Today the European Commission imposed a record-breaking fine of €4.34 billion on Google for abusing its dominant position in three distinct markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system. The Commission essentially found that Google used its Android mobile operating system to cement the dominance of its search engine.
According to the Commission, Google abused its dominance on the relevant markets by imposing restrictions that limited market access for Google’s competitors. First, it required manufacturers of smart mobile devices to pre-install Google Search and Google’s Chrome browser on their devices as a condition for licensing Google’s app store (the Play Store). Second, it gave significant financial incentives to certain large manufacturers and mobile network operators on the condition that they exclusively pre-installed Google Search on their devices. Third, it prevented manufacturers wishing to pre-install Google apps from selling smart mobile devices running on alternative versions of Android that were not approved by Google. The fine follows an in-depth investigation the Commission launched in April 2015.
The Commission’s press release contains various interesting findings. First, on market definition, the Commission concluded that licensable mobile operating systems is a market on its own and app stores for Android is a separate market. Second, the Commission investigated to what extent competition for end users, in particular between Apple and Android devices, could constrain Google’s market power for the licensing of Android to device manufacturers. The Commission found that this competition does not sufficiently constrain Google inter alia because Google Search is set as the default engine on Apple devices. Therefore, even if users were to switch from Android to Apple devices, this would not have a great impact on Google’s core search business. Third, the Commission found that pre-installation can create a “status quo bias.” Users who find search and browser apps pre-installed on their devices are unlikely to install alternative competing apps.
Today’s decision is likely to affect Google’s business model significantly. Google now has 90 days to comply with the Commission’s decision and bring its conduct to an end in an effective manner or it will face penalty payments of up to five percent of the average worldwide turnover of its parent company, Alphabet. Google has indicated that it intends to appeal today’s decision to the EU General Court.
This is the second major fine the Commission has imposed on Google for abuse of dominant position in violation of EU competition law. On June 27, 2017, the Commission fined Google €2.42 billion for abusing its dominance as a search engine by giving a prominent placement to its own comparison shopping service and demoting rival comparison shopping services in its search results. Sidley was recently named Competition & Regulatory Team of the Year at The Lawyer Awards 2018 in recognition of our work on behalf of complainants in the first abuse of dominance case against Google. Sidley was also involved for a third party in today’s decision against Google.