02|10|2019
European Commission 18.07.2018. decision in case No.40099 Google Android
European Commission (Commission) has imposed a fine of 4 342 865 000 EUR (1 921 666 000 EUR jointly with Alphabet Inc.) to Google LLC (Google) and its parent company Alphabet Inc. (Alphabet), as well as periodic penalty payments for a continuous infringement of the prohibition of abuse of dominant position within EU and the obligations refraining from several actions listed in the decision. The turnover of the Alphabet for the year of 2017 was approximately EUR 98 127 million.
In 2013, a complaint from a competitor Fair Search had been received. Commission initiated proceedings against Google in 2015 and against Alphabet in 2016 after more complaints from Aptoide S.A., Yandex N.V. and Disconnect Inc. were received.
The infringements concern smart mobile devices and their operating systems, apps and app stores, as well as the application programming interfaces, general search services, web browsers regarding the use of Google’s dominant position in the tying its products, services and licenses with third party products and services.
As Commission had found out, in 2007 Google established the Open Handset Alliance, trying to convince original equipment manufacturers, mobile network operators and app developers to participate in it and to agree on various product and service terms, additionally concluding an agreement with Apple and making the Google Search the default search engine in safari browser in various smart mobile products including iPhones, and acquiring and developing of the mobile operating system Android.
Later on Google entered into anti-fragmentation agreements, mobile application distribution agreements and revenue share agreements for Google Search with third party companies HTC, Huawei Technologies Co. Ltd., Lenovo Group Ltd., LG Electronics Inc. and Samsung and Sony Corporation, requiring them only to distribute Android compatible devices and not to create and develop any third party software development kits, as well as to include mandatory Google apps in the hardware devices, to put the icons on the home screen and to configure appropriate Client ID number for each of the manufactured or sold device allowing to track the app use of the clients, and tying the Google Search app with the Play Store, Google Chrome with the Play Store and the Google Search app, as well as granting of revenue share payments and licensing for a compatible behavior with these terms.
Google entered into a portfolio-based revenue share agreements with original equipment manufacturers and mobile network operators where the latter agree that they will not allow to install any application, product or service which is the same as or substantially similar to the Google products on their manufactured, sold or serviced devices. And, even if the original equipment manufacturer decides to install Android on its devices, due to technical reasons he cannot pre-install an app store that has not been developed for Android, as he would only be able to pre-install a non-Android app store by installing a non-Android OS, in which case the quality of the Play Store, an app for the sale of mobile smart phone applications, would deteriorate thus resulting in the decrease of the mobile smartphone and similar product sales of the manufacturer.
The infringement in this case was consisting of four separate infringements:
In the decision Commission concludes that Google and its parent company has abused its dominant position in the market both in the territory of EU, as well as in the worldwide market of app stores and general search services, except for the territory of China, as the latter mostly use forked and heavily customized versions of Android.
However, the Commission stated that the access to the case materials has been given in a timely and complete manner, taking into the account the rights of information providers to protect their business secrets and other confidential information, and that Google had a period of four months to prepare its Response to the Statement of Objections, as the case materials had been given out to Google or its advisors. Commission noted that it had provided Google with adequate access to all minutes of meetings with third parties and has assessed the case evidence. Commission adds that it is not necessary for every item of evidence to be adduced in order to be sufficiently precise and consistent to establish the infringements.
Commission stated that the relevant product markets in the case are:
The Commission stated that Android app stores constitute a separate relevant product market, as other apps do not belong to the same product market as app stores, and app stores for other licensable smart mobile devices do not belong to the same product market as the app stores for Android devices, The Android app stores function as distribution channels for other apps, allowing users to access services and products, and the app stores cannot be replaced by other apps for search purposes. The manufacturer can choose various different Google Android app stores for its Google Android devices however, other Google Android app stores are merely seen as limited substitutes for the Play Store.
The Commission had concluded that the provision of general search services constitutes a separate relevant product market. In return to the free search services offered to its users, the search service can use the information for its purposes, as well as to advertise third parties and its own services, monetising the search services, thus there are other parameters of competition between general search services, such as the speed, depth of indexing of the worldwide network information and the used interface appeal.
Even though users do not pay a monetary sum for the use of search services, they contribute to the monetization of the service by providing new data with each search, and the general search services are the only online services where users can seek results from all categories at the same time in comparison to the special search services. Commission concludes that the markets for general search services are national in scope, while mobile web browsers are of worldwide scope and global competition.
According to Commission, non-OS specific mobile web browsers constitute a separate relevant product market as OS-specific mobile web browsers, as they rely on different technology and are not compatible.
Commission concludes that the Google holds a dominant position in the worldwide market (excluding China) for the licensing of smart mobile OSs and Android app stores as well as each national market for general search services in the EEA.
The Commission notes that the market member who is in a dominant position has a special responsibility not to impair or create a distorted competition within the market, and the abuse of a dominant position itself does not necessarily have to consist of the use of the economic power of the dominant position as it can manifest in different ways, as well as abusive practices can impact healthy competition in a different, indirect way. The effects of the dominant undertaking's actions do not have to be manifested in a concrete manner, as it is sufficient that the actions can restrict competition, even if they are not successful, thus the Commission is not required to demonstrate that a particular practice has an actual anti-competitive effect.
The tying of Google Chrome with the Play Store and the Google Search app constitutes an abuse of Google’s dominant position as:
Commission concludes that Google, being in a dominant position in the market, with earlier mentioned agreements with original equipment manufacturers and mobile network operators, as well as other companies, enforced third parties to obey to its requests, further strengthening its dominant position in the market of internet software, apps and mobile services and products, increasing Google revenues with search advertisements and pushing out anyone not compatible with its requests and product specifications therefore restricting normal and healthy competition. The timeframe from which the infringements had started was 2011 until the time of the decision (ongoing).
Available:
https://ec.europa.eu/competition/antitrust/cases/dec_docs/40099/40099_9993_3.pdf
In order to obtain more information about this decision, you can contact Attorneys at Law Azanda & Associates by writing to email info@azanda.lv
Sākums
In 2013, a complaint from a competitor Fair Search had been received. Commission initiated proceedings against Google in 2015 and against Alphabet in 2016 after more complaints from Aptoide S.A., Yandex N.V. and Disconnect Inc. were received.
The infringements concern smart mobile devices and their operating systems, apps and app stores, as well as the application programming interfaces, general search services, web browsers regarding the use of Google’s dominant position in the tying its products, services and licenses with third party products and services.
As Commission had found out, in 2007 Google established the Open Handset Alliance, trying to convince original equipment manufacturers, mobile network operators and app developers to participate in it and to agree on various product and service terms, additionally concluding an agreement with Apple and making the Google Search the default search engine in safari browser in various smart mobile products including iPhones, and acquiring and developing of the mobile operating system Android.
Later on Google entered into anti-fragmentation agreements, mobile application distribution agreements and revenue share agreements for Google Search with third party companies HTC, Huawei Technologies Co. Ltd., Lenovo Group Ltd., LG Electronics Inc. and Samsung and Sony Corporation, requiring them only to distribute Android compatible devices and not to create and develop any third party software development kits, as well as to include mandatory Google apps in the hardware devices, to put the icons on the home screen and to configure appropriate Client ID number for each of the manufactured or sold device allowing to track the app use of the clients, and tying the Google Search app with the Play Store, Google Chrome with the Play Store and the Google Search app, as well as granting of revenue share payments and licensing for a compatible behavior with these terms.
Google entered into a portfolio-based revenue share agreements with original equipment manufacturers and mobile network operators where the latter agree that they will not allow to install any application, product or service which is the same as or substantially similar to the Google products on their manufactured, sold or serviced devices. And, even if the original equipment manufacturer decides to install Android on its devices, due to technical reasons he cannot pre-install an app store that has not been developed for Android, as he would only be able to pre-install a non-Android app store by installing a non-Android OS, in which case the quality of the Play Store, an app for the sale of mobile smart phone applications, would deteriorate thus resulting in the decrease of the mobile smartphone and similar product sales of the manufacturer.
The infringement in this case was consisting of four separate infringements:
- tying of the Google Search app with the Play Store;
- tying of Google Chrome with the Play Store and the Google Search app;
- licensing of the Play Store and the Google Search app conditional on the anti-fragmentation obligations;
- granting revenue share payments to original equipment manufacturers and mobile network operators on condition that they pre-install no competing general search service on any device.
In the decision Commission concludes that Google and its parent company has abused its dominant position in the market both in the territory of EU, as well as in the worldwide market of app stores and general search services, except for the territory of China, as the latter mostly use forked and heavily customized versions of Android.
However, the Commission stated that the access to the case materials has been given in a timely and complete manner, taking into the account the rights of information providers to protect their business secrets and other confidential information, and that Google had a period of four months to prepare its Response to the Statement of Objections, as the case materials had been given out to Google or its advisors. Commission noted that it had provided Google with adequate access to all minutes of meetings with third parties and has assessed the case evidence. Commission adds that it is not necessary for every item of evidence to be adduced in order to be sufficiently precise and consistent to establish the infringements.
Commission stated that the relevant product markets in the case are:
- market for the licensing of smart mobile OSs;
- market for Android app stores;
- market for the providing of general search services;
- market for non OS-specific mobile web browsers.
The Commission stated that Android app stores constitute a separate relevant product market, as other apps do not belong to the same product market as app stores, and app stores for other licensable smart mobile devices do not belong to the same product market as the app stores for Android devices, The Android app stores function as distribution channels for other apps, allowing users to access services and products, and the app stores cannot be replaced by other apps for search purposes. The manufacturer can choose various different Google Android app stores for its Google Android devices however, other Google Android app stores are merely seen as limited substitutes for the Play Store.
The Commission had concluded that the provision of general search services constitutes a separate relevant product market. In return to the free search services offered to its users, the search service can use the information for its purposes, as well as to advertise third parties and its own services, monetising the search services, thus there are other parameters of competition between general search services, such as the speed, depth of indexing of the worldwide network information and the used interface appeal.
Even though users do not pay a monetary sum for the use of search services, they contribute to the monetization of the service by providing new data with each search, and the general search services are the only online services where users can seek results from all categories at the same time in comparison to the special search services. Commission concludes that the markets for general search services are national in scope, while mobile web browsers are of worldwide scope and global competition.
According to Commission, non-OS specific mobile web browsers constitute a separate relevant product market as OS-specific mobile web browsers, as they rely on different technology and are not compatible.
Commission concludes that the Google holds a dominant position in the worldwide market (excluding China) for the licensing of smart mobile OSs and Android app stores as well as each national market for general search services in the EEA.
The Commission notes that the market member who is in a dominant position has a special responsibility not to impair or create a distorted competition within the market, and the abuse of a dominant position itself does not necessarily have to consist of the use of the economic power of the dominant position as it can manifest in different ways, as well as abusive practices can impact healthy competition in a different, indirect way. The effects of the dominant undertaking's actions do not have to be manifested in a concrete manner, as it is sufficient that the actions can restrict competition, even if they are not successful, thus the Commission is not required to demonstrate that a particular practice has an actual anti-competitive effect.
The tying of Google Chrome with the Play Store and the Google Search app constitutes an abuse of Google’s dominant position as:
- Google Chrome is a distinct product from the Play Store and the Google Search app and the Play Store and Google Search app cannot be obtained without Google Chrome;
- Google is dominant in the worldwide market for Android app stores and in the national markets for general search services;
- tying of Google Chrome with the Play Store and the Google Search app is capable of restricting competition.
Commission concludes that Google, being in a dominant position in the market, with earlier mentioned agreements with original equipment manufacturers and mobile network operators, as well as other companies, enforced third parties to obey to its requests, further strengthening its dominant position in the market of internet software, apps and mobile services and products, increasing Google revenues with search advertisements and pushing out anyone not compatible with its requests and product specifications therefore restricting normal and healthy competition. The timeframe from which the infringements had started was 2011 until the time of the decision (ongoing).
Available:
https://ec.europa.eu/competition/antitrust/cases/dec_docs/40099/40099_9993_3.pdf
In order to obtain more information about this decision, you can contact Attorneys at Law Azanda & Associates by writing to email info@azanda.lv
