Google in court: Alphabet unit Google on Monday blasted EU antitrust regulators for ignoring rival Apple as it launched a bid to get Europe’s second-highest court to annul a record 4.34-billion euro ($5.1 billion) fine related to its Android operating system.
Far from holding back rivals and harming users, Android has been a massive success story of competition at work, representatives of Google told a panel of five judges at the General Court at the start of a five-day hearing.
The European Commission fined Google in 2018, saying that it had used Android since 2011 to thwart rivals and cement its dominance in general internet search.
Regardless of how the court rules, Google, Apple, Amazon and Facebook will have to change their business models in the coming years to ensure a level playing field for rivals following tough new rules proposed by European Union antitrust chief Margrethe Vestager.
“The Commission shut its eyes to the real competitive dynamic in this industry, that between Apple and Android,” Google’s lawyer Meredith Pickford told the court.
“By defining markets too narrowly and downplaying the potent constraint imposed by the highly powerful Apple, the Commission has mistakenly found Google to be dominant in mobile operating systems and app stores, when it was in fact a vigorous market disrupter,” he said.
Google in court to appeal EU’s Fine
Pickford said Android “is an exceptional success story of the power of competition in action”.
Commission lawyer Nicholas Khan dismissed Apple’s role because of its small market share compared with Android.
“Bringing Apple into the picture doesn’t change things very much. Google and Apple pursue different models,” he told the court.
Khan cited Google’s agreements which forced phone manufacturers to pre-install Google Search, the Chrome browser and the Google Play app store on their Android devices, and payments to pre-install only Google Search as conduct that did not allow for competition.
He said Google’s dominance as an incumbent and the immense barriers for rivals resulted in “a virtuous circle for Google but a vicious circle for anybody else”.
Android, free for device makers to use, is found on about 80% of the world’s smartphones. The case is the most important of the European Union’s three cases against Google because of Android’s market power. Google has racked up more than 8 billion euros in EU antitrust fines in the last decade.
German phone maker Gigaset Communications GmbH, which is backing Google, said its success as a European smartphone maker was due to Android’s open platform and lamented the negative impact of the Commission’s decision on its business.
“The licence fee for the Play Store that Google now charges as a result of the contested decision represents a significant portion of the price of Gigaset’s smartphones aimed at price-sensitive consumers,” its lawyer Jean-François Bellis told the court.
Lobbying group FairSearch, whose complaint triggered the Commission case, was however scathing about Google’s tactics with phone makers.
“Google adopted a classic bait and switch strategy. It hooked (them) on a supposedly free and open source operating system subsidised by its search monopoly, only to shut that system to competition through the web of restrictions at issue in this case,” its lawyer Thomas Vinje told the court.
A verdict may come next year. The case is T-604/18 Google vs European Commission.
($1 = 0.8537 euros)
Licensing agreements
The key question for the five-judge panel is whether Google abused its dominance by excluding rivals with three types of interrelated licensing agreements.
Google is expected to press the Commission in particular on its findings about the pre-installation of its search and browser apps, a debate that is scheduled to take place on Tuesday.
Google’s “Play Store” app store is a must-have for phone-makers such as Samsung and HTC, the Commission found, and by requiring the phone-makers who seek access to it to pre-install Google’s entire suit of apps, including its lucrative Search and Chrome apps, the U.S. tech giant reduced the ability of rivals to effectively compete with Google.
Google will argue that it bundles the apps to bear the cost of developing and maintaining its operating system.
Complainants expect Google’s bundling to fit squarely into the precedent that the court established in the appeal of the Commission’s first Big Tech case against Microsoft in the early 2000s, in which Microsoft was found to illegally tie its Media Player software to its dominant Windows operating system.
For Google, an important difference with the Microsoft case is that it was more difficult to download alternatives at the time, unlike on mobile, where competition is just a tap away. This in turn is expected to be disputed by European consumer organization BEUC, which is intervening on the side of the Commission, and will point to evidence that users tend to stick with pre-installed software.
Other important contracts in focus concern payments Google made to phone-makers and mobile operators until 2014 on the condition that they exclusively pre-installed the Google Search app on their devices. The third type of agreement prevented manufacturers from creating alternative versions of Android — which complainants argue blocked the way for competing ecosystems, such as Amazon’s Fire or Microsoft’s Windows Live.
Apple interest
Apple will also take a keen interest in the Android court proceedings, because the fines and orders the iPhone-maker may face over its own iOS operating system and App Store depend on how the EU carved up the markets in the Google case.
The Commission found that Google controls over 95 percent of the market for “smart mobile operating systems available for license.” But that market definition excludes Apple, as iOS is non-licensable, meaning that Apple could be deemed a full monopolist in its own market. That is in part because users don’t easily switch between Apple and Google’s ecosystems.
While the Android case mostly looks back at past Google conduct, it may also impact future developments. To comply with the order contained in the Commission’s decision, Google implemented a choice screen allowing users who install a new smartphone to choose from a list of search engines — a menu last tweaked on September 1.
If Google wins the court case, it is free to roll back the choice screen. But the ultimate outcome of the case is unlikely to come soon.
The General Court could take at least another year to issue its ruling, which is then open to appeal in front of the Court of Justice, the EU’s highest court.
(This story has been copyright by Sports Report)