EU vs Google Antitrust Sanction

The EU’s recent charges against Google‘s Android operating system took me by surprise.

Microsoft’s anti-trust woes in the 90s were well documented. Google obviously recognised this and took great pains to avoid it occurring to them – hence the open source version of Android. By providing this open sourced version, Google could nullify any potential claims of running a monopoly (despite Android being the most popular OS by a country mile).

One thing I wasn’t aware of prior to this antitrust case was the existence of a second “semi-closed-source” version of android. In this version, additional elements including proprietary softwares are included to access some google services (maps, youtube etc). This “semi-closed-sourced” version of android is what is installed on smartphones produced by companies such as LG, Samsung and HTC. I like to think of it as a souped up Android. [1]

EU courts claim that Google used it’s monopoly position in Android to force handset manufacturers to pre-install it’s apps and refuse potential licensing deals with Google’s competitors. What I struggled to understand though is that if handset manufacturers weren’t happy with these “forced requests” from google, why didn’t they just use the free, open source version of Android?

I did some more reading on the google antitrust case. Here’s an excerpt from the EU Commission’s case against Google

At this stage, the Commission considers that Google is dominant in the markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system. Google generally holds market shares of more than 90% in each of these markets in the European Economic Area (EEA).

In today’s Statement of Objections, the Commission alleges that Google has breached EU antitrust rules by:
– Requiring manufacturers to pre-install Google Search and Google’s Chrome browser and requiring them to set Google Search as default search service on their devices, as a condition to license certain Google proprietary apps;
– Preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code;
– Giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.
– The Commission believes that these business practices may lead to a further consolidation of the dominant position of Google Search in general internet search services. It is also concerned that these practices affect the ability of competing mobile browsers to compete with Google Chrome, and that they hinder the development of operating systems based on the Android open source code and the opportunities they would offer for the development of new apps and services.

The EU commission’s main argument isn’t really about Android being a monopoly. That, as I previously argued, is nullified by it’s open source version of android.

The EU’s arguement is about licencing “Google’s proprietary apps”

Here’s the line that makes all the difference: Requiring manufacturers to pre-install Google Search and Google’s Chrome browser……as a condition to license certain Google proprietary apps;

That didn’t make much sense to me at first. How can google require manufacturers to do anything? Isn’t android open source? Also, what proprietary apps are they referring to?

Turns out, there are secret agreements in place between Google & handset manufacturers. I Googled around (hah, irony) to find the handset agreements which the EU commission referred to. [2]

This blogger covered it so well. Here’s a paragraph I stole from him:

Google claims that its Android mobile operating system is “open” and “open source”—hence a benefit to competition. Little-known contract restrictions reveal otherwise: In order to obtain key mobile apps, including Google’s own Search, Maps, and YouTube, manufacturers must agree to install all the apps Google specifies, with the prominence Google requires, including setting these apps as default where Google instructs. It’s a classic tie and an instance of full line forcing: If a phone manufacturer wants any of the apps Google offers, it must take the others also.

Now application bundling isn’t illegal. Microsoft, Adobe, Oracle etc often bundle together applications. No anti-trust there.
Bundling is, however, illegal when one of your apps in the bundle is a monopoly that the consumer cannot function without.

This behaviour is anti-trust because you are abusing your monopoly app to boost usage of your other apps. Eg. Microsoft used it’s monopoly of Windows to push Internet Explorer down consumer’s throats.

Looking through the Android app list, there aren’t any obvious monopolies. Every app has a viable competitor (Youtube has Vimeo / Google Maps has Yahoo Maps / Google Search has Bing)

The Google App Store however (Google Play) is a monopoly. No other alternative exists. (Google will argue that the Amazon App Store is a viable competitor and therefore Google Play isn’t a monopoly. That’ll make Jeff Bezos happy but they’re not fooling anyone. It’s not even close.)

If handset manufacturers don’t install Google Play App, the phone is “shut off” from the android world. You need the app store to get other apps – including the app store app itself! (there are workarounds but these are limited to people with good tech knowledge)

Google Play Store is part of the mobile app bundle handset manufacturers are “forced” to install along with Youtube, Maps and a few others.

Google used that monopoly position to force handset manufacturers install Youtube, Maps and NOT install alternatives from Microsoft or Yahoo. So in a way, Google was backing manufacturers into a corner. Take our bundle (with the app store) or sell the open source android without our app store (which no consumer will want to buy).

Looks pretty anti-trust to me. It’s a shame that Google, a company whose motto has been “Don’t Be Evil”, resorted to behaviour like this. It was completely unnecessary.

Google Maps, Youtube, Search – they’re all market leaders in their own right. Any knowledgeable consumer would pick those apps over their alternatives. There was no need drive out the competition so hard.

It is possible to make a business more successful by using strong arm tactics. But this is the internet. It’s a democracy. The costs for switching apps are so low. The best will always rise to the top.

Google, if you’re reading this, please continue doing what you’re doing. Maps, Search, Youtube – they’re a class above the rest. Keep innovating. Make them better. Don’t worry about the competition. They’re only there to push you harder.

I see him not as a rival but as a person. I see him as someone who makes me a better player and I make him a better player.
– Cristiano Ronaldo on Lionel Messi.

[1] Funnily though, some companies have taken the open sourced android version and souped it up themselves. I personally ran one such version for several years on my Galaxy S2. The new lightweight rom gave the phone lightning speed – extending it’s life far beyond what I originally thought possible.

[2] These agreements were secret. The leak had to have come from someone inside one of the large handset manufacturers. It was deliberate. I suspect the whistle blower took this step as they were unhappy about being pushed around by Google over this apps issue. Handset margins are incredibly thin. If Yahoo or Bing want to pay a manufacturer 2 USD/unit to pre-install their search bar on the phone, it’s a big loss (especially when you’re producing millions of units)