As announced in our last edition (see EUROPE 12064), Margrethe Vestager, the Commissioner for Competition policy, on Wednesday 18 July handed down a new record fine, of €4,342,865,000, to Google in the 'Android' case for abuse of dominant position on the mobile Internet search engine market.
“Google has used Android as a vehicle to cement the dominance of its search engine”, Vestager told a press conference, adding: “this is illegal under the EU rules”. She also took pains to reiterate the importance of this affair, which concerns mobile telephone devices, stressing that mobile Internet “makes more than half of the global Internet traffic”.
Although the decision to impose a fine was made this Wednesday, it refers back to objections made against the US giant several months ago concerning commercial practices in place from 2011. A statement of objections was submitted to it on 20 April 2016 (see EUROPE 11536), following the launch of a formal investigation procedure on 15 April 2015 and an investigation carried out by the Commission (see EUROPE 11295).
Objections upheld. The statement of objections noted a number of practices that were of concern to the institution. Google was firstly accused of forcing manufacturers of smartphones wishing to preinstall Google Play Store, the Google app shop for Android (a programme developed by Google), to preinstall Google Search as the device's default search engine. In this process, the Commission revealed that rival search engines in the European Economic Area (EEA) had no opportunity to become default search engines on most Android devices sold and that this practice deterred manufacturers from offering rival applications and consumers from downloading them. In its decision of 18 July, the Commission considered that this practice had been illegal since 2011.
The document also stated that Google had insisted on the preinstallation of its mobile navigator Chrome in return for the licensing of Google Play app store or Google Search, leading to the same competition problems as those referred to previously. The institution took the view that this linked sale had run counter to EU law since 2012.
The company was also accused of forcing mobile telephone manufacturers to sell only devices that work on Android, and not those using alternative 'fork Android' operating systems that were able to compete with the original Android system. The Commission noted a breach of the competition rules on this point between 2011 and 2014.
Finally, the Commission noted considerable financial incentives on the part of Google in favour of major manufacturers of smartphones and tablets to preinstall only Google Search on their products, consequently damaging competition on this market segment. This practice was considered to have been against EU law since 2011.
In light of these observations, the Commission concluded that rival search engines were unable to compete on their own merits, that Google had hindered the development of Android forks, that might have allowed alternative search engines to experience increased traffic, and that the practices had breached competition and innovation in mobile Internet.
The EU and the US in favour of "fair competition". “We congratulate all companies the success”, the Competition Commissioner went on to stress, referring to the innovation and products they develop. “Such a dominance is not a problem under EU anti-trust rules”, she added, with regard to the problems that may arise from this decision, for instance concerning economic relations with the US. When asked about this point, Vestager furthermore said that she “firmly believed that the US authorities also wanted fair competition”. Companies “need to play by EU anti-trust rules” and not try to remove their competitors from the markets, she also stressed.
Application. In line with Commission guidelines of 2006 on the calculation of fines, the level of the fine takes account of the duration of the infringement (since 2011), the gravity of the breach of the EU rules and Google's turnover.
Google now has 90 days to comply with the decision by putting an end to the practices which the Commission consider to be against EU law. “This is an illegal behaviour, we want to stop this in an effective manner”, Vestager added. If it fails to come into line with the Commission's decision, Google may be ordered to pay daily penalties of up to 5% of the average daily global turnover of Alphabet, its parent company.
A new record for Google. The US giant is thus slapped with another heavy fine, just over a year after the institution's decision against it in the Google Shopping case (see EUROPE 11817), when it was ordered to pay €2.42 billion to the EU, also for abuse of dominant position. Vestager said that her services had not yet decided within the US giant had complied with that decision by putting an end to its illegal practices.
Another investigation concerning the company is, moreover, underway in the 'AdSense' affair (see EUROPE 11594), but the Commissioner said that she was unable to comment or to anticipate the results of the case.
Google to appeal before the General Court of the EU. Unsurprisingly, the US giant does not share the Commission's analysis. It lost no time in reacting to the institution's decision, arguing that Android had created “more choice for everyone, not less”. “A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition”, it added, going on to announce that it would appeal to the General Court of the European Union against the decision.
BEUC welcomes the decision. The European Consumer Organisation (known by its French acronym, BEUC) issued a press release after the decision fell, welcoming the fine handed down to Google.
“The European Consumer Organisation strongly favours competition in the market for mobile operating systems, apps and search engines and therefore welcomes the Commission's decision as a necessary step to create a truly competitive digital landscape”, the organisation responded.
This was echoed by the Open Internet Project, which welcomes the “determination and dynamism of Mrs Margrethe Vestager”. (Original version in French by Lucas Tripoteau)