The Android software in most smartphones is a mix of open-source software and proprietary software from Google — and the European Union’s antitrust authority is concerned that the way Google ties the two together could constitute abuse of a dominant market position.
Google’s Android mobile operating system is based on open-source software, but some of the most useful parts of it – Maps and Search, for instance – are proprietary, and the company makes sure that anyone wanting to use those features has to use other services that make it money too.
If an investigation by the European Union’s antitrust authority finds that behavior constitutes abuse of a dominant market position, it could expose Google to a fine of up to $11 billion.
While the fine won’t have much effect on Android users, device makers or service providers, the legal remedies that usually accompany such findings could mean bigger changes to the way Google licenses Android, and in particular access to its search tools and Play store.
If Google were forced to change those agreements, it could become easier for major phone manufacturers to sell devices with “forks” of the Android software that provide better security or privacy than Google’s default, or to include search engines or browsers better suited to the needs of businesses.
What most people see as the Android operating system is part open source, part proprietary. AOSP, the Android Open Source Project, is the core software that handles interactions with the phone hardware and allows calls and internet access over the wireless network. Anyone can use and develop it.
However, another key component is GMS, Google Mobile Services, which Google describes as “the best of Google.” It’s the part of a phone’s software that most people think of when they talk about Android, and includes Google’s voice-controlled mobile assistant; Maps and the Chrome browser; as well its Gmail, Youtube, Photos and chat apps. Most crucially of all, it includes the Google Play store, giving access to millions of other apps, games, movies and TV shows, music tracks and magazines.
You don’t have to pay to use or distribute GMS, but you do have to enter a license agreement with Google. Those agreements are at the heart of the case.
In April 2015, the European Commission opened a formal investigation into whether Google had breached EU antitrust rules by entering into anticompetitive agreements or abusing a possible dominant market position. Such actions could have hindered the development and market access of rival mobile operating systems, applications and services to the detriment of consumers and developers of innovative services and products, the Commission said at the time.
Android is the most-used mobile OS in Europe ahead of Apple’s iOS, as it was when the Commission began its investigation. Since then, however, two other competitors have dropped out of the smartphone software market: Microsoft Windows Mobile and BlackBerry OS.
European Union Competition Commissioner Margrethe Vestager, announcing formal antitrust charges against Google in Brussels in April 2015.
In April 2016, EU Competition Commissioner Margrethe Vestager sent Google a “Statement of Objections” – formal charges that it expected the company to answer. It accused the company of a breach of EU antitrust rules, abusing its dominant position by imposing restrictions on Android device manufacturers and mobile network operators.
Google, it said, had implemented a strategy on mobile devices to preserve and strengthen its dominance in general internet search. That strategy meant Google Search was pre-installed and as the default or exclusive search service on most Android devices sold in Europe – and also prevented rival search engines using competing mobile browsers and operating systems to enter the market.
It also accused Google of giving smartphone manufacturers and mobile network operators financial incentives to exclusively pre-install Google Search on their devices, or of making such installation a condition for access to the Play store.
A Statement of Objections is a formal document issued by the European Union’s antitrust authority, the European Commission, in cases of anticompetitive practices or abuse of market dominance. It sets out how the Commission believes a company has breached EU law, and gives the company a chance to defend itself, either in writing or in an oral hearing.
If, after reviewing the company’s response, the Commission still feels it has a case, it either invites the company to make formal commitments to remedy the situation, or it publishes a decision of its own imposing remedies, a fine, or both.
There’s no deadline for the Commission to complete its investigation, but indications from Brussels are that it will publish a decision in the Android case before August 2018.
In the Google Android case, the Commission could theoretically fine it up to $11 billion, or 10 percent of parent company Alphabet’s $110 billion worldwide revenue in 2017 – but recent antitrust fines have come nowhere near that level.
There’s a separate investigation ongoing into the company’s AdSense online advertising service, looking at the restrictions it places on the ability of third-party websites to display search ads from its competitors. That could expose the company to a similar-size fine.
And, of course, the Commission has already hit Google with one antitrust fine, for abusing the dominance of its search engine to promote its own comparison shopping services. That cost it $2.7 billion in June 2017, around 3% of its prior-year revenue.
Other recent fines for abuse of a dominant market position are in the same ballpark. In January 2018 it fined Qualcomm $1.2 billion, or just under 5% of annual revenue, while Intel’s $1.3 billion fine in June 2014 represented about 3.8% of revenue.
Given the nature of the Commission’s complaints, it could impose remedies requiring Google to change the way it licenses the GMS add-ons to Android, including its search engine and the Play store, or seek commitments from the company that it will make such changes.
