The General Court partially annuls the Commission’s Google-Android decision

In its judgment of 14 September 2022 (the “judgment”), the General Court partially upheld Google’s appeal against the Commission’s 2018 decision. Google/Android decision, but upheld the most important and consequential elements of the decision, thereby confirming that some of Google’s practices regarding the Android mobile platform could be considered part of a strategy to protect and strengthen the Google’s dominant position for general online search services and violated Article 102 TFEU.

In summary, the Tribunal:

  • confirmed the strict standards applicable to the evaluation of exclusivity agreements under section 102, as developed in Intel and Qualcom, and reversed the Commission’s finding that Google’s payments for the exclusive installation of Google apps on mobile phones under Revenue Sharing Agreements (“RSAs”) violated Section 102, challenging the Commission’s analysis of market coverage and its use of the “as an effective competitor” (“AEC”) option;
  • showed great deference to the Commission’s finding that the pre-installation requirements under Mobile Application Distribution Agreements (“MADA”), linking a license in the Google App Store to the pre-installation of Google’s general search application (Google Search) and browser application (Google Chrome), crowded out rival search application vendors as it provided Google with a significant distribution advantage over competitive;
  • confirmed the Commission’s view that the anti-forking obligations under the Anti-Fragmentation Agreements (“AFAs”), which prohibited OEMs that sold devices with pre-installed Google apps from selling devices with non-Android forks compatible, restricted competition by preventing the emergence of alternative mobile platforms where rival search service providers could promote their products.

The General Court also reduced the fine imposed on Google from 4.34 billion euros to 4.125 billion euros. The Tribunal’s most significant findings are summarized below.

The Commission was entitled not to take into account the competition between the Google and Apple mobile ecosystems when defining the relevant markets

The General Court agreed with the Commission that Google held a dominant position in the worldwide market (excluding China) for the licensing of operating systems for smart mobile devices (“OS”). Like the Commission, the Court found that Google’s arguments regarding competition between mobile ecosystems (namely that intense competition between Apple’s and Google’s mobile platforms prevented Google from exercising market in its relationship with OEMs) were not relevant for the purposes of market definition. The competitive constraints exerted by Apple’s platform were only indirect and insufficient to counterbalance Google’s market power.

Notably, the Tribunal endorsed the Commission’s use of the new SSNDQ test – an attempt to examine the likely effects of a small but significant, non-transitory decline in quality – and confirmed that the SSNDQ test, despite its limitations, could constitute relevant evidence for the purpose of defining the relevant market.

The pre-installation of MADAs provided a competitive advantage (distribution)

The Tribunal agreed that MADA’s pre-installation requirements created a “status quo bias” that discouraged users from switching to competing search applications in sufficient numbers. Pre-installation thus gave Google a significant competitive advantage that competing general search providers could not compensate for, whether through downloads, agreements with search engine developers or pre-installation agreements with OEMs.

Google’s counterfactual argument also failed to convince the Court. Google had argued that the contested decision failed to take into account that the Android platform created unprecedented competitive opportunities for its rivals and that Google would not have been able to develop and keep the Android platform open. and free in the absence of MADA conditions.

The Court disagreed, considering that the Commission was not contesting the MADA as a whole, but only the conditions precedent to the installation. The Court even agreed with the Commission’s view that Google could have instead granted a paid license to the app store, thus calling into question a key element of Google’s business model, which was based on the idea that a free license should reduce costs for OEMs and increase adoption of the Android Platform.

Anti-fragmentation agreements (“AFA”) prevented competition by forked Android platforms

The Court also found that the Commission had correctly assessed the effects of the anti-fragmentation obligations, which required OEMs to comply with a minimum compatibility standard for the implementation of Android source code for all devices running on an Android system. exploitation developed from Android source code. . These obligations allowed OEMs to use “Android compatible forks”, but prevented them from using “non-compatible Android forks”.

The Court noted that the Commission considered the anti-fragmentation obligations to be unfair only insofar as they applied to all Android OS devices and therefore included devices without pre-installed Google apps. Banning OEMs from marketing any device running an unsupported Android fork deprived unsupported Android forks of any commercial market and in turn, rival search providers from a platform on which they could market their products. .

The Commission has not established that the RSA exclusivity payments exclude competitors

The Court overturned the Commission’s finding that Google’s payments to certain OEMs and MNOs – provided they did not pre-install, or make available immediately after purchase, competitive general search services on a mobile device wallets themselves constituted illegal exclusive loyalty payments, as they made it more difficult for Google’s competitors to enter national markets for general search services.

Relying on the Intel judgment of the Court of Justice, the General Court found plausible Google’s argument – ​​that the coverage of the portfolio-based RSA was less than 5% of the market defined by the Commission. At the same time, the General Court noted that the Commission had not explained its own assessment of market coverage. It therefore concluded that the share of the relevant market covered by the exclusivity payments could not be described as significant. Moreover, as in the Intel case, the General Court found that the Commission had made a number of errors when applying the AEC test to establish that the exclusivity payments had exclusionary effects.

Comments

The Google/Android ruling, which comes after the Commission successfully defended its Google Shopping decision, lends significant support to the Commission’s enforcement agenda against major digital platforms. Contrary to the high standards governing the review of the Commission’s assessment of exclusivity payments, the Tribunal continues to show greater deference when reviewing a Commission finding that certain conduct, even if not do not induce exclusivity, provide a significant competitive advantage that smaller rivals cannot overcome.

Case T-604/18, Google and Alphabet v Commission

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