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Europe Strikes Again

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Antitrust enforcement is supposed to protect competition in order to benefit consumers.  By that criterion, the European Commission’s decision against Google’s Android operating system fails miserably.  By proscribing pro-competitive business practices, the Commission’s decision will harm consumers.

The Commission claims its decision does not question Android’s open source model, but in reality it relies crucially on Google being the only company to offer a popular open source operating system. The Commission rejects the iPhone as a competitor because Apple’s operating system is proprietary.

This strained logic implies the Commission would prefer a proprietary Android that only Google could use because it would then compete directly with Apple. Of course, in the real world, few would accept that logic. Proprietary and open source models both have pros and cons and do compete with each other.

This case, however, isn’t really about the mobile market, but rather is a means to pursue Google Search. The decision targets certain practices that, as the Commission puts it, “have enabled Google to use Android as a vehicle to cement the dominance of its search engine.” The problem is that the Commission does not demonstrate that these practices harm consumers and, even if one wants to dismiss the possibility that consumers value some of these practices, the Commission’s tortuous arguments do not support its conclusions.

First, the Commission objects to Google’s requirement that manufacturers who want to preinstall Google’s Play Store (the app store for Android) also preinstall Google Search and Google’s browser, Chrome. The Commission contradicts its fundamental conclusion that Apple is not a competitor in order to support this point. The Commission concedes that Android users might switch to Apple, but argues that “even if end users were to switch from Android to Apple devices, this would have limited impact on Google’s core business. That’s because Google Search is set as the default search engine on Apple devices and Apple users are therefore likely to continue using Google Search for their queries.”

But Apple’s decision to also preload Google Search on its devices suggests that Apple believes consumers want this as a feature, not because it wants to “cement the dominance” of another firm’s search product. In other words, Apple’s decision to include Google Search in its own set of preinstalled applications suggests that having it preloaded is something consumers value, not (as the Commission alleges) that Google is unconstrained.

In any event, consumers can easily download a different search engine either to supplement or replace Google Search. The fact that downloading apps is so easy and routine undermines the Commission’s argument that status quo bias is the reason most consumers use Google Search.

Second, the Commission objects to Google’s requirement that manufacturers wishing to pre-install Google apps use approved versions of Android—not modified “Android fork” versions, such as the one Amazon developed for its Fire products. “Fragmentation” has long been noted as a problem for Android—meaning there are so many versions of Android in operation that it becomes increasingly difficult to ensure that all Android apps work on all Android phones. Forking is an extreme version of fragmentation, but usually a good one because it allows others, like Amazon, to modify Android as they see fit.  However, there is no reason to expect forked versions to run Google’s apps properly. So the choice is to allow manufacturers of forked versions to preinstall Google apps that may not function, or to allow preinstalled apps only when the manufacturer can guarantee they will work. Ignoring this pro-consumer and efficiency-enhancing practice does not fit any reasonable theory of anticompetitive behavior.

Finally, the Commission objects to Google financially compensating manufacturers that do not preinstall search engines other than Google’s on any of their devices. Google no longer offers this incentive, but arguably this decision, which the Commission presumably applauds, leaves consumers worse off. Specifically, it was possible that because handset manufacturers were paid by Google as well as consumers, the final price to consumers was less than it would have been otherwise. Without this incentive, consumer prices for handsets could increase, slowing mobile broadband adoption.

Google has created a popular smartphone platform with an operating system and apps, all available for free. The Commission has targeted pro-competitive practices that help make that system work. Requiring Google to abandon or work around those practices will not be good for consumers.