GOOGLE DEFENDS AGAINST ANTITRUST CLAIMS IN THE EUROPEAN UNION
Mega-giant internet company Google was hit last week with multiple antitrust charges in the European Union in the form of a “Statement of Objections” issued by the European Commission. The Commission alleges that Google has been abusing its dominance on the market by forcing Android phone makers and mobile network providers to load Google’s applications on Android phones. The Commission further claims that Google’s business model prevents serious competition by phone manufacturers seeking to run different operating systems using Google’s open source code.
Current estimates indicate that as much as 80% of smartphones in Europe run on Android. Google requires that these phones have certain Android apps preinstalled by manufacturers. Google provides Android for free, and the apps drive traffic and generate revenue for Google, which has a massive market share.
Clearly this is a very serious accusation, and if Google can’t prove otherwise the fine could be as high as 10% of the company’s annual global sales, which comes out to a hefty $7 billion.
Confused? Just check out this handy chart:
Google’s general counsel Kent Walker believes the European Commission is incorrect, and Google’s business model actually increases competition by utilizing open innovation. Walker claims that Google’s methods seek to “keep manufacturers’ costs low and their flexibility high, while giving consumes unprecedented control of their mobile devices.” Walker added that no one is forcing companies to enter into partner agreements with Google. He said in a statement that Google’s partner agreements, “foster[s] a remarkable — and, importantly, sustainable — ecosystem, based on open-source software and open innovation.” He also pointed out that over 50 billion Android apps have been downloaded to Android-based devices, and many of them directly compete with the apps Google offers.
Google is also fighting separate charges in the EU for allegations in 2015 that Google has abused its power in the market by promoting its own Google Shopping ads above other paid search results of others. The European Commission said in that case that this behavior drives away competition by not providing users with the search results that may best suit their needs. Google responded to these claims by saying that today’s consumers have a multitude of choices as to where to find information, goods and services, and anything else they may seek online.
It’s clear that Google is up to its neck in legal woes in Europe, as new allegations seem to be popping up every week. While it’s likely nothing Google’s army of lawyers can’t handle, the constant barrage of issues brings up some very interesting points, such as when does a company become TOO big. Success in the marketplace has made Google a powerhouse, but as the company grows and expands that success becomes marred by global accusations of impropriety.
Is this the downside of growth? Having a massive target on your back? Quite possibly it is, but like many banks, Google is likely “too big to fail.” Chances are they will come out of this little to no worse for wear.
The big question will boil down to whether Google is truly doing what it claims and using open innovation to increase competition in the marketplace. People appear to be divided on this issue, and needless to say, we’ll be following this story over the coming weeks as it may set some interesting precedent for future cases.
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