European Commission Fines Google for Illegal Tying

The European Commission (“EC”) recently fined Google €4.34 billion, stating that “Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search.” The EC focuses on Google’s pre-installation and default search requirements and argues that Google is dominant in three markets: general internet search services, licensable smart mobile operating systems, and app stores for the Android mobile operating system. The Missouri Attorney General has sent Google a civil investigative demand to further investigate these issues.

Google has stated that it plans to appeal the EC’s decision. The EC limits the extent of competition from non-Android developers in defining its relevant markets. For example, the EC claims that vertically integrated developers, such as Apple iOS and Blackberry, should not be included in the alleged market for licensable smart mobile operating systems. The EC argues that these vertically integrated developers are not available for license by third-party device manufacturers. The EC further claims, even if it considers end-user competition between Android and Apple devices, Apple cannot act as a sufficient constraint on Google’s contracts because of purchasing decision factors, price differentials, and switching costs and because Apple devices set Google Search as the default search engine. However, these reasons do not address Apple’s growth in sales of smart mobile operating systems in Europe or Apple’s efforts to attract Android users (including its “Move to iOS” Android app).

1Google openly publishes its Android source code, covering basic features of the operating system, which allows third parties to create “Android forks.” Whether Google’s open-source platform has resulted in more choices for manufacturers, network operators and consumers and whether Android fork developers can continue to enter and compete also is a point of contention. Google argues that phone makers can use or modify Android, resulting in more choices for consumers such as Amazon’s Fire tablets. However, the EC alleges that Google prevented manufacturers who pre-installed Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google and that this prevented a number of large manufacturers from developing and selling devices based on Amazon’s Fire OS.

Stephanie M. Mirrow has worked on numerous issues involving monopolization claims, including tying claims. She previously was an economist in the Antitrust Division of the U.S. Department of Justice.