For many years now, Google has been the dominant force in the smartphone market thanks to their Android operating system. It’s gone from being a second-place player to Nokia’s Symbian and BlackBerry’s Mobile OS to commanding near 90% market share according to recent studies. Mindshare is at an all-time high too, because most people consider an Android handset before Apple’s iOS thanks to the strength of Google’s ecosystem. It’s impressive. But that dominance attracts attention and scrutiny to the ways in which Google does business, and this past week the European Commission completed their findings into Google’s allegedly abusive market practices. Not only was Google found to be in violation of EU antritrust law, it was slapped with the biggest fine the commission has ever dealt out in the EU’s history.
In a ruling delivered on Wednesday, 18 July 2018, the European Commission (EC) ordered Google’s parent company Alphabet to pay the EC a record fine of €4.34 billion for breaking antitrust laws, abusing their position and market dominance, and reducing or taking away consumer rights wholesale. The fine is separate from the commission’s finding that Google incentivised the inclusion of Chrome and the Google search as the default browser and service on mobile phones, blocked phone manufacturers from creating custom versions of Android that offered access to the Google Apps platforms, and made significant payments to third parties to exclusively bundle the Google Search widget on their phones. That last part is very Intel-like in its execution; according to the EC, Google’s payments were to incentivise both manufacturers and network operators to bundle the search widget on the homescreen by default, and to disregard other services or search engines.
In the report published by the EC, which you can read here, lead competition policy commissioner Margrethe Vestager said the following:
“Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”
The report also details the ways in which Google fell afoul of the law, which includes the following practices:
- Google offers its mobile apps and services to device manufacturers as a bundle, which includes the Google Play Store, the Google Search app and the Google Chrome browser. Google’s licensing conditions make it impossible for manufacturers to pre-install some apps but not others.
Google granted significant financial incentives to some of the largest device manufacturers as well as mobile network operators on condition that they exclusively pre-installed Google Search across their entire portfolio of Android devices. This harmed competition by significantly reducing their incentives to pre-install competing search apps.
Google has prevented device manufacturers from using any alternative version of Android that was not approved by Google (Android forks). In order to be able to pre-install on their devices Google’s proprietary apps, including the Play Store and Google Search, manufacturers had to commit not to develop or sell even a single device running on an Android fork. The Commission found that this conduct was abusive as of 2011, which is the date Google became dominant in the market for app stores for the Android mobile operating system.
Given that the commission’s study of the materials and abuses started from 2011, the fine wasn’t just indicative of Google’s global annual revenues in 2017 (which amounted to $110 billion) but it was also skewed to be higher given that Google had spent so much time since 2011 enforcing these practices on their clients and partners. In the past, several companies that used Android on their phones had tried to offer access to the Play Store but not Google’s bundled apps, and that has been one of the main reasons why we’ve seen brands like Samsung and Huawei begin to experiment with their own platforms.
The CyanogenMod project is one such example – although Cyanogen shopped around their offering to third parties such as Xiaomi, they were not successful because Google disincentivises their partners from doing this. They even partnered up with Microsoft to offer their apps and services on their custom Android OS, but this partnership ran into Google’s wall of money. According to the press release, any parties negatively affected by Google’s activities may be able to approach courts inside the EU to seek damages if they have been affected.
The EC has given Google up to 90 days to fix their product offering to consumers, and to stop offering incentives to third parties to prefer its services over others in the internet search market. Google’s rebuttal to the ruling, which went up within half an hour of the ruling being published, said that Android “has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation, and lower prices are classic hallmarks of robust competition”. The company says they intend to appeal the ruling and fine, but the EC doesn’t typically budge from their decisions. If anything, Google might be risking more punishment if they try to justify their position further.