The burden of success

On 20 April, the European Commission has sent a formal Statement of Objections to Google and its parent company Alphabet, challenging the way Google promotes the licensing of its Android operating system, the pre-installation of its Android proprietary apps and its general internet search services in agreements with hardware manufacturers. These concerns are based on the European Commission considering Google to already dominate the European markets for general internet search services (Google’s market share is 90% and above in most member states), for licensable smart mobile operating systems (Google’s market share is deemed to exceed 90%, noting that approximately 80% of all smartphones run on Android in Europe today) and for app stores for the Android operating system (more than 90% of all Android apps are downloaded from Google’s Play Store).

Proceedings had been triggered last year by Google’s policy of requesting that manufactures of smart devices wanting to pre-install Google’s app store (“Play Store”, an essential app from consumers’ perspective) also pre-install the Google Search app and set Google’s search services as default. Moreover, manufacturers wishing to pre-install Google’s Play Store or Google Search also had to pre-install Google’s Chrome browser. While Android is a free and open source operating system that, funded by Google, gives way to parallel Android developments (so-called Android forks), a commitment to only install the Android system developed and licensed by Google had been imposed upon manufacturers intending to pre-install proprietary Google software on their devices, including Play Store and Google Search (so-called “Anti-fragmentation”). Finally, further incentives had been granted to manufacturers that committed to exclusively pre-install Google Search on their devices. The European Commission so far found these measures to basically choke all competition from potentially competing developments of the Android operating systems, alternative app stores and third-party search services.

Kent Walker, Google’s Senior Vice President and General Counsel, blogged later that day that Google’s business model for Android contained no unfair conditions. Rather, Google had helped developing a very successful ecosystem, open to everyone, allowing manufacturers to freely choose which software to install on their devices.

From a strictly procedural perspective, this Statement of Objections might be seen as just a formal step in the ongoing abuse of dominance investigation of Google’s business practice related to Android. Widening the view to also include the various parallel investigations of Google’s activities, this Statement of Objections falls in line with the evolving enforcement of competition law in digital markets. As rightfully commented by Commissioner Vestager two days prior to the issuance of this Statement of Objections, network effects similar to those at stake had led to prohibiting that Microsoft pre-installs its media player on devices running the Windows operating system more than ten years ago. Today, it will be up to Google to demonstrate that the pro-competitive effects of its investments in the Android system outweigh the restrictions of competition now identified by the European Commission.

Following receipt of the Statement of Objections, Google has three months to present an official response to the EC and to request an oral hearing to discuss their position.

Further reading: EC - Press Release, 20 April 2016, Margrethe Vestager's speech, 18 April 2016, Google Europe Blog, Kent Walker