Member Article

Recent media reports have informed us that the European Commission has issued an official charge sheet accusing Google of an abuse of dominance concerning its Android mobile operating system and contracts with smartphone producers and telecom operators. The European Commission considers Google dominant in the markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system. This is not the first time the Commission has been looking into Google's operations through an antitrust lens. The company has already faced heavy scrutiny concerning its search engine and treatment of competing shopping services and advertisements.

In the Android case, the European Commission investigated a number of potential abuses of dominance, including – among others – the practice of preinstalling Google apps, giving potentially anti-competitive financial incentives to mobile operators (which leveraged Google's market power in search advertising), and preventing phone makers from developing the Android operating system through open-source versions of the software. More precisely put, the behaviour deemed problematic by the European Commission included setting Google search as the default search engine on all Android-based handsets (pre-installation), concluding "revenue-sharing" agreements which stipulated that phone makers and telco operators are entitled to share search-advertising revenues with Google, provided that they do not use competing search engines (financial incentives for exclusivity), and preventing mobile companies from selling devices that run on open-source versions of Android which differ from the latest version used by Google (as means of forestalling the fragmentation of the operating system). The competition authority argues for this last point by remarking that Google itself created Android by fragmenting the previously existing Sun Microsystem's Java software. Finally, the European Commission also states that every example of alleged abuse is being treated on an individual basis, but also as part of a wider strategy of maintaining dominance over the market of Internet search.

Consequently, Google will likely have to change its contracts with handset producers and operators in order to alleviate the competition concerns identified by the European Commission, i.e. to forego setting Google search set as the default option, granting financial incentives with exclusive effects and discouraging third party adjustments to Android. Going by previous practice, Google will also be facing a fine of several hundred million euros, as the amount of the fine will be determined based on a set percentage of Android sales in the European Economic Area.

In their defence, Google officials have stated that their consumers are already accustomed to downloading any app they prefer on their smartphone, meaning that the consumers have the freedom to personalise their devices by downloading and using apps that directly compete with their own.

Veljko Smiljanic, a member of Karanovic & Nikolic's Competition team, noted on this latest development: "It is no secret that digital markets in general, and Google in particular, have been in the focus of the European Commission for some time now. Some of the charges are nothing new and have been around since the Microsoft cases, while others are specific to Google's operations. The final outcome will not only affect Google, but will likely shape the manual for antitrust compliance in the digital world for years to come."