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Google could face damages claims after record breaking fine

Posted on 27 September 2018

Google could face damages claims after record breaking fine

A €4.3 billion fine for Google in relation to anti-competitive practices within the EU could potentially open up the company to a raft of private competition damages actions.

The European Commission imposed the fine on Google in July 2018 for abusing its dominant position in markets in relation to the Android operating system for mobile phones. The Commission concluded that Google "…used Android as a vehicle to cement the dominance of its search engine" in the general internet search market.

The Commission re-affirmed its finding in June 2017 that Google is dominant in the market for general internet searches, and decided that it has been dominant in the market for app stores for the Android mobile operating system since 2011, and is also dominant in the market for licensable smart mobile operating systems. Google announced that it has plans to appeal.

The Commission's finding that Google abused its dominant position in markets in relation to the Android mobile phone operating system paves the way for private competition damages actions against Google by any person or business affected by its anti-competitive behaviour. Unless Google successfully appeals the Commission’s decision, it is binding on the courts of the EU, so those bringing a “follow-on” claim will not need to establish Google’s liability. Claimants need only prove how much loss, if any, they suffered as a result of Google’s anti-competitive behaviour.

The Commission's Investigation

The Commission has had Google firmly in its sights for the last eight years, with three investigations initiated against the company during that period. The Commission first targeted Google with an investigation into comparison shopping. That investigation concluded in 2017 with a €2.4 billion fine against Google, when the Commission determined that Google was unfairly directing consumers away from other online stores, and towards Google-favoured retailers. The Commission is also investigating Google regarding whether the company unfairly banned competitors from websites that used its search bar and adverts.  

In April 2015, the Commission began an investigation of the company's alleged abuse of dominance in relation to Google’s Android mobile operating system and Google’s mobile applications. Android is the mobile operating system used in the majority of the world's smartphones. Google bought the original developer of Android in 2005, and has continued to develop Android ever since.  When Google creates a new version of Android, it publishes the source code online (i.e. open-source).  In theory, this allows third parties to download and modify the open-source code to create "Android forks". Android forks are created when someone takes the existing open-source code, and starts an independent project based on it, changing the code.  For example, the Amazon Fire operating system is an Android fork. However, the open-source code online does not cover Google's proprietary apps and services.  Smartphone manufacturers who wish to obtain Google's proprietary apps and services have to enter into contracts with Google, and Google imposes a number of restrictions as part of these contracts. Google also imposed restrictions in its contracts with certain large mobile network operators.

The Commission's Conclusions

The Commission concluded that Google breached antitrust rules by engaging in the following illegal practices:

  • tying of the Google Search app, ensuring that its Google Search app is pre-installed on nearly all Android devices sold in the EEA, and tying of the Google Chrome browser, ensuring that its mobile browser is pre-installed on practically all Android devices sold in the EEA.
  • Illegal payments conditional on exclusive pre-installation of Google Search.
  • Illegal obstruction of development and distribution of competing Android operating systems.

Google denied any wrongdoing.  The company unsuccessfully argued that the Commission should include Apple's operating system as a rival to Android in its definition of the market.  The fine imposed on Google shows that the Commission does not accept Google's denial of wrongdoing.  The fine was calculated on the basis of Google's revenue from search advertising services on Android devices in the EEA. The Commission decision requires that Google bring its illegal conduct to an end "in an effective manner within 90 days of the decision".

Google has 90 days from 18 July 2018 (i.e. until 16 October 2018) to stop and to not re-engage in any of the types of practices identified by the Commission as illegal. If Google fails to ensure compliance with the Commission's decision, its parent company, Alphabet, could be liable to further fines of up to 5 per cent of daily revenues.

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