play Store and it can be preinstalled only by manufacturers.

Three allegations arise concerns. First, Google obliges manufacturers to preinstall Google Search and set it by default, should they wish to preinstall Google Play Store.

The Commission concludes that this practice limits the manufacturers’ choice to preinstall apps from third-parties while strengthening dominance in the market of general search online and adversely affecting competition in the market for mobile browsers.

Anti-Fragmentation Agreement

Second, the use of Google’s apps and services on Android devices is not open-source for real since manufacturers wishing to preinstall Google proprietary apps are told to enter into an Anti-Fragmentation Agreement which prohibits to sell devices running alternative versions of Android OS.

To the extent that these versions could be superior than Android itself, Google impedes competitors to enter in the market of apps and general search services.

Third, Google imposes manufacturers to preinstall exclusively Google Search on their smartphones and tablets by the means of a financial incentive not to be paid until a competitor search provider is preinstalled on their mobile device.

Amid antitrust violations and consumers interest

The opening of a proceedings by EU Commission has a direct effect on Member States jurisdiction. National competition authorities pursuant to Article 11 of Antitrust Regulation can no longer apply to the case if EU Commission has initiated investigation, while Article 16 of the Antitrust Regulation provides that national courts should not take any decision in conflict with the Commission opened proceedings.

Courts abroad, like FTC in a similar case involving Google, concluded for rejection of antitrust claims as far as innovation never can harm competition. But EU antitrust law are conceived to protect consumers and they are now focused on safeguarding consumers’ choice of a wider range of mobile apps and services.

Google stands in the market of mobile apps and services holding over 90% share and it could be the best framework to detect an abuse of dominant position. While this leading position is well-accepted by EU Commission, the concerns target Mobile Application Distribution Agreement that Google uses to sign with Android devices manufacturers for the pre-installation of YouTube, Chrome and other Google’s apps and services as a precondition to sell smartphone and tablets running access to Google Play, the Android app store.

While assessing these circumstances under antitrust law, EU Commission should balance interest of consumers, that keep on choosing Android as their favorite OS, and maintenance of competition’s integrity as premise for a rival undertaking to launch a better product in the market

Previous cases of bundling and tying

The assessment of an abuse of dominance was the same subject matter of Yandex’s claim before Federal Antimonopoly Service of Russia while specific Android has brought numerous issues upon alleged infringement of copyrights and patents against Google, before FTC and EU Commission. As well as Google, Microsoft faced abuse of dominant position claims just for bundling and tying its Windows Media Player / Internet Explorer to Windows exactly like its biggest rival with Google Play / Google Chrome and Android did.

Copyright © 2017