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Should The European Commission Penalize Google?

Photo of Karol Severin
by Karol Severin

In April 2016, The European commission accused Google of abusing the market leadership of Android to prevent rivals from competing with alternative software and services. Google is now dismissing the claims. The stakes are relatively high – a potential fine of $7.4bn to be precise, 10% of Google’s global revenue.

I’m not a legal or an EU/EC policy expert, but here are a few comments with my mobile media analyst hat on, as we watch this unfold:

This is a case of ‘’he’s right, she’s right and the guy standing in the corner is also right”. Each side has a solid argument and it will all depend on from whose point of view this will be mostly judged. The end consumers? The app economy businesses? Telcos and manufacturers? The theoretical framework of competition?

Is Google Officially Competing With Apple?

One of the premises Google wants to reject is EC’s opinion that it does not compete with Apple, which would point to a more monopolistic status of Google/Android. If you are going by revenue composition, then indeed Google is officially not competing with Apple and EC may have a case. One is an ad company and the other is a hardware company. However, despite different end games, their strategies absolutely cross journeys on the operational level. Both companies are ultimately trying to deliver the best mobile experience possible to boost their respective revenue channels. And of course the market share of their respective platforms is important for both. Thus, from Google’s point of view, it does compete with Apple. The fact that Google is rolling out the Pixel Phone might help its case about direct competition, because they are now moving more visibly into smartphone sales (Nexus was more of a niche product).

Penalizing Google May Not Necessarily Make Things Better

Would more OS (operating system) platforms and or search engines emerge on the market if Android’s/Google's dominance became more regulated in Europe? Perhaps. But would that make the World better? And if so, whose world? Of course there shouldn’t just be a monopoly on digital distribution of information (Google Search). On the other hand, consumers want their digital experiences in one place and probably would prefer one search engine than a plethora for everyday use. So no matter how many search engines or OS platforms there are, the best ones are bound to rise to the top and start acting as a chip leaders if they can. Google succeeded with Search because it produced the best search engine on the market at one point. It is also important to note, that despite trying to help its adoption by striking pre-install deals for Google apps, Google doesn’t obstruct or prevent end consumers from switching to an alternative Search engine.

With regards to the OS itself, it is manufacturers' choice which OS they implement. If they felt, they could deliver a better experience they would build and market their own OS instead of partnering with Android. Clearly that’s not the case.

From the point of view of app developers and the app economy infrastructure, more OS platforms as well as search engines would make lives more difficult, as apps would have to be developed and optimised for more platforms and SEO (Search Engine Optimisation) & ASO (App Store Optimisation) maintained across additional search engines. This would essentially make app development slower and more costly. In this sense, EC making the OS part of the app economy more competitive could hurt the supply side of the value chain.

So what is EC expecting of this? For Google to close-off its platform and start acting more like Apple? Unlikely. Or for Android to remain open and act less commercially to Google’s advantage? If Google can’t capitalise enough on Android, then it can’t put as much money into its ongoing development, which ultimately results in stalling innovation of end-users' experiences. Or is the EC simply attempting to tax Google’s success? Except the latter, none of the above would really bring any significant benefits to end consumers in Europe, in my opinion.

I wouldn’t dare to predict the result from the legal perspective, but Google’s case speaks stronger to me personally, than that of the EC.

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