The EU Google Android appeal: Exclusionary practices in the digital sector
Global | Video | October 2022 | 08:35
Video Details
| Miranda Cole | Richard, we've now got the General Court’s judgment in the second of the three Google cases, the Android case. It seems like a very interesting case in a number of respects. Would you like to take us through the evolution of the case and the General Court judgment? |
| Richard Whish KC | Yes, absolutely. So, let's start with the Commission. As you say, it is the second of three Google decisions. We've already had Google Shopping, which was upheld by the General Court and is now on appeal to the Court of Justice. This is the second, Google Android, substantially but not entirely upheld by the General Court. What did the Commission have to say here? Google licenses Android, an open source software regime and it licenses it free to the OEMs that make the smartphones. So, the licence is free, but the OEM says, we would like to have access, please, to the Google Playstore. And Google says, well yes, you can have access to the Playstore on two conditions, that you have to pre‑install Google Chrome and you have to pre‑install the Google search engine. And the Commission says, that's an abuse of a dominant position because it's tying, which is a well‑known form of abuse. There's a second abuse which is that Google says to the OEMs, if you want to take Android and then adapt it, for example, to develop other apps, in those circumstances, you can't have access to Google Search, so take it or leave it. These are the anti‑forking agreements, and the Commission says, well, those are anti‑competitive because that prevents people developing, innovating, producing potentially competing software. And then the other thing is that Google says to certain OEMs, if you pre‑install Search then we will share our revenue with you in certain circumstances if you pre‑install and deal with us on an exclusive basis. And the Commission says, well, these are payments in return for exclusivity and that is abusive behaviour. And then, importantly, the Commission says this all adds up to a single overall abuse for which we fine you €4.24 billion. |
| Miranda Cole | You mentioned in that context some of the very interesting conclusions regarding the operating system, etc, and I think probably the conclusions about licensable operating systems may have ramifications for other cases. But picking up that last point that you just flagged about the exclusive arrangements. This is, you could say, the third of three cases that have looked at Commission decisions dealing with potential exclusionary effect of either rebates or revenue sharing, so Intel, Qualcomm. How does Android fit into that series of cases? |
| Richard Whish KC | Yes, well frankly, I think it's all a bit of a pickle. Competition authorities, legal practitioners and economists have been debating this issue of payments, loyalty rebates, payments for exclusivity, it's been debated for a long time. You referred to Intel where the Court of Justice established beyond doubt that these kind of payments are not, if you like, per se, illegal, they require effects analysis. And, ultimately, on the facts of Intel, the General Court said, I'm sorry Commission, you have failed to prove to us to our satisfaction that the payments in question could have a foreclosure effect. In that case, they said you've got the contestable share of the market wrong and there were other problems as well. Then we had Qualcomm, where the Commission imposed a big fine for exclusivity payments and the General Court says, well, actually Commission, you've just got that wrong because the payments weren't for exclusivity, they were because only Qualcomm chips satisfied the technical demands of Apple. And now you've had this one, where there were the payments being made and the Court said, well, actually we think you've got this wrong, you've applied an AEC test, but we think that there are errors in your methodology and we're not satisfied. So, as you say, we've got three of these cases in a row. Where does it leave us? Well, the Commission, of course, has appealed the Intel case to the Court of Justice and I heard of a senior official from DG Comp say recently that they're throwing themselves at the mercy of the Court and saying, tell us what do we have to do when it comes to these payment cases, what do you expect of us, what do we have to do to demonstrate an anti‑competitive effect to your satisfaction? So, I think we're in a state of flux at the moment. |
| Miranda Cole | So, in that context, the Court again talked about the rigour of the Commission's analysis and really dug in on particular aspects, you know, for example, the use of operational costs rather than incremental costs. This sounds like, from your comment about the Commission throwing itself on the mercy of the Court, that there may be some implications here for how the Commission uses the test in future. It has, of course, been described in all three of those judgments, so Intel, Qualcomm and now Android as only being useful for assessing whether there is exclusion. There are, of course, other ways to consider exclusion and the effects, right? |
| Richard Whish KC | Well, yes. I mean, the first thing I would say there is that no judgment of the Court has ever established that the application of an AEC test is required. It is not a legal necessity, it is one among other methods of proving an anti‑competitive effect. However, when I think it comes to pricing cases, I think it is inevitable that at some point an AEC test is going to be applied. Because the dominant firm, DomCo, will always argue that the prices in question couldn't have eliminated an as efficient firm and, so in that sense, if it's going to come from the DomCo as part of its defence it's inevitable that the Commission is going to have to apply it anyway, whether it's a legal requirement or not. I do think also on your point that the General Court seems to me to go much more deeply into the file nowadays than used to be the case. I think that can be demonstrated by reference to a number of decisions, you know, Qualcomm and Intel among them. |
| Miranda Cole | So, I guess that leaves the question of what happens next? I mean, the Commission has to wait for the Court of Justice in Intel, but as they continue to do their 102 pricing-related cases, is there something that we should expect to see change in the meantime, in terms of the way they look at elements of exclusion, you know, the extent of the allegedly dominant undertaking’s dominant position, the coverage in the market. Should we be expecting the Commission will be changing things now in response to these cases? |
| Richard Whish KC | Well, one thing I would say there is, do let us remember in Android that the payment was a small part of a much bigger abuse case. I very much doubt that the Commission would ever have proceeded against Google simply on the basis of revenue sharing. So, the way I would deal with your question would be to say, I don't anticipate them doing a pure loyalty rebate case for a long, long time, and certainly not until we've seen the outcome of Intel. |
| Miranda Cole | Great, that makes sense. I mean, I think to your point in at least recent years, it's always been part of a bigger case, so I suppose your conclusion is watch this space? |
| Richard Whish KC | Most definitely. |
