Android Investigation
The Brussels Technology Days
15 October 2014
Trevor Soames and Sara Ashall
Disclaimer: All views expressed in this
presentation are the authors’ own, and are not
attributable to any client of Shearman &
Sterling LLP
Preliminary EC investigation
 Multiple complaints public, there may be others…
 Two rounds of RFIs:
 July 2013 –RFI by request
 July 2014 – RFI by decision
 Next steps: opening of proceedings?
Ny kommissær….
ew Commissioner…
We are working on Android with som
problems, not yet a formal investigat
quite an advance knowledge about t
problems. We can work in all the are
Google, where some people are sen
arguments, in some cases formal co
talking about possible abuses of dom
[...],” (CNBC - 9 Sep 2014)
http://www.insidermonkey.com/blog/google-inc-googl-is-on-eu-competition-c
327543
?
Let’s start at the beginning…
June 2007: Apple releases iPhone, first true smartphone
Easy internet access on your phone! Anywhere! Anytime!
Amazing wealth of personal data generated but Google left at home
Google and Apple had signed an exclusive agreement in 2007, prior to the iPhone
launch for Google Search to be the default as well as YouTube and Google Maps to be
preloaded, rumoured to be worth USD 1 billion p/a
 Open Handset Alliance launched and Android released 5 November 2007
 Android proves popular and rapidly gains traction:
 Open source!
 Cool names!
 Do no evil!
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Android vs Google Android
“Open” Android (AOSP)
Plain vanilla operating system
Limited ecosystem
No Android trademark
No Google apps available
Amazon Fire… erm, some national
Chinese players…
Google Android
Operating system/platform with extensive
functionality
Broad and deep ecosystem
Strong brand and trademark
Updates released with fanfare and constantly
updated
Full line of Google apps preloaded
 Samsung, LGE, Sony, HTC,
ZTE, Huawei, NEC, Toshiba,
we could go on…
Google Play Services
(thanks to Chillin’ Competition for the graphic)
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Beating heart of Google Android
Unavailable on AOSP
Since 2012 service APIs and platform features bundles together in ‘take-it-or-leave-it” clien
Critical APIs moved from AOSP and into Google Play Services
Google Play Services and Google Play Store are now technically (and perhaps contractua
together
 If developers use Google APIs in Google Play Services their apps will only run on Goog
approved devices
 “Apps may not work if you uninstall Google Play services”
 Applies to Google Apps and third party apps
“We don’t know whether the complainants have focused on that point or not. If not, th
should.”
Google Android “honey trap”
AFA
Signed by all members of Open Handset
Alliance?
Why?
Five year term: is it renewed and how often?
What does “fragmentation” mean?
MADA
Signed by all Google Android implem
License Google Android trademark an
Google apps and services
Mandatory Google Apps
Placement and default requirements
Do not build a competing Android fork – “my
way or the highway”…
You want a Google Android device,
you have to take this, this, that, this
and that. And that. In this order.
Other agreements? Revenue sharing agreements?
Compatibility Test Suite, Compatibility Definition Document
and pre-approval process acts as check point
Is [Google] Android dominant?
 Most widely-used OS for smart mobile devices
 These are Google Android, not “vanilla” AOSP Android
 For an OEM, what are the licenseable alternatives?
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OEM switching between OSs is limited
Lock-in effects:
 Limited alternatives and commercially less attr
 Insufficient portability and interoperability of ap
Network externalities – strong positive feedback
App developers have limited capacity and attentio
focus their efforts on most successful OSs unless
incentivised
Google fully controls both Google Android and va
Article 101 or Article 102?
Article 102
Article 101
Classic tying
Classic tying
Full-line forcing
Full-line forcing
De facto exclusivity
De facto exclusivity
Predatory pricing
Intel type rebates/incentives?
TTBER
Classic tying
Full-line forcing
De facto exclusivity
Dominance not actually required, ma
(>30%) sufficient for a finding
infringement for many of the of
Public debate of out of date and sometimes deceptive…
See for example Geoffrey Manne – Chillin’ Competition)
[http://chillingcompetition.com/2014/10/03/microsofts-android-anathema/]
“Microsoft wants you to believe that Google’s business practices stifle competition and harm
consumers. Again.”
Google and its supporters seek to portray it as such to undermine the credibility of wi
held concerns.
“In fact, along with the Microsoft-funded trade organization FairSearch..”
FairSearch is not just MSFT but many other companies all with concerns particular to
businesses
On Körber: “Exhaustive scholarly analysis“ but Körber says
“This paper is based upon an expert opinion funded by Google”
“MADA” in the following refers to the HTC‐MADA of 2011”: fn 34
“It is this claim that Microsoft and a network of proxies brought to the Commission when the
manufacture a search-neutrality-based competition case against Google failed.”
It has not failed: the EC considers there to be a sufficient prima facie case to demand
Tying and/or Full Line Forcing
 Through the MADA, OEMs forced to take each of the mandatory Google apps and services
Google Android
 Reinforced by technical tie created by Google Play Services
 Google Android is dominant
 Moreover, many of the Google apps services are also
dominant
 OS and each of the apps are separate products, and
all are tied/bundled together
 Tying likely to lead to anti-competitive foreclosure
 Efficiencies (if any) do not outweigh any negative
foreclosure effect
 Not having to pay for tied products irrelevant
 Number of Google apps now preloaded on every Google Android device far exceeds the nu
as mandatory apps in the 2011 MADA documents (some reports suggest 9
20!):
De facto exclusivity?
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Again, what is “fragmentation”?
Do AFA and MADA prevent OEM signatories from developing non-Google approved AOSP
Does AFA prevent OHA members from commercialising non-Google approved AOSP devic
Other than Google Android, what OS options do OEMs realistically have?
Exacerbated by stagnation of AOSP and creation of Google Play Services
 No per se approach – assess the effect of the arrange
particular how much of the market is foreclosed
 CTS/CDD/Device approval opacity creates uncertaint
 Discourage use of non-Google Android components
 Disciplining OEMs in case of “betrayal”?
 Ever-greening of the AFA
Example of potential foreclosure:
German MNO OHA members: T-Mobile (~32%) + Telefonica (~37%) + Vodafone (~31%) = 10
Examples of “fragmentation” infringers disciplined
 Acer - Ali Baba – Acer blocked from launching competing device:
“Our partner received notification from Google that if the new product with Aliyun went ahead, Go
terminate Android product cooperation and related technical authorisation with Acer”
[http://uk.reuters.com/article/2012/09/13/us-acer-alibaba-google-idUKBRE88C0HW20120913]
 Skyhook – Launch of Motorola’s Droid X device blocked because it didn’t use Google’s netwo
services. Skyhook’s innovative Network Location Service met the compatibility requirements…
“using compatibility as a club to make [OEMs] do things we want”
[Dan Morrill – Google]
 Kikin – Innovative search function excluded:
Google’s agreement with device manufacturers has made it overly challenging to customize the l
version of the Android operating system, KitKat 4.4 [...] Since Webview customization is a key
for kikin, Google’s move has effectively eliminated kikin on Android.
[http://www.kikin.com/blog/2014/08/vodafone-device-update/]
Predatory pricing?
 Predation raised by some parties: “Google’s predatory distribution of Android at below-cost makes it d
other providers of operating systems to recoup investments in competing with Google’s dominant mobi
FairSearch Press Release
 Dominant company deliberately incurs losses /
foregoes profits in the short term (‘sacrifice’)
 Foreclosure or likelihood of foreclosure of one
or more of actual or potential “as efficient
competitors” with a view to strengthening or
maintaining market power
 Consumer harm
 Significant academic debate about existence of predation in multi-sided markets or platforms
Detrimental Effects
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Input foreclosure and customer foreclosure
Competition between operating systems effectively extinguished
Innovative products not being included due to chilling effects of Google policies
Dominance in SEARCH reinforced as Google has control over more personal data as an
advertising than any other company could ever dream of…
There is the ever present threat hanging over industry players: unless they are subservien
agree to everything that Google sees fit to impose, or does, they risk being excluded from
Android “family” and deprived of access to key features and services, as a result of which
smartphones would risk commercial failure