Google and its Android mobile phone operating system are facing an antitrust investigation in Europe. But the roots of the probe stretch across the Atlantic and well into the past.
In 2010, enterprise software giant Oracle sued Google over the way Android made use of the Java programming language. Oracle had assumed control of Java a year earlier, after purchasing one-time tech powerhouse Sun Microsystems, and its suit claimed that Google had infringed on Java-related patents and copyrights. But the case turned up documents that would help spark a very different investigation in the Europe.
The trial revealed various contracts in which Google required phone makers to bundle certain Google services when using its Android operating system, such as Google Search, Google Maps, and the Google app store (a.k.a. Google Play)—and bundle them at the expense of other services from third parties. These contracts—which had been discussed in the press and behind closed doors for years—became the basis for an antitrust complaint brought to the EU by FairSearch, a consortium of companies that includes Oracle, Microsoft, Nokia, and many others, alleging that Google’s Android practices are anti-competitive.
“One way in which this case was helped forward was the trial between Oracle and Google,” says Dieter Paemen, a Brussels-based lawyer with the multi-national law firm Clifford Chance, who represents FairSearch and was part of the team that filed the complaint in the EU. “The core evidence comes—originally—from there.”
Paeman and FairSearch filed their complaint in April 2013. A Portuguese company called Aptoide lodged an additional complaint more than a year later. And this month, the European Commission announced that it’s opening a formal investigation into Android, indicating that it’s probing the kinds of contracts that surfaced during the Oracle trial.
Google denies any wrongdoing. “Anyone can use Android without Google and anyone can use Google without Android,” a company spokesman tells us. “Since Android’s introduction, greater competition in the smartphone market has given consumers more and better choices.” And it points out that the United States Federal Trade Commission and the Korean Fair Trade Commission have examined Google’s agreements around Android and did not sanction the company.
Nonetheless, enormous–and enormously complex—forces that have gathered against Google in Europe. The ties to the Google-Oracle only begin to show the scope of this battle. As the commission investigates Android—nudged by Oracle, Microsoft, Aptoide, and others—it has issued a formal statement of objections against Google’s search practices, which could lead to penalties against the company later this year. A much longer list of rivals, including many of big German online publishers as well as U.S companies such as a Yelp, Expedia, and TripAdvisor, are pushing for changes in other Google services that threaten the core of Google’s mobile business model. And the various threads running through these cases reinforce each other in so many ways.
It’s the EU’s biggest antitrust action against an American tech company since it levied charged against Microsoft and its Windows operating system in 2000, which eventually resulted in huge fines for the company and notable changes to its technology. This time, the tables have turned, but the case is playing out in similar ways. Like the Microsoft case before it, the Google Android case is about bundling applications with an operating systems (though the arguments are somewhat more complicated because Android is open source). And according to some, it could also result in large fines or remedies or both.
It’s telling that before serving the Microsoft-backed coalition that brought a complaint against Google, Paeman was part of the legal team that fought against Microsoft the last time around. At one point, he fought against Microsoft on behalf of Oracle. This time around, many of the positions have changed. But the stakes are just as high. And the forces are just as strong.
‘The Android Case Is More Conventional
The EU’s search case is closer to completion. After five years of investigation and a formal statement of objections, the commission could issue a remedy by the end of the year. But according to Paul Lugard, a Brussels-based antitrust lawyer with the multi-national firm Baker Botts, who has no connection to the many companies involves in this legal melee, the Android case may be the greater threat to Google. “The competitive harm is a little bit easier to establish than in the search case,” he says. “The Android case is more conventional.”
American regulators haven’t pursued action against Google in this area, but as Lugard says, the burden of proof in such cases isn’t as high in Europe as in the U.S. “The process in Europe is more formalistic and less economics-effects driven than in the U.S,” he says. In other words, the EU doesn’t have to work as hard to show that consumers and competitors have been harmed.
Because the commission has now opened a formal investigation—after a long informal investigation, so to speak—the chances are good that regulators issue a statement of objections involving Android, according to Lugard. It should be noted, however, the search case dragged on for five years before a formal statement of objections arrived.
The End Result
The search case—and the Java trial in the States—have also shown that Google’s rivals are intent on fighting for remedies for years on end. At one point, the search case seemed close to a settlement, but many Google competitors continued to push for something more. And many of the same names are behind the push against Android, including Microsoft, Oracle, and Foundem, the tiny UK company that filed the first search complaint against Google.
The forces mounting against Google are sometimes difficult to understand. What is Oracle’s interest in services bundled on Android? It’s a company that sells databases and computer servers. But these forces are enormous, and whatever their motivations, their case—as Lugard says—has some teeth to it.
What is the end result? If the commission does crack down on Android, we may see a large fine against the company, Logan says. Or we may see a dissolution of those Google contracts with handset makers. That may be the biggest threat to Google. Googles doesn’t make money from Android. It makes money from the ad-driven services that run atop the OS. And with Oracle, Microsoft, and so many others pushing so hard, those services may lose at least part of their foothold.