On 18 July 2018 the European Commission fined Google for imposing restrictions on Android device makers and mobile operators. Which practices it penalises, the 90-day deadline to end them and the appeal the company has announced.
On 18 July 2018 the European Commission fined Google €4,342,865,000 for breaching European Union competition rules. According to Brussels, since 2011 the company has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement the dominant position of its search engine. Competition Commissioner Margrethe Vestager said Google used Android as a vehicle to cement the dominance of its search engine.
The three practices
The decision concerns three types of contractual restrictions. The first is the tying of apps: Google required manufacturers to pre-install its search app and the Chrome browser as a condition for licensing its app store, Google Play. The Commission considers the tying of the search app illegal from 2011 and that of Chrome from 2012.
The second is payments conditional on exclusivity: Google granted financial incentives to some of the largest manufacturers and operators in return for pre-installing its search engine, and only its own, across their whole range of Android devices. The Commission considers this conduct illegal between 2011 and 2014, when it effectively ceased. The third is the obstruction of alternative versions of Android, known as forks: to pre-install Google’s apps, manufacturers had to commit not to develop or sell a single device running a version of Android not approved by the company.
What Brussels orders
Google must bring these practices to an end effectively within 90 days of the decision. At a minimum, it has to stop them, not re-engage in them and refrain from any measure with an equivalent effect. If it fails to comply, it faces payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company; the Commission would have to establish the non-compliance in a separate decision. The fine was calculated on Google’s revenue from search advertising on Android devices in the European Economic Area, and takes into account the duration and gravity of the infringement.
The Commission stresses that the decision does not question Android’s open-source model or the operating system itself. Google may put in place a reasonable, fair and objective system to ensure that devices running its apps work properly, provided it does not restrict manufacturers’ freedom to produce devices based on other versions of Android. Android runs on about 80% of smart mobile devices, both in Europe and worldwide.
Google responded the same day. Its chief executive, Sundar Pichai, wrote that the decision rejects the business model that supports Android, which in his view has created more choice, not less, and announced that the company intends to appeal. The fine adds to the €2.42 billion that Brussels imposed in June 2017 for favouring its shopping comparison service; the Commission is still investigating the AdSense case separately, concerning restrictions on rival search advertising on third-party websites.
What to review
The decision is addressed to Google, but its effects reach manufacturers, operators, app developers and companies that advertise or sell through Android devices. The Commission points out that any person or business affected by these practices can bring a claim for damages before the courts of the Member States, and that the European directive on damages for competition infringements makes this easier.
Companies that depend on third-party platforms can review their distribution, pre-installation or advertising contracts: which exclusivity clauses they contain, what conditions they impose and what alternatives exist. Ask your legal adviser how it affects your case.
Holding a dominant position is not illegal in itself; what Brussels penalises is using it to shut out rivals.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
