Regulators in the United States are going to be taking a close look at Google’s Android mobile operating system and how Google conducts business with the hardware partners who create the plethora of Android phones offered to American shoppers.
David McLaughlin reports for Bloomberg that the Federal Trade Commission (FTC) has reached a clearance agreement with the Justice Department to investigate Google’s Android business. FTC officials have met with tech company representatives who say that Google gives priority to its own services on the Android platform while restricting others. Both groups use the clearance process to decide which is better suited to lead a particular investigation, and the inquiry, which is still in its early stages, could end without a case against Google.
McLaughlin reports that the FTC scrutiny comes after Europe’s antitrust chief challenged Google regarding its dominance over Internet search. The European Union (EU) has also begun its own investigation into Google’s Android platform after it received complaints, including one from a group that represents Microsoft, Expedia, and Nokia. The group, called FairSearch.org, has claimed that Google’s practices make it “more difficult and expensive for fresh, innovative companies to reach the market.”
In the second quarter of this year, the Android operating system accounted for 59% of the U.S. smartphone market, while Apple’s iOS had 38% and Microsoft’s Windows Phone platform had just 2.35%. Google’s mobile operating system ties together many of its other services into a single bundle, which McLaughlin notes echoes the dominant Microsoft Windows platforms of two decades ago. In 1998, the U.S. claimed that Microsoft unlawfully protected its Windows monopoly by keeping computer makers from promoting web browsers that competed with Internet Explorer, and Microsoft agreed to end the anticompetitive practice in a settlement four years later.
Bloomberg reports that the practice of bundling products and services together can violate antitrust laws if a company dominates the market for a product that customers need, and then effectively forces them to buy a complementary product or service. If consumers can go to another manufacturer to avoid the bundled product, then there’s no antitrust violation.
The EU’s Android investigation centers on Google’s targets of bundling software — like YouTube, Maps, and Chrome — with the Android operating system. The EU is investigating whether the practice harms developers of rival apps, as well as device manufacturers who need to accept the whole package. They’re also investigating whether smartphone makers are prevented from developing their own versions of Android.
Vlad Savov reports for The Verge that it might, at least initially, seem like a “preposterous” question to ask whether Android constitutes an actual monopoly, since Google doesn’t really make smartphones and doesn’t force Android on anyone. The company also isn’t fully in control of the Android operating system, and engages in fair and healthy competition with Apple’s iOS in the United States. As Savov notes, “The main thing that Google has any say over is which devices get to carry its Google apps and services. And if that’s a monopoly, then it seems like a just one: if you invest the time and money to develop sophisticated apps like Gmail, Chrome, Maps, and YouTube, then you should have the right to decide who gets to use them.”
Savov continues, however, that things get more interesting when you consider the Play Store, Google’s most important app and the portal through which consumers obtain the vast majority of Android apps. It’s also the only viable competitor to Apple’s App Store. While, from a consumer’s perspective, Android has 59% of the market, from a smartphone manufacturer’s view, it might as well have 100%. Apple doesn’t share access to its operating system or the assortment of apps created for it, and Windows Phone doesn’t have a competitive selection of apps. So everyone who wants to create a new smartphone opts for Android.
Smartphone companies without their own operating systems can choose Android with the Play Store and Google Play services; a stripped-down version of Android without an app ecosystem or Google’s latest security updates; or Windows Phone. This illustrates how Google has significant influence over phone vendors in a kind of “soft power” monopoly that hasn’t hurt consumers so far, but could open the door to future abuses.
Savov reports that so far, the demands that Google has imposed upon hardware makers have been beneficial for the users of the resulting Android phones. The company has asked smartphone manufacturers to cut excessive software customizations and adhere to a uniform and user-friendly interface. It’s encouraged them to use Chrome instead of their own browsers, which makes it easier for users to sync their Android phones with their activity elsewhere. But Savov writes that “being a benign monopolist doesn’t make you any less of a threat to the proper, competitive operation of a market.”
Without competitive app stores of their own, Android phone makers in Europe and in the U.S. need to adhere to Google’s rules. They still technically have a choice, though in reality, the choice is between success with Google’s platform and certain failure with any other operating system. Google doesn’t hold a monopoly over the global smartphone market, or enjoy the same level of influence everywhere. But Savov notes that in Europe and in the United States, Apple’s non-participation in the operating system market and Microsoft’s failure to compete give Android a “practical stranglehold.”
It seems fair that authorities at least look into Google’s relationships with its hardware partners. But it’s unclear what there is to be done when Google is giving its software away for free, and on terms that companies and consumers willingly accept.