On 20 April 2016, the European Commission confirmed it issued a Statement of Objections ("SO") to Google concerning the imposition of restrictions on Android device manufacturers and mobile network operators. The investigation was formally opened in April 2015 (see VBB on Competition Law, Volume 2015, No 4, available at www.vbb.com). Google now has until July 2016 to formally respond to the Commission's concerns.
Based on the press release, the Commission's preliminary view is that Google abused its dominance in the markets for (i) general internet search services, (ii) licensable smart mobile operating systems, and (iii) app stores for the Android mobile operating system.
The Commission's concerns are based on a finding that Google's Android business model pursues an anticompetitive strategy of protecting and expanding its dominant position in internet search. As Commissioner Vestager explained in a statement, Google's Android business model "denies consumers a wider choice of mobile apps and services and stands in the way of innovation by other players". In particular, it is alleged that Google breached Article 102 TFEU by:
- Requiring manufacturers to pre-install Google Search and Google Chrome browsers as default options on devices,
- Preventing manufacturers from selling smart mobile devices running competing operating systems based on the Android open source code, and
- Giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.
The Commission alleges that the restrictive arrangements are imposed by Google through a suite of licencing agreements with manufacturers and developers including, inter alia, a Compatibility Definition Document (CDD), Mobile Application Distribution Agreement (MADA) and Anti-Fragmentation Agreement (AFA). Similar to any abuse of dominance allegation, the European Commission has relied on Google's high market share in the relevant markets to underpin the dominance allegation contained in the SO and estimates that Google has shares of in excess of 90% for the relevant markets.
A Fact Sheet accompanying the press release also notes that the network effect of more consumers adopting the Android operating system means that a greater number of developers create apps for that system – which in turn creates barriers to entry that further protect Google's position. Also, the European Commission asserts that the switching cost for a customer to change operating system is high, given that it involves losing apps, data and contacts.
Finally, the Commission continues to investigate Google for an alleged abuse of a dominant position in the market for general internet search services in the EEA by way of systematically favouring its own comparison shopping product in its general search results on the web (see VBB on Competition Law, Volume 2015, No 4, available at www.vbb.com).
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