Short Reads

Google receives a second record fine of EUR 4.34 billion for imposing restrictions on Android device makers

Google receives a second record fine of EUR 4.34 billion for imposing

Google receives a second record fine of EUR 4.34 billion for imposing restrictions on Android device makers

01.08.2018 EU law

On 18 July 2018, the European Commission announced its decision to fine Google EUR 4.34 billion for abusing its dominant position in the general internet search market by imposing illegal restrictions on Android device manufacturers and mobile network operators.

Background

In 2005, Google acquired the developer of the Android mobile operating system, which it has since continued to develop. Although Android is an open-source mobile operating system, most smartphone and tablet manufacturers in Europe use the Android operating system in combination with various Google's proprietary applications and services. In order to obtain the right to install these applications and services on their Android devices, manufacturers are required to enter into agreements with Google which impose a number of restrictions as discussed below. Some of these restrictions were also included in contracts with mobile operators that have the ability to determine which apps and services are installed on devices.

Google's dominance

In Europe, 80% of smart mobile devices run on Android. The Commission concluded that Google is dominant in three relevant markets. First, in accordance with a 2017 decision, the Commission found that Google was dominant in each relevant national market for general internet search throughout the EEA. Google's share of internet searches exceeded 90% in most EEA countries [See our Google comparison shopping article in our July 2017 Newsletter].

Secondly, the Commission found that Google is dominant in the market for licensable smart mobile operating systems and app stores for the Android mobile operating system. Thirdly, party manufacturers of mobile devices can enter into licence agreements with Google to run Android on their devices. The Commission concluded that Google, with a market share of 95%, is dominant in the worldwide market (excluding China) for licensable smart mobile operating systems. The Commission noted that Android does not compete with operating systems used by vertically-integrated developers like Apple (iOS), because the latter are not available to be licensed by device manufacturers. Equally, competition for end users, in particular between Apple and Android devices, does not indirectly constrain Google's market power, according to the Commission.

Finally, the Commission concluded that Google is dominant in the worldwide market (excluding China) for app stores for the Android mobile operating system. Google's app store accounts for more than 90% of apps downloaded on Android services.

Google's abusive practices

The Commission's investigation indicated that Google imposed three types of restrictions on Android device manufactures and network operators:

  1. Tying of Google's search and browser apps: In order to license Google's app store, manufacturers were required to pre-install the Google Search app and browser app (Chrome). According to the Commission, users are not likely to download alternative search and browser apps and instead use those pre-installed on their devices. Therefore, tying Google's search and browser apps reduced the incentives of manufacturers to pre-install competing search and browser apps and also the incentives of users to subsequently download them.
  2. Illegal payments conditional on exclusive pre-installation of Google Search: Google made payments to certain large device manufacturers and mobile network operators on the condition that they pre-installed only the Google Search app on their devices, reducing their incentives to pre-install competing search apps.
  3. Illegal obstruction of the development and distribution of competing Android operating systems: Google 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 (so-called "Android forks"). This harmed competition because it reduced the opportunity for devices running on Android forks to be developed and sold and also closed a relevant channel for competitors to introduce apps and services.

The Commission's record-setting fine underscores its aggressive stance in enforcing competition laws in technology-intensive industries [see our Facebook/Whatsapp and Intel Newsletter]. In addition, this decision will have an important impact on the way dominant undertakings implement licensing models. Although the decision has not yet been published, it has already prompted extensive debate.

This article was published in the Competition Law Newsletter of August 2018. Other articles in this newsletter:

  1. European Court of Justice dismissed Orange Polska’s appeal in abuse of dominance case
  2. General Court underlines importance of Commission's duty to state reasons
  3. General Court dismisses appeals by investor against power cable cartel fine
  4. European Commission issues a new Best Practices Code for State aid control
  5. District Court in the Netherlands rules on limitation periods in CRT case
  6. Court of Appeal in the Netherlands decides to appoint independent economic experts in TenneT v ABB
  7. Belgian Court of Cassation annuls decision prohibiting pharmacists from using Google Adwords

Team

Related news

18.07.2019 NL law
ESMA publishes report on licencing of fintech firms across europe

Short Reads - On 12 July, the European Securities and Markets Authority ("ESMA") published a report on the status of licencing regimes of FinTech firms across the European Union ("EU").  The report is based on two surveys conducted by ESMA since January 2018, which gathered evidence from EU national competent authorities ("NCAs") on the licensing regimes of FinTech firms in their respective jurisdictions.

Read more

09.07.2019 NL law
Testen van zelfrijdende auto's sinds 1 juli 2019 vergemakkelijkt

Short Reads - Op 1 juli 2019 is de Experimenteerwet zelfrijdende auto's in werking getreden (Stb. 2019, 240), Het betreft een wijziging van de Wegenverkeerswet 1994 (Wvw) waardoor het testen van zelfrijdende auto's (met besturing op afstand) makkelijker wordt. De wetswijziging vormt een belangrijke stap om belemmeringen in de huidige regelgeving weg te nemen en ruim baan te maken voor nieuwe technologische ontwikkelingen op het gebied van zelfrijdende auto's.

Read more

17.07.2019 BE law
EU Single-Use Plastics Directive is now in force: brief recap

Articles - Plastic is a significant and growing global concern. A recent study commissioned by WWF and carried out by the University of Newcastle, Australia, suggests that people are consuming around 2,000 tiny pieces of plastic every week (which is approximately 5 grams of plastic, the weight of a credit card).  In this context, the EU adopted a new directive aiming at tackling marine litter generated from 10 single-use plastic products and from abandoned fishing gear and oxo-degradable plastics. This is called the Single-Use Plastics Directive and has entered into force this month, on 2 July 2019.

Read more

15.07.2019 EU law
ICO to impose record-breaking fines for inadequate security measures and data breaches

Short Reads - Though the European data protection authorities have taken their time in enforcing the GDPR, two announcements by the ICO in the UK regarding proposed fines for British Airways and Marriott demonstrate that large fines are about to start landing regularly. Both of the substantial fines are to be handed out as a result of shortcomings in handling data breaches caused by cyber-attacks.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring