Background

Google introduced its mobile OS Android in 2008. In recent years, the system has become a major player on the mobile OS market across the European Economic Area (“EEA”) and globally. Android runs on most mobile devices manufactured by many of the biggest consumer electronics makers such as Samsung, LG, HTC or Sony.

Android is an open-source platform – meaning that the software may be used freely by any developer or phonemaker. However, the large majority of manufacturers who use Android on their devices use it in combination with numerous Google proprietary applications and services (such as the Google App Store), which require them to enter into licencing agreements with Google.

The probe

The European Commission announced on 15 April 2015 that it had opened a formal investigation into Android.

In its press release, the Commission appears to consider that Android is dominant in the market for licenced mobile OS; this market definition excludes Apple’s iOS as Apple does not licence its software to third-parties.

Statement of objections

The European Commission issued its statement of objections just over a year after opening its formal probe, on 20 April 2016. The Regulator alleges that Google has breached Article 102 of the Treaty on the Functioning of the European Union on three principal grounds:

  • By forcing manufacturers to pre-install some of its products (including Google Search and Google Chrome) and requiring them to make Google Search the default search engine on their devices, as a condition to licence some of its proprietary apps to them (including the Google App Store, which is a commercial necessity for phonemakers). This is an allegation of “tying” or “bundling” and, according to the Commission, prevents competing search engines and browsers from competing for the mobile market.
  • By preventing manufacturers from selling devices running competing versions of Android, as a condition to obtain the licence to use those same proprietary apps. The Commission claims that this conduct prevents potentially competing mobile OS from gaining traction and hinders innovation.
  • By offering significant financial incentives to the largest manufacturers and mobile network operators in return for offering Google Search as the default search engine on their devices.

The Commission’s view is that these actions reinforce Google’s dominance in the market for internet search, and hinder competition on the markets for mobile internet browsers and mobile operating systems.

Commissioner Vestager stated that a competitive mobile internet sector is increasingly important, and that Google’s alleged behaviour denies consumers a wider choice of mobile apps and services, standing in the way of innovation. Notably, Commissioner Vestager immediately went on record stating that EU antitrust rules “apply to all companies active in Europe”, in an apparent move to anticipate any claim of protectionism or bias against US tech firms.

Google’s reply

Google was quick to respond to the allegations via a blog post, noting that:

  • Its partner agreements are entirely voluntary, and manufacturers are free to use Android without any of Google’s other products (giving Amazon as an illustration of this).
  • Manufacturers are free to load third-party apps on their phones, and that such was the case for most of the major phonemakers (who pre-install apps such as Facebook, Amazon or mobile carrier apps).
  • End users are entirely free to download other apps onto their phones and make these apps the default programmes used by the system, including apps that compete directly with Google products.

Google also positioned the commercial realities of its Android business as an explanation for the contractual requirements imposed on phonemakers, stating that it needs to offset the price of developing and maintaining the software (which is free to use) through revenue generated by its other products and services (and that it would not be a viable business model otherwise). It also argued that Android had been a great success of collaboration and innovation.

Comments

As this investigation becomes the second ongoing antitrust probe by the Commission into Google’s affairs (in addition to the Google Search inquiry), it will inevitably trigger further debate on the Commission’s approach to regulating large US tech firms.

Moreover, it is one of the most wide-ranging probes by the Commission into the mobile market, which has become increasingly important in recent times. The outcome of this investigation may shape the way transnational and domestic competition authorities view, define and regulate mobile markets in the future. 

Google now has 12 weeks to respond to the allegations.