In a five-day session, between September 27, 2021 and October 2, 2021, the General Court of the European Union (the “General Court”) heard Google’s and the European Commission’s (the “Commission”) arguments in the Google Android case.[1]
Background
In July 2018, the Commission adopted a decision (the “Decision”) fining Google a record- breaking €4.34 billion for allegedly imposing anticompetitive restrictions on original equipment manufacturers (“OEMs”) and mobile network operators (“MNOs”), with a view to strengthening a dominant position in general internet search.[2]
The Commission found three infringements of Article 102 TFEU. First, under mobile application distribution agreements (“MADAs”), Google tied the Google Search and Chrome apps with the Play Store. Second, under the anti-fragmentation agreements (“AFAs”), Google conditioned its licensing of the Play Store and Google Search app on OEMs committing not to develop or sell devices running a non-compatible version of Android (a so-called “Android fork”). Third, Google entered into revenue sharing agreements (“RSAs”) with OEMs and MNOs on the condition that they did not preinstall competing general search applications on any device within an agreed portfolio.
In October 2018, Google filed an appeal to the General Court seeking the annulment of the Commission’s decision. Google raised six pleas, contesting each of the three alleged infringements, as well as the Decision’s assessment of market definition and dominance, its fine calculation, and the Commission’s procedure.
The hearing
The five-judge panel was presided by judge Anna Marcoulli, with Sten Frimodt Nielsen acting as Judge-Rapporteur. The main parties were joined by a number of interveners.[3] Despite Covid-19 limitations, the hearing was public and attended by the press. It was conducted in English, the language of the case.
Below is a brief overview of the main arguments the parties raised before the Court in respect of the four substantive pleas.
Market definition and dominance. Google argued that Android and the Play Store are not dominant because they face significant competition from Apple. By focusing on the OEMs’ perspective, and the fact that Android is licensable and Apple is not, the Decision wrongly dismissed the intense “system competition” for users and developers between, on the one hand, Android and Google Play and, on the other hand, iOS and Apple’s App Store. In response, the Commission argued that any constraint Apple’s ecosystem exerts on Android and Google Play could only be “indirect.” The Commission also argued that it analyzed the indirect constraint from Apple and found it “insufficient.”
The Court queried the Commission’s finding that users would not switch to Apple from Android in response to a small but significant and non- transitory decrease in quality (“SSNDQ”) of Android. Google argued that the Commission had failed to show that the SSNDQ test—which the Decision itself put forward—was satisfied. The Commission submitted that, whilst quantifying a quality reduction is a “metaphysical impossibility,” it did engage with quality levels by looking at the low frequency of OS updates on Android devices.
MADAs. With respect to the preinstallation of the Google Search app and Chrome under the MADA, Google emphasized the MADA’s procompetitive nature: it licensed Google Play for free in return for OEMs’ promoting Google Search and Chrome through non-exclusive preinstallation. The Commission submitted that Google did not offer any credible evidence to back its claim that the preinstallation obligations on OEMs were justified to facilitate Google’s investments in Android.
Google also contended that the non-exclusive preinstallation condition could not result in anticompetitive foreclosure because users have easy and unrestricted access to rivals, for example through downloading. The fact that rival general search apps had low download rates was evidence of user preference for Google Search on account of its superior quality.
The Commission maintained that the MADA preinstallation requirements amounted to classic tying. According to the Commission, rivals’ means of reaching users were unviable, especially when what comes on the device is “satisfactory.” The Judge-Rapporteur recognized that, unlike in the Microsoft Media Player case from the 2000s,[4] users face no barriers to downloading rival apps, which he noted is trivially easy.
RSAs. With respect to the competitive impact of the portfolio RSAs, Google argued that RSAs’ coverage of the relevant market was miniscule (less than 5%), precluding any plausible harm to competition. The Commission accepted that the challenged RSAs had a low coverage, but that qualitative factors—such as the strategic importance of mobile devices and data— augmented the impact of the RSAs.
Google also highlighted that the Commission did not carry out an accurate “as-efficient competitor” (“AEC”) test. The Commission responded that the AEC test had limited value in the current circumstances, given Google’s high share in search services, which made “the emergence of an efficient competitor almost impossible.”
AFAs. With respect to the AFAs, the parties argued over whether the AFAs restrict competition and are objectively justified. Google submitted that the AFA’s compatibility obligations are not a restriction of competition because they only set the minimum requirements to achieve compatibility and do not prevent differentiation and innovation on top of the compatibility baseline. The Commission argued that the AFAs were capable of foreclosing competition, as OEMs that wanted to license Google Play and the Search app could not experiment with Android devices that Google had not approved.
Google also explained that the AFAs are objectively justified because they address a real concern that fragmentation could kill Android and ensure that the attractiveness of the Android platform is preserved. The Commission claimed that Google used the AFAs as a means to control Android implementations, citing Google internal documents said to support its case that Google sought to restrict competition from incompatible Android implementations (such as mobile devices running Amazon’s Fire OS).
Next steps
The panel will now deliberate, and will deliver a ruling within approximately one year. The main parties will then have the right to appeal the General Court’s judgment to the Court of Justice.
[1] Google LLC and Alphabet Inc. v Commission (Case T604/18), case pending. Cleary Gottlieb is representing Google in the proceedings.
[2] Google Android (Case COMP/AT.40099), Commission decision of July 18, 2018. See Cleary Gottlieb’s European Competition Report of Q3, 2018.
[3] The Application Developers Alliance (ADA), the Computer & Communications Industry Association (CCIA), Android OEMs Gigaset and HMD, and browser rival Opera intervened in support of Google; consumer organization BEUC, FairSearch, rival search services Seznam and Qwant, and two German publisher associations intervened in support of the Commission.
[4] See Microsoft v Commission (Case T-201/04) EU:T:2007:289.