EU court upholds a record competition law penalty for Google

A long running competition law case investigating Google’s practices around the Android operating system sees a record fine imposed on Google. In 2018 the EU Commission decided that Google had abused its dominant position by imposing unlawful restrictions on mobile network operators and manufacturers of Android mobile devices. The Commission handed down its largest ever anti-trust fine - almost €4.343 billion. The EU General Court has now agreed with most of the Commission’s findings, although reduced the fine to €4.125 billion.

Background

In 2005 Google bought the Android operating system business for smart mobile devices – reports suggest the price tag was a mere $50m. At the time Android was struggling, but by the date of the Commission’s decision in July 2018, around 80% of devices used in Europe were running Android.

The Commission fined Google for having abused its dominant position by imposing anticompetitive restrictions on manufacturers of mobile devices and mobile network operators. Until a change of policy following the 2018 judgment, they were forced to carry Google’s search and web browser apps to access the Google Play Store. Three sets of contractual restrictions were identified as anti-competitive.

Contractual restrictions

OEMs were required to pre-install the Google Search app and Chrome browser on devices under Mobile Application Distribution Agreements. This produced a ‘status quo bias’, as users tend to use the search and browser apps available to them, rather than change the option that came with the phone. This led to use, on a lasting basis, of Google’s services - an anti-competitive advantage which could not be overcome by Google’s rivals. The Court upheld the Commission’s finding that these pre-installation conditions were abusive of Google’s dominant position.

Anti-Fragmentation Agreements required OEMs to undertake not to sell mobile devices running versions of the Android operating system that had not been approved by Google. If they did, they would not be able to access the operating licence needed to pre-install the Google Search and Play Store apps on the devices they manufactured. The court confirmed that this practice led to the strengthening of Google’s dominant position in the market for general search services. It also deterred innovation as it limited the diversity of offers available to users.

Revenue Share Agreements granted OEMs and MNOs a percentage of Google advertising revenue, provided that they agreed not to pre-install a competing general search service on any device within an agreed portfolio. This part of the Commission’s decision was reversed for essentially procedural reasons, leading to a reduction in the total fine.

Decision and effect

The imposition of a record fine in an EU anti-trust case reflects the intentional implementation of the unlawful practices, the revenue made whilst participating in the infringement and the web of complementary measures that were taken to implement the unlawful practices.

Consumer groups have welcomed the judgment as opening up choice for users of mobile devices. However, the scale of the fine serves as a warning to business. This was a complex case and on a scale not often seen. However, where an organisation dominates a particular market, close scrutiny of agreements that tie business partners into particular goods or services can be expected.

Google and Alphabet v Commission T-604/18

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