Google hopes to revoke the EU’s record $5 billion fines and antitrust directives through appeals, which have hit the core of the US technology giant’s profitability. At a five-day hearing held by the European General Court in Luxembourg, Google wanted to prove that the European Commission’s request to modify allegedly anti-competitive contracts with Android phone manufacturers was wrong. The Android system is the operating system for most mobile devices in the region.
The Android case is one of three penalties for EU antitrust director Margrethe Vestager to curb Google’s growing dominance. She has imposed fines totaling more than 8.2 billion euros (9.6 billion U.S. dollars) on Google and is still investigating the company’s alleged control of digital advertising.
Tommaso Valletti, professor of economics at Imperial College London, said the case will become a major precedent for the United States because the United States is investigating exactly the same issues. During his tenure as an EU antitrust economist, he advised regulators on this case.
Despite making headlines, he said that investigations of Silicon Valley companies are relatively uncommon and that if the committee loses in this case, investigations may become even rarer. What’s at issue this week is the EU’s investigation into the contract, which requires Android phone manufacturers to accept Google’s search and browser applications and other Google services when they want to authorize the Play App Store.
The European Union considers the contract to be an illegal restriction, but Google said that the decision undermines the business model that allows it to provide Android software for free while generating advertising revenue. Google’s revenue last year was $182.5 billion. Due to its core position on Android devices, Google has established a huge banner and video advertising business.
A Google spokesperson said before the hearing: Android creates more choices for everyone, not less, and supports thousands of successful companies in Europe and around the world. This case has no factual basis. There is no legal basis.
The hearing may review how Google’s contract prevented the emergence of potential competitors 10 years ago. The European Commission said that these regulations prohibit cell phone manufacturers from selling phones that use other versions of the Android system, such as Amazon’s Fire OS Android version. Google said these regulations are necessary to ensure that Android applications and devices can run smoothly.
The ruling may take up to a year to appear. Since Google took action in 2018 to comply with the European Union’s Open Competition Order, it is unlikely that the court will pay attention to what Google is doing. It started charging manufacturers a license fee for using Android. It also slowly resolved the complaint of competitors that it did not provide a wide selection of competitors’ apps to set it as the default app for new phones.
But these two measures did not weaken Android, Android’s share of the European mobile phone market is close to 70%, and Google’s share of the mobile search market has stabilized at 97%.
Deep-Rooted Status
The deep-rooted monopoly of Google and other large technology platforms makes it difficult for these companies to argue in Europe that they face continuous competition and must continue to innovate to keep up.
At the time of the Android case, competition regulators across Europe continued to pressure their advertising and news businesses to investigate. Competitors such as Google and Apple (AAPL.US) are facing pressure from proposed new laws that may restrict the behavior of technology companies.
Google’s one-court victory in three court challenges against the European Union may support the company, but it is unlikely to stop the wave of regulation. Georgios Petropoulos, a researcher at Bruegel, a Brussels think tank, said this may at best limit some of the specific regulations that lawmakers are discussing.
But defeating the powerful EU antitrust authority will weaken its ability to curb the profitability of technology companies and limit the extent to which they require changes in business behavior. The first test will come on November 10, when the court will rule on the earlier appeal against the European Union shopping search fine.
