On 18 July 2018, the Commission fined Google for having abused its dominant position by imposing anticompetitive contractual restrictions on manufacturers of Android mobile devices and mobile network operators.
Three types of restrictions were identified. Firstly, those contained in distribution agreements requiring manufacturers of mobile devices to pre-install the general search (Google Search) and browser (Chrome) apps in order to be able to obtain a licence from Google to use its app store (Play Store). Secondly, those contained in antifragmentation agreements, under which the operating licences needed to pre-install the Google Search and Play Store apps could only be obtained by mobile device manufacturers if they undertook not to sell devices running versions of the Android operating system not approved by Google. Thirdly, those contained in revenue share agreements, under which the granting of a share of Google’s advertising revenue to the manufacturers of mobile devices and the mobile network operators concerned was subject to them undertaking not to pre-install a competing general search service on a pre-defined portfolio of devices.
According to the Commission, Google’s practices consolidated its dominant position in relation to general search services and strengthened the revenue it obtained from search advertisements. Therefore, the Commission classified these restrictions as a single and continuous infringement of Article 102 TFEU and imposed a fine of almost 4,343 billion euros on Google. Google challenged the Commission’s decisions. Consequently, the General Court handed down its judgment in the case on 14 September 2022 (Case T-604/18).
As a first step, the General Court examined whether Google’s exercise of its power on the relevant markets enabled it to act independently of the various factors likely to constrain its behaviour. The General Court noted that the Commission went on to find that, of the four interconnected markets identified, Google held a dominant position on three of them, namely (i) the worldwide market (excluding China) for the licensing of smart mobile devices operating systems; (ii) the worldwide market (excluding China) for Android app stores and (iii) the various national markets within the EEA for the provision of general search services. In this regard, the General Court observed that the Commission correctly found that the ‘non-licensable’ operating systems exclusively used by vertically integrated developers, such as Apple’s iOS or Blackberry, are not part of the same market, given that third-party manufacturers of mobile devices cannot obtain licences for them. The General Court also ruled that nor did the Commission err in finding that Google’s dominant position on that market was not called into question by the indirect competitive constraint exerted on that market by Apple’s non-licensable operating system.
As a second step, the General Court examined whether the restrictions at issue were abusive. Firstly, the General Court rejected in its entirety the plea whereby Google alleged that the pre-installation conditions were not abusive. Indeed, the Commission found that such pre-installation could give rise to a status quo bias as a result of the tendency exhibited by users to use the search and browser apps available to them, such as to increase significantly and on a lasting basis the usage of the service concerned – an advantage which could not be offset by Google’s rivals. The General Court found that none of the criticisms put forward by Google could be levelled against the Commission’s analysis in that respect.
Secondly, regarding the assessment of the sole pre-installation condition included in the portfolio-based revenue share agreements, the General Court found that the Commission was justified in considering the agreements at issue to constitute exclusivity agreements, insofar as the payments provided for were subject to there being no pre-installation of competing general search services on the portfolio of products concerned.
Nevertheless, the General Court identified a number of deficiencies in the Commission’s assessment. Indeed, in finding them to be abusive, the Commission considered that those agreements were such as to encourage the manufacturers of mobile devices and the mobile network operators concerned not to pre-install such competing services. However, according to the case law, the Commission was required to carry out an analysis of their capacity to restrict competition on the merits in the light of all the relevant circumstances, including the share of the market covered by the contested practice and its intrinsic capacity to foreclose competitors at least as efficient as the dominant undertaking (AEC test). The General Court considered that the statement whereby the Commission found that the agreements in question covered a “significant part” of the national markets for general search services, irrespective of the type of device used, was not supported by the evidence set out in the contested decision. Therefore, the General Court found that the AEC test did not support the finding of abuse resulting from the portfolio-based revenue share agreements in themselves.
Thirdly, regarding the assessment of the restrictions contained in the anti-fragmentation agreements, the General Court observed that the Commission considered such a practice to be abusive insofar as it seeks to prevent the development and market presence of devices running a non-compatible Android fork. Therefore, the General Court upheld the Commission’s finding that the practice in question had led to the strengthening of Google’s dominant position on the market for general search services, while deterring innovation, insofar as it had limited the diversity of the offers available to users.
Google also sought, before the General Court, a declaration that its right of access to the file was infringed and that its right to be heard was not respected. Concerning the latter, given that the Commission refused Google a hearing on the AEC test, even though it had sent Google two letters of facts substantially supplementing the substance and scope of the approach initially set out in the statement of objections in that respect, but without adopting, as it ought to have done, a supplementary statement of objections followed by a hearing, the General Court considered that the Commission had infringed Google’s rights of defence. Thus, it had deprived Google of the opportunity to better ensure its defence by developing its arguments in a hearing. Given the deficiencies previously identified in the Commission’s application of the AEC test, the General Court also observed that the value of a hearing was all the more apparent in this case. Consequently, the General Court decided that the finding regarding the abusive nature of the portfolio-based revenue share agreements must be annulled on that basis too.
Finally, making use of its unlimited jurisdiction, the General Court carried out an autonomous assessment of the amount of the fine and concluded that the amount of the fine to be imposed on Google for the infringement committed was to be 4,125 billion euros. Indeed, the General Court observed that, while the contested decision should accordingly be annulled in part, insofar as it concludes that the portfolio-based revenue share agreements are in themselves abusive, this partial annulment did not affect the overall validity of the finding of an infringement, in the light of the exclusionary effects arising from the other abusive practices implemented by Google.
The case in hand can be considered one of the most significant competition decisions of the year. In addition to following up on a competition authority's decision to impose the largest fine ever imposed in Europe, the decision comes in the wake of the "Google and Alphabet v. Commission" saga, which seeks to counter Google's abusive practices consolidating its dominant position.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information about this case and/or for general legal advice relating to Belgian and EU competition law.