And

roid

Inve

stig

atio

nTh

e Br

usse

ls Te

chno

logy

Day

s15

Oct

ober

201

4

Trev

or S

oam

es a

nd S

ara

Ash

all

Dis

clai

mer

: A

ll vi

ews

expr

esse

d in

this

pr

esen

tatio

n ar

e th

e au

thor

s’ o

wn,

and

are

not

at

trib

utab

le to

any

clie

nt o

f She

arm

an &

St

erlin

g LL

P

Prel

imin

ary

EC in

vest

igat

ion

M

ultip

le c

ompl

aint

s pu

blic,

ther

e m

ay b

e ot

hers

…

Tw

o ro

unds

of R

FIs:

Jul

y 20

13 –

RFI b

y re

ques

t J

uly

2014

– R

FI b

y de

cisio

n N

ext s

teps

: ope

ning

of p

roce

edin

gs?

Ny

kom

mis

sær…

.ew

Com

mis

sion

er…

?

We are working on Android with some problems, not yet a formal investigation but quite an advance knowledge about the problems. We can work in all the areas of Google, where some people are sending us arguments, in some cases formal complaints, talking about possible abuses of dominance [...],” (CNBC - 9 Sep 2014)http://www.insidermonkey.com/blog/google-inc-googl-is-on-eu-competition-commissions-radar-again-327543

Let’s start at the beginning…

June 2007: Apple releases iPhone, first true smartphone Easy internet access on your phone! Anywhere! Anytime! Amazing wealth of personal data generated but Google left at home Google and Apple had signed an exclusive agreement in 2007, prior to the iPhone

launch for Google Search to be the default as well as YouTube and Google Maps to be preloaded, rumoured to be worth USD 1 billion p/a

Open Handset Alliance launched and Android released 5 November 2007 Android proves popular and rapidly gains traction:

Open source! Cool names! Do no evil!

Android vs Google Android

“Open” Android (AOSP)Plain vanilla operating systemLimited ecosystem No Android trademarkNo Google apps availableAmazon Fire… erm, some national Chinese players…

Google AndroidOperating system/platform with extensive functionalityBroad and deep ecosystem Strong brand and trademarkUpdates released with fanfare and constantly updatedFull line of Google apps preloaded Samsung, LGE, Sony, HTC,

ZTE, Huawei, NEC, Toshiba, we could go on…

Google Play Services(thanks to Chillin’ Competition for the graphic)

Beating heart of Google Android Unavailable on AOSP Since 2012 service APIs and platform features bundles together in ‘take-it-or-leave-it” client library Critical APIs moved from AOSP and into Google Play Services Google Play Services and Google Play Store are now technically (and perhaps contractually) tied

together If developers use Google APIs in Google Play Services their apps will only run on Google

approved devices “Apps may not work if you uninstall Google Play services” Applies to Google Apps and third party apps

“We don’t know whether the complainants have focused on that point or not. If not, they should.”

[http://chillingcompetition.com/2013/09/09/some-thoughts-on-the-new-anti-google-android-complaint-post-33-bundling-allegations/?relatedposts_hit=1&relatedposts_origin=8524&relatedposts_position=2]

Goo

gle

And

roid

“ho

ney

trap

”

AFA Sig

ned

by a

ll mem

bers

of O

pen

Hand

set A

llianc

e? W

hy?

Five

yea

r ter

m: i

s it

rene

wed

and

how

ofte

n? W

hat d

oes

“frag

men

tatio

n” m

ean?

MADASigned by all Google Android implementersLicense Google Android trademark and Google apps and servicesMandatory Google AppsPlacement and default requirements

Other agreements? Revenue sharing agreements?

Compatibility Test Suite, Compatibility Definition Document and pre-approval process acts as check point

You want a Google Android device, then you have to take this, this, that, this, oh, and that. And that. In this order.

Do not build a competing Android fork – “my way or the highway”…

Most widely-used OS for smart mobile devices These are Google Android, not “vanilla” AOSP Android For an OEM, what are the licenseable alternatives?

OEM switching between OSs is limited Lock-in effects:

Limited alternatives and commercially less attractive Insufficient portability and interoperability of apps across OSs

Network externalities – strong positive feedback loop App developers have limited capacity and attention span and

focus their efforts on most successful OSs unless otherwise incentivised

Google fully controls both Google Android and vanilla Android

Is [Google] Android dominant?

Art

icle

101

or A

rtic

le 1

02?

Art

icle

102

Cla

ssic

tyin

g

Ful

l-lin

e fo

rcin

g

De

fact

o ex

clusiv

ity

Pre

dato

ry p

ricin

g

Int

el ty

pe re

bate

s/in

cent

ives?

Art

icle

102

Cla

ssic

tyin

g

Ful

l-lin

e fo

rcin

g

De

fact

o ex

clusiv

ity

Pre

dato

ry p

ricin

g

Int

el ty

pe re

bate

s/in

cent

ives?

Article 101

Classic tying

Full-line forcing

De facto exclusivity

Article 101

Classic tying

Full-line forcing

De facto exclusivity

TTBER

Classic tying

Full-line forcing

De facto exclusivity

TTBER

Classic tying

Full-line forcing

De facto exclusivity

Dominance not actually required, market power (>30%) sufficient for a finding of an

infringement for many of the offenses

Dominance not actually required, market power (>30%) sufficient for a finding of an

infringement for many of the offenses

Publ

ic d

ebat

e of

out

of d

ate

and

som

etim

es d

ecep

tive…

See

for e

xam

ple

Geo

ffrey

Man

ne –

Chi

llin’

Com

petit

ion)

“Microsoft wants you to believe that Google’s business practices stifle competition and harm consumers. Again.”Google and its supporters seek to portray it as such to undermine the credibility of widely held concerns.

“In fact, along with the Microsoft-funded trade organization FairSearch..”FairSearch is not just MSFT but many other companies all with concerns particular to their businesses

“It is this claim that Microsoft and a network of proxies brought to the Commission when their efforts to manufacture a search-neutrality-based competition case against Google failed.”It has not failed: the EC considers there to be a sufficient prima facie case to demand remedies

On Körber: “Exhaustive scholarly analysis“ but Körber says“This paper is based upon an expert opinion funded by Google”“MADA” in the following refers to the HTC‐MADA of 2011”: fn 34

[http://chillingcompetition.com/2014/10/03/microsofts-android-anathema/]

Tyin

g an

d/or

Ful

l Lin

e Fo

rcin

g

Google Android is dominant Moreover, many of the Google apps services are also

dominant OS and each of the apps are separate products, and

all are tied/bundled together Tying likely to lead to anti-competitive foreclosure Efficiencies (if any) do not outweigh any negative

foreclosure effect

Not having to pay for tied products irrelevant Number of Google apps now preloaded on every Google Android device far exceeds the number listed

as mandatory apps in the 2011 MADA documents (some reports suggest 9 20!): [The Information: https://www.theinformation.com/Google-s-Confidential-Android-Contracts-Show-Rising-Requirements]

Through the MADA, OEMs forced to take each of the mandatory Google apps and services if they want Google Android

Reinforced by technical tie created by Google Play Services

De

fact

o ex

clus

ivity

?

Agai

n, w

hat i

s “fr

agm

enta

tion”

?

Do A

FA a

nd M

ADA

prev

ent O

EM s

igna

torie

s fro

m d

evel

opin

g no

n-G

oogl

e ap

prov

ed A

OSP

dev

ices?

Do

es A

FA p

reve

nt O

HA m

embe

rs fr

om c

omm

ercia

lisin

g no

n-G

oogl

e ap

prov

ed A

OSP

dev

ices?

Oth

er th

an G

oogl

e An

droi

d, w

hat O

S op

tions

do

OEM

s re

alist

ically

hav

e?

Exac

erba

ted

by s

tagn

atio

n of

AO

SP a

nd c

reat

ion

of G

oogl

e Pl

ay S

ervic

es

No per se approach – assess the effect of the arrangements and in particular how much of the market is foreclosed

CTS/CDD/Device approval opacity creates uncertainty Discourage use of non-Google Android components Disciplining OEMs in case of “betrayal”? Ever-greening of the AFA

Example of potential foreclosure:German MNO OHA members: T-Mobile (~32%) + Telefonica (~37%) + Vodafone (~31%) = 100% As an OEM, how do you, or could you, distribute an Android Fork device?

Exam

ples

of “

frag

men

tatio

n” in

frin

gers

dis

cipl

ined

A

cer

- Ali

Bab

a –

Acer

blo

cked

from

laun

chin

g co

mpe

ting

devic

e:“O

ur p

artn

er re

ceiv

ed n

otifi

catio

n fro

m G

oogl

e th

at if

the

new

pro

duct

with

Aliy

un w

ent a

head

, Goo

gle

wou

ld

term

inat

e An

droi

d pr

oduc

t coo

pera

tion

and

rela

ted

tech

nica

l aut

horis

atio

n w

ith A

cer”

[http

://uk

.reut

ers.

com

/arti

cle/

2012

/09/

13/u

s-ac

er-a

libab

a-go

ogle

-idU

KBR

E88C

0HW

2012

0913

]

Sk

yhoo

k –

Laun

ch o

f Mot

orol

a’s

Droi

d X

devic

e bl

ocke

d be

caus

e it

didn

’t us

e G

oogl

e’s

netw

ork

loca

tion

serv

ices.

Sky

hook

’s in

nova

tive

Netw

ork

Loca

tion

Serv

ice m

et th

e co

mpa

tibilit

y re

quire

men

ts…

“usi

ng c

ompa

tibilit

y as

a c

lub

to m

ake

[OEM

s] d

o th

ings

we

wan

t” [D

an M

orril

l – G

oogl

e]

K

ikin

– In

nova

tive

sear

ch fu

nctio

n ex

clude

d:G

oogl

e’s

agre

emen

t with

dev

ice

man

ufac

ture

rs h

as m

ade

it ov

erly

cha

lleng

ing

to c

usto

miz

e th

e la

test

ve

rsio

n of

the

Andr

oid

oper

atin

g sy

stem

, KitK

at 4

.4 [.

..] S

ince

Web

view

cus

tom

izat

ion

is a

key

requ

irem

ent

for k

ikin

, Goo

gle’

s m

ove

has

effe

ctiv

ely

elim

inat

ed k

ikin

on

Andr

oid.

[http

://w

ww.

kiki

n.co

m/b

log/

2014

/08/

voda

fone

-dev

ice-

upda

te/]

Pred

ator

y pr

icin

g?

Pr

edat

ion

raise

d by

som

e p

artie

s: “G

oogl

e’s

pred

ator

y di

strib

utio

n of

And

roid

at b

elow

-cos

t mak

es it

diff

icul

t for

ot

her p

rovi

ders

of o

pera

ting

syst

ems

to re

coup

inve

stm

ents

in c

ompe

ting

with

Goo

gle’

s do

min

ant m

obile

pla

tform

” Fa

irSea

rch

Pres

s Re

leas

e

Dominant company deliberately incurs losses / foregoes profits in the short term (‘sacrifice’)

Foreclosure or likelihood of foreclosure of one or more of actual or potential “as efficient competitors” with a view to strengthening or maintaining market power

Consumer harm

Significant academic debate about existence of predation in multi-sided markets or platforms (Evans)

Det

rimen

tal E

ffect

s

In

put f

orec

losu

re a

nd c

usto

mer

fore

closu

re

Com

petit

ion

betw

een

oper

atin

g sy

stem

s ef

fect

ively

extin

guish

ed

Inno

vativ

e pr

oduc

ts n

ot b

eing

inclu

ded

due

to c

hillin

g ef

fect

s of

Goo

gle

polic

ies

Do

min

ance

in S

EAR

CH

rein

forc

ed a

s G

oogl

e ha

s co

ntro

l ove

r mor

e pe

rson

al d

ata

as a

n in

put f

or

adve

rtisin

g th

an a

ny o

ther

com

pany

cou

ld e

ver d

ream

of…

There is the ever present threat hanging over industry players: unless they are subservient, and agree to everything that Google sees fit to impose, or does, they risk being excluded from the Android “family” and deprived of access to key features and services, as a result of which their smartphones would risk commercial failure