Appellate court rejects Google appeal

23.08.2016

Google filed an appeal seeking the cancellation of last year’s decision by the court of first instance. Previously, the court of first instance had upheld the position of the Russian antimonopoly agency (‘FAS’) that Google had abused its dominant position on the market for pre-loaded apps for mobile devices controlled by Android OS. Abuse of a dominant position is prohibited by Article 10 of Federal Law No.135-FZ “On Protection of Competition”. On August 17, the court of appeal rejected Google’s claim.

Initially, the FAS found that Google offered its Google Play app store to vendors of mobile devices only if they agreed to pre-load other Google apps and the Google search engine and place them in a priority position on the device screen. As a result, vendors of mobile devices refused to pre-load onto their mobile devices competing apps and services offered by other vendors such as Yandex, Google’s main competitor in search services. The FAS investigation was started following a claim filed by Yandex.

Importantly, the FAS also issued a mandatory order requesting Google to unbundle access to the Google Play app store and other Google services including Google search as a default search engine. Google was also required to amend existing contracts with vendors of mobile devices in order to remove anti-competitive terms.

Recently, following the upholding of the FAS findings by the court of first instance earlier this year, the FAS imposed a fine on Google of RUB 438 billion (some USD 6.7 billion), which Google is yet to pay.

FAS investigates price coordination in respect of the iPhone

On August 8, the FAS announced that it had started proceedings against Apple. The FAS suspects Apple of coordinating the prices of iPhones sold by Russian resellers, resulting in resellers setting identical prices for iPhone 6s and iPhone 6s Plus. Among the 16 affected resellers are market leaders such as MTS, VimpelCom, Euroset and Ozon and others.

An FAS investigation showed that following the launch of official sales of the iPhone 6s and iPhone 6s Plus in Russia in October 2015, most resellers set identical prices for those smartphone models and such prices were maintained for some time. Also, the FAS established that the prices of other smartphone models were identical among resellers, too. The FAS believes that such a coincidence in price can be explained by Apple coordinating the pricing policy of Russian resellers, resulting in iPhone prices being fixed at the same level in the Russian market and acceptance by resellers of ‘recommended’ prices as mandatory. Coordination falls under the prohibition of Article 11 Part 5 of the Russian Federal Law On Protection of Competition.

Price recommendations can often trigger antitrust concerns in the light of FAS practice in recent years, in particular where resellers/dealers actually keep to the recommended prices.

Interestingly, iPhone prices in Russia had already been under FAS scrutiny in 2012. At that time, the FAS investigated identical prices for the iPhone 4 after the launch of Russian sales. The FAS concluded that from September 2010 to April 2011, OAO MTS and OAO VimpelCom, importers of the iPhone 4 to Russia, both offered similar prices for the iPhone4 Black 16 GB and iPhone4 Black 32 GB on the wholesale market. In turn, retailers set identical retail prices, too. Both importers were held liable for anti-competitive concerted practices (Article 11.1 of Federal Law No.135-FZ “On Protection of Competition”). Consequently, the FAS imposed fines on both OAO VimpelCom and OAO MTS of as much as RUB 16 billion and RUB 18 billion respectively.