Android: Setback for Google in dispute over competition fine

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Android operator Google and its holding company Alphabet have suffered a setback in the legal dispute over a record fine imposed by the EU: Juliane Kokott, Advocate General at the European Court of Justice (ECJ), supports the legal opinion of the EU Court of First Instance. The Advocate General's legal opinion carries considerable weight at the ECJ; the Court of Justice does not have to follow it, but often does. Kokott also refers to several previous ECJ decisions that speak against Google's arguments. This means that Google's chances of averting the fine of more than 4.12 billion euros for abuse of market power through Android contracts are dwindling.

The back story

At its core, this is a well-known anti-competitive method: a company uses its power in one market to gain an advantage in another market. The EU Commission has identified four such cases with Android: From 2011, device manufacturers were only allowed to install the Google Play app store if they also included Google's search. Because Android without Play was not suitable for the mass market at the time, this link is said to have brought Google additional advertising revenue from the search engine.

Secondly, Google forbade manufacturers from launching other Android devices without Google Play on the market at the same time. Manufacturers who did not want to sell exclusively googled devices were not allowed to sell any devices with Google at all, which was not economically viable. Thirdly, Google also made the installation of the Chrome web browser mandatory from 2012.

Fourthly, Google gave mobile providers and device manufacturers a share of the advertising revenue if they installed Google's search exclusively on defined device classes (portfolio-based revenue share agreement). It was only in April 2014 that Google reduced this clause from a device portfolio to the respective model – from this point onwards, the EU Commission also had no problem with this contract model.

Billion-euro fine, slightly reduced

The EU Commission investigated and found that all four contract models served to use Google's market power with Android as leverage for other business areas, in particular the search engine and its advertising revenue. It therefore imposed a record fine of 4.34 billion euros on Google in 2018 for abuse of market power in the European Economic Area (EEA).

Google appealed, in part with success: the EU court deemed the portfolio-based revenue share agreements to be admissible and reduced the fine to 4.12 billion euros in 2022. While the EU Commission accepted this ruling, the partial success was not enough for Google. The case is now before the ECJ.

Advocate General confirmed

However, Google's arguments against the fine are not falling on fertile ground, at least with the Advocate General. Google demands an analysis of what the competitive situation would have looked like without the offending behavior. However, the German lawyer considers the EU court's finding that the pre-installation of Search and Chrome impaired competition to be sufficient. Competitors were therefore unable to take action against the pre-installed applications.

Google also believes that the comparison should not relate to actual competitors, but to a hypothetical competitor that is just as strong as Google. In Kokott's view, this is unrealistic in the present case and would undermine the prohibition of abuse of market power.

Ultimately, the Advocate General cannot identify any miscalculation or error in classifying Google's actions as a continuous, single infringement. The ball is now in the ECJ's court (Case C-738/22 P).

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