What’s at risk if the EU forces Google to pay for Android’s success

Member states of the EU stand to gain US$5.1 billion from the antitrust lawsuit against Google, but they also risk losing big.
19 July 2018 | 666 Shares

European Competition Commissioner Margrethe Vestager addresses a news conference on Google in Brussels. Source: Reuters

The European Commission has just announced it will impose a EUR4.34 billion (US$5.1 billion) fine on Google for illegal practices regarding Android mobile devices to strengthen dominance of the company’s search engine.

According to the commission’s press release, since 2011, Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search.

Google must now (per the directive) bring the conduct effectively to an end within 90 days or face penalty payments of up to 5 percent of the average daily worldwide turnover of Alphabet, Google’s parent company.

According to CNBC, Alphabet’s revenue for Q1 2018 was US$31.15 billion. Which means, for every 90 days of delay in compliance, the company will have to pay the EU US$1.56 billion.

The facts of the case, as presented by the commission, state that Google has violated the region’s antitrust rules as it:

  • 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 (so-called “Android forks”).

The commission concluded 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 – and that it has achieved that position by engaging in wrongful practices.

The EU’s findings

According to the commission, Google offers its mobile apps and services to device manufacturers as a bundle, which includes the Google Play Store, the Google Search app, and the Google Chrome browser.

It claims that Google’s licensing conditions make it impossible for manufacturers to pre-install some apps but not others.

And although the commission’s own findings proved that the Play Store is a “must-have” app and users expect to find it pre-installed on their devices, it believes that the other two apps are illegally tied into the Android operating system.

Being pre-installed, the commission says can create a status quo bias. Users who find search and browser apps pre-installed on their devices are likely to stick to these apps.

Next, official investigations found that Google 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.

This harmed competition by significantly reducing their incentives to pre-install competing search apps, in their opinion.

Finally, the commission says that Google has prevented device manufacturers from using an alternative version of Android that has not been approved by Google (Android forks).

In order to be able to pre-install on their devices Google’s proprietary apps, including the Play Store and Google Search, manufacturers had to commit not to develop or sell even a single device running on an Android fork.

The commission found that this conduct was abusive as of 2011, which is the date Google became dominant in the market for app stores for the Android mobile operating system.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. 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.

“They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

Inforgraphic

But what about consumer’s choice?

Like one part of the commission’s study found, customers expect their Android devices to have Google Play Store pre-installed.

Further, plenty of surveys and research has proved that Google Chrome is the best browser on the market. And for consumers, this makes a huge difference.

How Google Chrome works is, you log into your browser and you have all your tabs saved. So, if you log in via your phone, you can browse for a bit, then log into your computer, and continue where you left off.

It’s more about the experience for most people, and it’s why they choose to use Chrome in the first place – even on Apple laptops.

Today, there are more than 24,000 different devices, at every price point, from more than 1300 brands.

A typical phone comes preloaded with as many as 40 apps from multiple developers, not just from the company you bought your phone from.

If you prefer other apps, or browsers, or search engines to the preloaded ones, you can easily disable or delete them, and choose other apps instead.

In addition, a typical Android user will install roughly 50 additional apps themselves, taking the total on a typical phone to roughly 90 apps.

According to data, over 94 billion apps were downloaded globally from the Google Play app store.

Browsers such as Opera Mini and Firefox have been downloaded more than 100 million times, and UC Browser has been downloaded more than 500 million times.

Android “Oreo” is the eighth major update and the 15th version of the Android OS. Source: Shutterstock

Android is more than an ecosystem, it’s an experience

The bottom line is, there’s plenty of evidence that customers use Android-based devices, across the world. They often choose to use Google Search and Google Chrome because the products provide a better experience than others.

Search the internet (via Google or Bing or any other search engine) for surveys or reports on the best search engines, and you’ll find they all say Google. Here’s report by Paul Gil, for example, that puts Google Search right at the top.

The commissioner has said that Android is a “very good operating system”, that “it is fine with us”, that she is “all for it”. But you can’t applaud Android and still reject its business model.

Obviously, there are costs involved in building Android and keeping it free: Google seems to have invested billions of dollars over the last decade – delivering more than 24 iterations of the operating system.

To recoup their investment, the company gives phone makers the option of pre-loading a suite of popular Google apps (such as Search, Chrome, Play, Maps and Gmail).

Some of these apps (primarily Search and Chrome) generate revenue for the company. However, phone makers don’t have to include the services from Google. In fact, they’re free to pre-install rival apps alongside Google’s.

This is the whole reason a lot of “geeks” talk about stock Android and bloatware, and have a preference for the former.

Stock Android only contains the best version of the Android operating system, while bloatware (in this context) refers to of additional apps that manufacturers include to push their own brand and the name of partner app developers.

Cybersecurity and concluding thoughts

An important point to keep in mind when evaluating the contribution of Google to Android is that the platform is a global, open-source project.

As a result, Android has a community of defenders collaboratively locating the deeper vulnerabilities and developing mitigations. This community may be orders of magnitude larger and more effective than a closed-source project of a similar scale.

In fact, according to Symantec Corporation, many threats to Android could be largely eliminated if all users upgraded their handsets to the latest version of the OS.

The reality is, Google has invested a lot in Android, which has made the operating system very successful. However, it has also leveraged the platform to quite an extent – much of which has been driven by user demand than anything else.

It really comes down to this: Would users want to buy a phone and have to download their own play store and browser before they can visit a website on their new phone? Not since 2010, I think. And definitely not in 2018.