European Union vs. Google

European Union vs. Google is an investigation and enforcement action by the European Commission against Google for alleged unfair competition. The investigation against Google started on 15 April 2015, after Margrethe Vestager, European Commissioner for Competition, accused Google of using Android OS to promote its mobile services. (The European Commission has also launched two other anti-competition cases against Google, involving Google Shopping and Google AdSense.)

EU's claims

On 15 April 2015, the European Commission started an official investigation against Google. The Commission released its Statement of Objections to Google^[1] – a formal claim against the company's actions in the market of mobile devices, and accused the company of abusing its dominant position by means of Android. Having recalled that about 80% of smart phones and tablet PCs sold in EU run on Android, the European Commission stated numerous complaints from the companies creating mobile apps based on this platform. After conducting its own investigation that lasted for a year, the Commission initiated a court trial to clarify the following:

1. Whether Google actions impede development of the market of mobile devices and access of competitors thereto by demanding or encouraging smart phone manufacturers to pre-install Google apps and services on their devices.
2. Whether Google suppressed attempts of smart phone and tablet PC manufacturers willing to install Google apps on their devices to run on modified and potentially competitive versions of Android.
3. Whether Google unlawfully impeded the market development by way of tacking the installation of certain Google apps with the use of other apps of this company or its software interface.

A year after, on 20 April 2016, the European Commission announced the issue of the second Statement of Objections to Google and Alphabet Inc., the consortium Google is a part of,^[2] which concerned Google Search engine being imposed, in the Commission's opinion, by the company to the manufacturers of mobile devices along with Google Chrome browser along with the direct prohibition for the manufacturers of mobile devices to pre-install other browsers. Those restrictions were set in Mobile Applications Distribution Agreements (MADA). The European Commission emphasized that about 80% of smart phones sold in the European market use Android, and with its actions, Google violates the antitrust law. Margrethe Vestager, European Commissioner for Competition, said:^[3]

A competitive mobile internet sector is increasingly important for consumers and businesses in Europe. Based on our investigation thus far, we believe that Google's behavior denies consumers a wider choice of mobile apps and services and stands in the way of innovation by other players, in breach of EU antitrust rules. These rules apply to all companies active in Europe. Google now has the opportunity to reply to the Commission's concerns.

In their Statement of Objections, the European Commission accused Google of the breach of EU antitrust rules in three ways:

• by requiring mobile manufacturers to pre-install Google Search and Google Chrome browser and requiring them to set Google Search as default search service on their devices, as a condition to license certain Google proprietary apps;
• by preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code;
• by giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.

In both cases, the antitrust body gave Google 12 weeks to reply. The damage inflicted by the company's actions was estimated by the European Commission at 10% of the company's annual revenue, which amounts to $7.4 billion.^[4]

The decision

On 7 June 2017, Google was found guilty and was charged a record-breaking 2.7 billion dollar fine. The verdict was in correspondence to two antitrust cases from the European Union: one involving their advertising products and the other with regards to the mobile phone and operating system company Android (bought by Google in July 2005).^[5] In both cases, Google was found guilty of favoring their services over their competition’s services. Google has denied the European Union’s accusations against them and made a statement claiming “its services had helped the region’s digital economy grow”.^[6] The 2.7 billion dollars represented just over 2.5% of Google's 2016 revenue.^[7]

Those who are in competition with Google are pushing for their company to be individually monitored, for fear of losing more business to the dominant search engine. This would include investigating and overviewing Google’s most prized search page algorithm, PageRank. The EU’s Competition Commission decided to monitor their decision and Google’s compliance with it, due to its obligation to report to the EUCC on a regular basis (every four months). Although the issue seems like it is at a close, the European Commission believes it will continue for some time.

In order to comply, Google is effectively separating its comparison shopping service into its own company after the fine. The Google Shopping service still will be a part of Google, but will run completely separately with its own revenues and profits. This move will allow Google to avoid further fines, according to Bloomberg, as it complies with the European Union’s order of allowing even treatment to businesses, no matter if they compete with Google or not.^[8]

However, even though Google is complying in part, the company is still appealing the decision. Google responded in its appeal papers to the EU Antitrust Fine by stating that the EU chair misstated facts and didn’t show enough evidence to prove that their site hurt rivals. Google wants the fine either overturned or reduced. The appeal was based on six arguments, with two of them being that the court didn’t prove that Google favored its own shopping service by placing paid ads on top the search results. Two of them stated that the courts misstated facts and evidence, and the other two argued that a fine wasn’t warranted as a possible penalty.^[9]

On 19 July 2018, EU has fined Google €4.3 billion (about US$5 billion). Google responded it would appeal, according to company spokesperson Al Verney "Android has created more choice for everyone, not less". To date, this fine is the biggest ever imposed by European Union on a company for anti-competitive behaviour.^[10] European Union Competition Commissioner Margrethe Vestager, who was part of the decision against Google, stated that only after the EU found against Google in the search anti-trust case in 2017 did Google attempt to settle on the issues of the Android anti-trust issues, which was far too late after the EU filed the initial charges against Google.^[11]

See also

• Russia antitrust case
• Microsoft Corp v Commission

References