Google Faces Class-Action Suit Over Secret Android Agreements

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Consumer rights law firm Hagens Berman has announced a class action suit against Google (NASDAQ:GOOG)(NASDAQ:GOOGL), alleging that the company has participated in anti-competitive behavior that has artificially raised the price of smartphones running on Android and led to stagnation in the mobile search market. The lawsuit claims that Google is in violation of several antitrust acts and calls for the company to reimburse consumers who bought Android phones at an artificially inflated price.

The suit says that Google had secret Mobile Application Distribution Agreements (MADA) with smartphone makers that required a suite of Google’s apps — including the company’s search engine, YouTube, and Google Play — to be pre-loaded onto Android phones. Those agreements, which were not meant to be public information but designated to only be seen by lawyers, have “hampered the market and kept the price of devices made by competing device manufactures like Samsung and HTC artificially high,” according to the firm.

“It’s clear that Google has not achieved this monopoly through offering a better search engine, but through its strategic, anti-competitive placement, and it doesn’t take a forensic economist to see that this is evidence of market manipulation,” said Steve Berman, the attorney representing consumers and a founding partner of Hagens Berman. “Simply put, there is no lawful, pro-competitive reason for Google to condition licenses to pre-load popular Google apps like this.”

The firm says that the mobile search market would benefit if phones running on the Android operating system were not required to use Google’s apps. Getting rid of that requirement would allow smartphone makers to choose the best mobile search engine rather than being forced to stick with Google, which would stimulate competition and force Google to keep improving its mobile search engine, instead of resting on its laurels.

“This comes down to a combination of Google’s power in the U.S. general mobile search market and their power in the realm of tablet and smartphone manufacturers,” Berman said. “As a result of the pricing conspiracy, everyone loses. Google and its competitors face an uncompetitive, stagnant market, and consumers are forced into one option.”

“Anyone can use Android without Google and anyone can use Google without Android. Since Android’s introduction, greater competition in smartphones has given consumers more choices at lower prices,” Matt Kallman, a Google spokesman, told Reuters.

Both Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) use altered versions of Android for their devices that do not include Google’s suite of apps. Amazon’s Kindle tablets use an operating system called Fire OS that is based on Android but supports Amazon apps. Microsoft sells a Nokia smartphone that uses Android but includes Microsoft’s top apps. Google clearly does not have the MADA agreements described in the lawsuit in regards to these two products.

Google is also embroiled in various patent disputes with its main competitor, Apple (NASDAQ:AAPL), related to the smartphone patents it owns through Motorola Mobility and the ongoing lawsuit between Apple and Samsung (SSNLF.PK), which has involved aspects of Android.

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