Why Google will lose Android battle?

The European Commission (EC) has fined Google €4.34 billion for breaching EU antitrust rules for illegal practices regarding Android powered mobile devices to strengthen its dominance in search engine. As per the decision, Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet.

Commissioner Margrethe Vestager, in charge of competition policy said, “Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits.”

Reacting to the decision, Google spokesperson said, “Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.”

As per EC, Google has required manufacturers to pre-install the Google search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store); made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google.

First, Google offers its mobile apps and services to device manufacturers as a bundle (includes Google Play Store, Google Search app and Google Chrome browser) and its licensing conditions makes it impossible for manufacturers to pre-install any competing apps so it is unlikely that the decision will be reversed.

Second, this is not the first time that Google has been fined. In June 2017, the European Commission fined Google €2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google’s own comparison shopping service. The Commission also continues to investigate restrictions that Google has placed on the ability of certain third party websites to display search advertisements from Google’s competitors (the AdSense case). In July 2016, the Commission came to the preliminary conclusion that Google has abused its dominant position in a case concerning AdSense. And all the cases are related with respect to abusing its dominance.

Third, Google has granted significant financial incentives to some of the largest device manufacturers as well as mobile network operators on condition that they exclusively pre-installed Google Search across their entire portfolio of Android devices and this has harmed competition by significantly reducing their incentives to pre-install competing search apps.

Fourth, the Commission found Google’s conduct to be illegal between 2011 and 2014. In 2013 , Google started to gradually lift the requirement and the illegal practice effectively ceased as of 2014. Since this was illegal from 2011-14, Google stopped this practice in 2014 to gain some sympathy from the Commission.

Fifth, Google’s practices have denied rival search engines the possibility to compete on the merits. The tying practices ensured the pre-installation of Google’s search engine and browser on practically all Google Android devices and the exclusivity payments strongly reduced the incentive to pre-install competing search engines.

The decision does not prevent Google from putting in place a reasonable, fair and objective system to ensure the correct functioning of Android devices using Google proprietary apps and services, without however affecting device manufacturers’ freedom to produce devices based on Android forks. It is Google’s sole responsibility to ensure compliance with the Commission decision so that the company is not penalized further in future.