European Commission Fines Google €4.3bn For Android Market Dominance Abuses
Today the European Commission has announced that it has found Google in breach of EU antitrust and has fined the company €4.34 billion.
The original proceedings against Google formally opened in April 2015 and investigate Google’s business practices related to Android licensing between 2011 and 2014 and has found the company of breaching EU rules prohibiting anti-competitive agreements and abuse of dominant market positions.
As detailed in the thorough press-release, the particular three illegal practices which Google has been found in conducting are as follows:
- has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store);
- made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and
- has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called "Android forks").
Furthermore in the press release, the Commission correctly details Google’s business model for Android as it describes that the operating system was created in order for Google to be a part of the crucial shift from desktop PCs towards mobile devices, and to ensure that its flagship product, Google Search, would feature predominantly in the mobile space. The Commission determined that starting 2011 Google became dominant in the market for app stores for Android, and thus its practise from there on to force manufacturers to preinstall the Google Search app was found to be illegal.
The tying of the Google Chrome browser into the list of required pre-installed application from 2012 onwards was also found to be abusive of its dominant market position.
The commission argues that pre-installation creates a status quo bias for users as whatever default applications are included in a sold device are the predominantly retained ones by users, creating a significant entry-barrier for competing alternatives. Google forcing manufacturers to pre-install the applications thus reduced the ability for rivals to compete.
The investigation also found that Google granted significant financial incentives to device manufacturers to exclusively just pre-install Google Search across that manufacturers whole device portfolio. The investigation is said to have shown that rival search engine providers would have been unable to counter-compensate a manufacturer for the loss of revenue from Google and still operate under a profit of their own. The Commission found that this particular conduct was gradually lessened in 2013 and ceased as of 2014.
Finally, one of the bigger findings is Google’s obstruction of development and distribution of competing Android operating systems (forks). As Android is an open-source operating system, in theory any manufacturer could just fork it and continue to develop it independently as they would see fit. While in theory nothing stops the manufacturer from doing this, in practise Google’s CTS requirements means that any such fork would not be supported by any Google services, and as such be shut out of the main Android application ecosystem. Of particular note is that a manufacturer would lose all rights to bundle Google apps across all of its devices if it were to sell any alternative device with a forked OS.
Google’s counterargument to this was that the restrictions were necessary in order to avoid fragmentation; the Commission however found that Google had made no effort in trying to determine if Android forks would be compliant with the technical requirements of its own proprietary applications, and also said that Google had made no credible evidence available demonstrating any technical failures of forks not being able to support Google’s apps.
The €4.34bn fine takes into account the duration and gravity of the infringements based on Google’s revenue from search and advertising in the European Economic Area. The Commission decision requires Google to end its illegal conduct within 0 days or else face further fines of up to 5% of daily average worldwide turnover of Alphabet (Google’s parent company).