Google Android (closed)

In fact, moving a first-rank page to the third rank reduce the traffic to it by 50%, and moving it to the tenth rank about 85%, proving that users’ decision to click on a link only depend from its position in the search results page. The traffic to the competitive comparison shopping websites has consistently lowered, notably after the introduction of Panda algorithm, but also over the longer run.

On the other hand, evidence shows that the contrary occurred to Google’s own comparison shopping website.

Google claims that the change in traffic should be accounted more to the develop and growth of market platforms like Amazon than to its conduct. The Commission states that if this is the case, then also traffic to Google Shopping should have decreased.

4.4.1.3 Final decision

The Commission concludes that the anti-competitive conduct have effects on the national markets of comparison shopping services and general search services. Google exploits its dominant position in the market of general search services by giving illegal advantage to its comparison shopping service. It has anti-competitive effects to the market of comparison shopping because it has the potential to foreclose competition and this may lead to higher fees imposed to merchants by Google once the competitors are eliminated, that would cause higher products’ prices for consumers.

Moreover, the conduct can reduce both innovation of comparative shopping market and improvement of Google Shopping quality since it would remain the only choice. Consumers could not be able to access easily to competitors’ webpage without being aware of the fact that Google Shopping has a favourable ranking and position.

The Commission concludes that Google should bring to an end the anti-competitive conduct within 90 days from the notification of the decision. The fine imposed to Alphabet Inc. and Google Inc. for the abusive conduct is € 2,424,495,000. [41]

three kind of users: manufacturer uses it as a component for their devices, application developers uses it to sell their apps, and consumers buy the device and the applications.

The relevant markets are the market for general search services, the market for licensable smart mobile operating systems and the market for apps’ stores for the Android mobile operating system. The market of general search services is a relevant market for the reasons previously discussed (section 3.2.1.1). The market for licensable smart operating system is different from operating system exclusively used by vertically integrated developers – like Apple iOS – since there are not available for licence by third-party device manufacturers: there is then little substitutability between the two of them.

4.4.2.2 Abuse of a dominant position

The Commission states that Google has a dominant position on all three relevant markets. Google has a dominant position in the general search services for the reasons we discussed in the Google Shopping case (section 4.3.1.2).

Google has a dominant position in the market for licensable smart mobile operating systems because: the company’s market shares worldwide (except for China) in this market exceed 90%; the entry barriers in the market are high because of the existence of network effects: the more users use an operating system, the more developers write apps for that system; there are high switching costs for Android users who wish to change operating system, since that would imply losing all their apps and data. Moreover, Apple’s presence doesn’t constrain Google’s market power since users’ choice are not influenced by the type of mobile operating system, Apple devices are priced higher than Android ones so they’re not accessible by great part of Android users and Google Search is the default search engine of Apple’s devices so Android users’ switch to Apple wouldn’t affect Google’s core business since they would likely continue to use it for their researches.

Google has a dominant position in the market for apps’ stores for the Android mobile operating system: in fact, Google’s Play Store accounts for more than 90% of apps’ downloads by mobile devices in european countries; it is crucial for manufacturers to install Play Store within the release of their devices and it is pre-installed in the majority of Android devices; it is not possible to download other app stores from Google’s Play Store so in order to switch to other app stores users would incur in high switching costs, since they should buy another device with a different operating system.

Three allegations are moved against Google, regarding three different anti-competitive behaviours, shown in Image 4.2.

Image 4.2. Allegations against Google. [42]

The first is the illegal tying of Google’s search and browser app to Android devices. Google ensured that both its search app and its Chrome browser were pre-installed on Android devices, by bundling the two services with Google Play Store, so that if manufacturers want to pre-install the app store in their device they can’t avoid pre-installing also Search and Chrome apps. The conduct is anti-competitive for the Commission, since it reduces the incentives of manufacturers to pre-install competing search and browser apps and of users to pre-install new ones. In fact, users are more propense to use apps that they found already on the device rather than installing new ones. This is proved by the fact that on Android devices more than 95% of all queries were made with Google Search app, while on Windows Mobile devices more than 75% were made with Microsoft’s Bing search app. The conduct aims to strengthen the dominant position on the general search services market and affect negatively competition on mobile browsers.

The second allegation is that Google granted illegal financial incentives on the condition of exclusive pre-installation of Google Search to the largest device manufacturers and mobile network operators. The Commission investigations shows that it would have been unlikely for a rival search engine to compensate the device manufacturer or the mobile network operator for the loss of revenues’ share guaranteed by Google and still make profits. The conduct has been taken on between 2011 and 2014.

The third allegation is that Google has prevented device manufacturer to develop new open source versions of Android (“Android forks”) for their devices. This conduct has denied consumers access to potential better alternative of Google Android operative system – for example the conduct prevented manufacturers to develop and sell devices equipped with Amazon’s Android fork Fire OS. Moreover, Google has prevented competitors to introduce alternative pre-installed apps along with the alternative Android fork operative system – in particular alternative search engine apps.

4.4.2.3 Final decision

The Commission concludes that these three types of abuse are part of a Google’s strategy to strengthen its dominant position in the market of general search services when mobile internet was starting to become important. Google’s conducts have prevented the development of potential superior Android operating system versions along with related potential superior apps and services, harming competition and consumers.

The Commission concludes that Google should bring to an end the anti-competitive conduct within 90 days from the notification of the decision. The fine imposed to Alphabet Inc. and Google Inc. for the abusive conduct is € 4,342,865,000. [42]

4.4.2.4 Google’s response

On October 16, 2018, Google filed an appeal against the Commission’s decision at the General Court of European Union, stating that Android has created more choice, not less. At the same time the company announced that has been updating the agreements with device manufacturers, unbundling Google Play, Search and Chrome and allowing Android forks. The company introduced a new paid licensing agreement for devices shipped to Europe, since the pre-installation helped Google to maintain free the Android’s distribution. The new licensing options are into effect from October 29, 2018. [43]