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Google’s EU Antitrust Battle

In a less than surprising move, the EU has declared Google in breach of antitrust regulations and has abused its dominance. There are three major arcs to their claims:

In today’s Statement of Objections, the Commission alleges that Google has breached EU antitrust rules by:

  1. requiring manufacturers to pre-install Google Search and Google’s 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;
  2. preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code;

  3. giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.

The Commission believes that these business practices may lead to a further consolidation of the dominant position of Google Search in general internet search services. It is also concerned that these practices affect the ability of competing mobile browsers to compete with Google Chrome, and that they hinder the development of operating systems based on the Android open source code and the opportunities they would offer for the development of new apps and services.

In the Commission’s preliminary view, this conduct ultimately harms consumers because they are not given as wide a choice as possible and because it stifles innovation.

The emphasis of this case seems to be more about the search dominance than anything else. As I digested this yesterday, I thought about all the angles I could take with this case. I can certainly sympathize with the EU’s position. They have a point that Google Search being the default search solution stifles any chance for a competing search product. Power users certainly have the choice to change their default search engine to something else and I’m sure some do. However, the issue here is the choice made by the OEM. One could reasonably claim that, if an OEM loaded DuckDuckGo or Yahoo as their default search engine, the consumer experience would suffer, because in reality Google Search is dominant because it is the best. Similarly, the claim that Chrome must be pre-installed as well on Google-approved Android devices. OEMs still ship a different browser in many cases to Chrome and put it on the home screen while they hide Chrome in a folder or buried in a sub-menu. Again, Chrome is the better browser and even without it being on the home screen of many modern day Android devices shipped, Google reported they passed 1 billion active users of the mobile web browser. Seems consumers are playing a role in choosing as well. I’d have an easier time accepting this claim if Google forced the OEM to load the Chrome browser into the default dock but they don’t.

It also seems the EU has turned a blind eye to the existence of Cyanogen, which comes quite close to providing an entire counter case to each of the EU’s claims. Google allows Cyanogen to provide a flavor of AOSP to customers with a host of bundled services. You can ship a version of Cyanogen that only comes with the bare basics of Google services like Play Store and Search and provide all the other solutions yourself. Cyanogen allows a vendor to pass only device level certification meaning said brand can also sell generic non-Google Android AOSP code, something the EU says is not possible when, in fact, it is. They claim once a vendor ships a Google certified smartphone they can no longer ship an AOSP version yet brands who are Google certified do this very thing in China every day.

The main point I landed on as I reflected on this is, even if the EU wins and Google provides even more flexibility than they already do, I honestly don’t think anything would change. This is the main point. Even if someone could bundle an alternate search engine, I doubt most would except for financial benefit which again could hurt the user experience. I don’t think someone is going to create a new startup focusing on search just because now they have an opportunity to be bundled on Android (this is the innovation claim they would). I firmly believe, even if the EU wins and Google changes their tactics, most OEMs would keep doing exactly what they do today.

While there isn’t much strength either in Google’s rebuttal blog post, as the examples they use don’t really help their position, it at least gives some updated terminology on the open yet controlled/managed dynamic of Android.

I understand why Google has the process they do in place to make sure their approved partner devices are capable of certain hardware requirements which is capable of running certain software experiences in order to provide as good of an Android experience as possible. I also sympathize with the OEMs who need to make money while still passing Google’s certification requirements. While I’m more on the side of Google than the EU here, I still believe they need to make more structural changes to Android to provide partners with more revenue opportunities.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

20 thoughts on “Google’s EU Antitrust Battle”

  1. I realize that this is not the way it is, but if it were up to me, if I didn’t have a choice other than to make a company money-either directly or indirectly, then that company should be regulated. perhaps as a public utility or similar standards.

    As I understand it, there is currently no way for Google to not make money, simply by users, any users, being on the internet. Their affiliate network is so vast, merely clicking on a link makes them money.

    As far as this lawsuit, as you’ve explain it goes, it’s IE all over again. Google gives prominence to their own service, but competing services can indeed be used. This may require the burden of knowledge to do so, and that’s the extent of the merit of the suit. If found guilty a stern penalty is appropriate.

    Still, that’s better than had Google outright forbidden anything or prevented access by the user. For this, a much more stern penalty ought to be called for.

    1. That’s the only part that gripes me, whether I want to or not I do business for Google. At least with MS if I didn’t want to do business with them I simply didn’t.


    2. You get it Wong unlike with Microsoft, the issue is not about Google blocking other from competing with the, is simply about google being too visible hence too dominant on their own platform that they pay for and give out for Free to those who want it, no one is force to use unless they want the best of the best to compete with Apple that’s the difference.

      Microsoft forced OEMs to pay and also to accept their own inferior services, while in this case the carriers and OEMs want to force Google to give up their own services and access to their own API for free and with less control, Big difference.

  2. I agree that this case really appears to be about Google’s dominance in search, whose incredible profits they appear to be protecting by leveraging their power over the OEMs. You could argue that no consumers were harmed by this because search is “free” and Google search is the best. However, that ignores the fact that 1) Google’s search subsidised Android which then killed Microsoft’s paid-for OS business model and 2) Google deprives any would-be search competitor from the momentum needed to get started.
    Having said this, antitrust is notorious for arriving late at the scene of the crime; search dominance on the desktop was a power to behold, but search on mobile is not nearly the same thing. So the world may not chance much if the EU wins, because Google’s business model does not work terribly well on mobile to begin with.
    As for the OEMs, I don’t think that the EU case has any chance of improving their lot in life. They are in a cutthroat commodity business and will remain to be so.

  3. The main problem in this case is the App Store, so if I were Google i would settle the case then turn around to license the App Store to any OEM who want for $15 per phone, and build up the nexus program with heavy marketing to compete against those who want the cake and eat it too.

    1. Google hook is the app store yes. It is the thing no one can say no to and as the case highlights it comes with conditions. A reasonable outcome is that Google does what you say for a fee or some other condition let them take the app store only and not use other services if they so choose. More of a flexible menu of services as an offering makes some sense.

      1. a perfect scenario will be for Google to license the App Store for a fee to those who want it, and put their applications such as search, Gmail, Hangouts, Maps in the ballot box with others competitor for users to choose as default at first setting session just to see how many user will choose Bing over google search, Here Map over Google Map, and outlook over Gmail in Europe.

    2. I’m surprised the Commission hasn’t said anything specifically about the “no-forking” rule that bars Google-Android OEMs from also selling AOSP-Android devices. That’s as big an issue as possible Search shenanigans and gapps forced bundling + default.

      I don’t think unbundling and forking would be grave short-term issues for Google, both the PlayStore and the gapps are superior apps, the gapps even manage to eke out a spot on iOS/Windows/MacOS where they are at a very significant disadvantage. Not the same as the Internet Explorer situation on Windows, where the ballot was the drop the made the bucket overflow. If the fix is not a ballot but FFA defaults, that’s worse for Google, people will end up using other stuff. Having to start setting up a new phone by answering 10-20 ballots won’t be fun either though.

      I think the branding would be thorny, people are already confused about Amazon’s Fire not having the PlayStore (no Clash of Clans ! I prevented several whoopsies last Xmas) nor the gapps (nor the invisible GMS). If we end up with lots of PlayStore-less phones and tablets, espcially if the PlayStore can’t be retrofitted (due to compatibility or business issues from Google, OEMs, Carriers…), the “Android ” brand becomes meaningless: no longer means access to all the apps especially the gapps, no longer means supervision by Google’s security mechanisms, no longer means access to the GMS-based stuff ie Pay, Wear, Auto, Fit, Work…

      What’s intriguing is that the Commission defined the market as “licensed Mobile OSes”. Which implies there’s an “unlicensed Mobile OS” market, ie iOS. I’m wondering if they’ll tackle that at some point.

      1. the commission case is weak they just want to force some competition in a winner take all dynamic type industry.

        1. That’s exactly why it’s important they work something out. Monopolies, even oligopolies, always end up hurting both customers and progress, see how Windows pretty much sterilized IT progress for a couple of decades.
          On top of plain old monopoly power (price/supply/distribute/advertise/sue… upstart competitors out), IT brings network effects and lock-in. That makes the issue both more important and harder to solve. There was talk back in the day of splinting MS into OS and Apps, I’m sure someone somewhere is thinking the same about Ads, OS, Apps, Cloud and Media these days.

          1. The argument that Google makes it impossible for the competitor to provide good Android phone without the Play Store sounds a lot like someone saying Apple makes it impossible for anyone to make a profit selling phone Google Job is not to make it easy on the competitor who try to milk their own platform or their own services.

            Google has never prevent OEMs from offering their own App Store or other services or access to the phone system level, while at the same time having access to Google applications, in fact Samsung used to have their own App market on their own Galaxy phone,
            if they EU want to reduce Google’s ability to monetize their own platform to pay for the exorbitant costs associated with the development and maintenance of Android then who will then pay for it?

            do you really believe the alternative will be better for OEM and carrier ?

            they all want more control, more access thinking that this will allow them to make more money, but do you really think they want to pay for the developing and maintaining of Android while defending against the patent lawsuit and all headaches that come with it?

            the idea of trying to make Google less visible so that competitor could have a chance to be more visible is ludicrous, in fact to better sustain the Android platform it will in the best interest of OEM to create partnership with company that can best monetize the platform in exchange for bigger cut and those who want visibility need to build their own version of Android.

          2. I think what’s tricky is the logical jumps between what’s good for Google, what’ good for the Android ecosystem, what’s good for the mobile market, and what’s good for users. All 4 are not perfectly aligned.
            The EU’s traditional answer is to make sure one player does not utterly dominate a market, and that switching costs are low. In the “licensed Mobile OS” market, the issue is that there’s only one player at the ecosystem level, and nowhere to switch to.

          3. No where to switch too or not advantageous to do so?

            there is no way for a company to create a platform where everyone would win primarily those who did not spend a dime developing it or want to compete with the platform owner.

            Those who think that Google is too visible on their own platform, must spend their own money and take risks to develop their own using AOSP as the Chinese has done to do so, it is unfair to look at the situation now, after Google had overcome all the challenge taking all the risk to succeed when those same competitor was just sitting there doing nothing, and then to expect the government to give them an easy way in to go to compete with the platform owner.

            Why anyone in the future will want to develop an open platform free for all in the future if the government will force him to provide an easy way in to his competitor to compete with him if successful, or to punish him for his success?

            That is my problem with this case, it will destroy incentives for Company to try to solve big problems in the long term because those who take big risks to accomplish something will always have huge advantage over those who did not but want to enjoy the fruit of the success.

          4. The flip side of that is letting someone who solved one important problem one time leverage that into abrogating competition a) in neighbouring markets b) for all eternity (or at least until a major upheaval à la Mobile vs PC).
            That’s where bundling comes into focus. Android-the-OS solved the “cheap Mobile” problem. Google is now using that to, in practice, forbid OEMs from competing with Android-the-Ecosystem (the PlayStore+GMS) and the gapps. I understand how the EU can see that as 1 or 2 steps too far.
            You’re right that the financing for A-the-OS comes from the ecosystem and the gapps. That financing can probably be unbundled too.

          5. i disagree with the characterization of the case

            OEM are not being prevented form doing anything they want in fact they’ve been successful in china without Google which prove they have alternative.

            one way or another Google need monetize the platform to pay for the cost associate with it either by making them pay for access or by having a preferential advantage to do so.

            Google payed to develop and protect and open platform, those who want to compete with them on it should not be giving a easy way in, they need to fin they own way in

          6. I agree that the case is not as clear-cut as Intel paying OEMs to not use AMD’s chips, or MS making sure 1-2-3 crashes on new DOS versions. Google does not prohibit competing software neither in their store nor preinstalled, just as defaults.

            But there’s something smelly about “if you want the Playstore, you must also get gmail+gmaps+gdrive+gsearch+gnow+…”, and make all of that default and prominent. Or any of the permutations “if you want gmaps you must also.. etc…”.
            And also, “if you want the Playstore in the US you must also have it in Finland to Portugal, Canada to Chile, Russia to Saudi Arabia, South Korea to Australia, Morocco to South Africa, “. Or any of the permutations, again.
            And the 2 combine, so in the end if you want a single Google thing in a single market, you must get all Google things in all markets, and make them default and prominent.
            And not use AOSP in any market.

            That’s great for Google. But it pretty much ensures that no Android variant, and no one competing with any of Google’s apps/services can get any critical mass. They can try, but they haven’t got a chance. That’s the EU’s issue.

            I agree it’s a Faustian bargain OEMs entered eyes wide open, most after trying alternatives for quite some time, and failing. It’s also tempered by OEM’s abilty to do whatever outside of the Android sphere (use Windows, Tizen…). The EU’s point is that those are only alternatives on paper, in practice Google has a monopoly in licensed mobile OSes (or ecosystems, the 2 are synonymous now), and is leveraging that to both lock out Android-based competitors (the only one who stand a chance by now, because apps) and force adjacent apps/services down suppliers and users’ throats. Not a crazy claim to make.

          7. Also, I’m not sure your initial comparison is apt: Apple is sucking most profit out of Mobile, but is not dictating what independent 3rd parties can do. Google is dictating what OEMs can do.
            Granted, one could say that OEMs are in essence manufacturing+marketing subcontractors, but that’s not what the formal relationship is, though that’s how it’s working out in the end.

          8. Google dictates what to do only with their own App and services that these third party want as a way to protect their brand and their investment, and it is voluntary, the reason they can do that in this situation is because they took all the risks and spent all the money to develop maintain and protect the platform in the first place, why would they let these stupid OEM or carrier that does not even care enough not to fix security problems that affected their consumers to do what they want with it?

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