Cleland served as Deputy United States Coordinator for Communications and Information Policy in the George H. W. Bush Administration. Eight Congressional subcommittees have sought Cleland’s expert testimony and Institutional Investor twice ranked him the #1 independent analyst in his field. Scott Cleland has been profiled in Fortune, National Journal, Barrons, WSJ’s Smart Money, and Investors Business Daily. Ten publications have featured his op-eds. For a full bio see: www.ScottCleland.com.
Latest posts by Scott Cleland (see all)
- Why New FTC Will Be a Responsibility Reckoning for Google, Facebook, Amazon - April 28, 2018
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Few outside of Alphabet-Google understand the immense market, economic, and technological power of an unaccountable monopoly over the underlying software that controls most all mobile devices in the world. Fortunately EU antitrust enforcers are some of the few who understand it.
Android, Alphabet-Google’s licensable mobile operating system, is an apparent EU/global monopoly facing an apparent EU antitrust case in its future.
This analysis explains why Android is a monopoly for antitrust purposes; what the crux of the Android antitrust case is; and why such a case would enjoy a uniquely solid foundation.
This matter is especially timely and relevant because the EU’s Commissioner for Competition, Margrethe Vestager is apparently on path to formally rule that Google’s “general online search services” are dominant and that Google Shopping has abused its search dominance. She is also expected to issue a formal EU Statement of Objections against Google-Android for anticompetitively foreclosing mobile OS competition and for tying/bundling its dominant search-related apps with its Android operating system to further foreclose competition in additional markets.
I. How is Android a monopoly for antitrust purposes?
Android, with a unique >1.5 billion monthly active users, is the only viable licensable mobile operating system globally, uniquely licensed by a critical mass of 400 OEMs, >550 carriers, and ~4,000 distinct devices — per Google.
In addition, Google commands the world’s leading browser-based operating system, Chrome, with >1 billion users and 57% market share globally, which is 3.5 times the share of the next competitor, Microsoft Explorer, per StatCounter. Google plans to consolidate Chrome with Android in 2016 per the WSJ.
What about Apple iOS?
For antitrust purposes, iOS is not a competitor to Android because iOS is an exclusive proprietary software operating system that cannot be licensed to any OEM like Android can. This licensable OS market definition is essentially settled antitrust precedent in both the EU and U.S. final rulings in the Microsoft OS antitrust cases: Microsoft v. Commission and United States v. Microsoft Corp.. Both cases found Microsoft guilty of abusing its Windows OS monopoly by contractually tying its free Explorer browser to its Windows OS to kill the first-mover browser, Netscape.
Given Apple’s iOS is not a competitor for antitrust purposes, Gartner stats per Statista show Google commands ~97% market share of 2015 global smartphone shipments, a monopoly position by most reasonable measure.
What about Microsoft?
In writing off its signature mobile acquisition, Nokia, Microsoft tacitly acknowledged defeat in mobile, and since has strategically pivoted away from being a “mobile-first” company to being a cloud-first enterprise company. Tellingly, Microsoft is folding its separate mobile OS functionality into its flagship Windows 10 OS.
Confirming that Microsoft and other potential mobile OS competitors are not significant competitors to the de facto Android mobile OS monopoly, Facebook-WhatsApp announced in a blog post that by the end of 2016, WhatsApp Messenger would “focus our efforts on the mobile platforms the vast majority of people use.” Thus it would no longer support the OSs of Nokia, Blackberry or Windows Phone 7.1. This is real world evidence that other mobile operating systems cannot offer developers enough user audience or app store distribution to be worth developers’ time.
Android is an apparent monopoly mobile operating system in the EU and globally.
II. The crux of the apparent Androidopoly antitrust case
Google, in contractually tying all its search-related apps (Search, Chrome, YouTube, Maps, Play, etc.) to its free Android mobile OS, not only has foreclosed competition in the mobile OS market, but also foreclosed competition in the mobile markets for “general online search services,” advertising services, metadata analytics, browsers, app monetization, maps/location services, video distribution, among others.
Specifically, Google is de facto cornering multiple digital and metadata markets simultaneously, by contractually forcing most all global OEMs, carriers, and devices to default to Google’s already 90+% share of the “general online search services” market, and also to Google’s other market-leading, search-driven and metadata-generating, advertising apps: Chrome, YouTube, Maps, Play, Gmail, Drive, etc. — so Google’s products and services are guaranteed to be positioned most advantageously on the home screens of most all of the world’s smartphones and tablets.
This tying/bundling strategy is highly effective because it exploits Google’s unique inside knowledge of global Internet user behavior, i.e. Google is confident Internet users will automatically acquiesce >90% of the time to any new automatic, Google-forced, default change or setting — with or without an opt-out. Absent antitrust accountability, Google can do whatever it wants with Android and its apps.
The problems/harms from Google’s leveraging its dominance in “general online search services” into the mobile OS market and further into the markets for the underlying Internet utility functions of access to: online information, apps, advertising, data/metadata monetization, computing, storage, etc. – are unprecedented in their scale, scope and reach.
The common harm to consumer welfare and innovation from Google’s anticompetitive behavior — in the EU’s charges involving “general online search services,” and the EU’s formalinvestigation into “mobile operating systems, [and] mobile communication applications and services” — is foreclosing competition, user competitive choice, and competitive innovation, by hindering the development and market access of rival products and services by systematically favoring Google’s products and services over rivals products and services.
III. Why an EU-Android antitrust case would enjoy a uniquely solid foundation
A potential EU Android case would greatly benefit from three unique and powerfully supportive circumstances.
First, assuming the EU as expected formally rules Google Search to be dominant and that it abused its search dominance in Google Shopping, an Android case that at least in part charges that Google contractually tied its dominant search apps to Android to extend its desktop ~90% search dominance into ~90% mobile search market share — then would not have to re-prove the most difficult part of the case, the market definitions and the findings of dominance, but only the abuses of dominance part, which relatively is a much easier task.
Second, it is unprecedented that Google has effectively repeated the violations of what another high-profile company did over the last twenty years that was proven illegal in both the EU and U.S.
While there are precious few antitrust precedents overall, the biggest, most-relevant, antitrust precedent that the EU does enjoy — fits much of Google’s illegal Android behavior almost like a glove.
EU antitrust enforcers are very familiar with how anticompetitive it is for a dominant operating system to tie a product to extend its dominance into an adjacent market, because of what Microsoft did in snuffing out Netscape by bundling its free Internet Explorer browser with its paid dominant Windows OS in the late 1990s.
While Google’s sequence was different in tying its dominant search capability to its free Android OS, the anticompetitive effect was the same in extending its dominance from one market to another. And that extended Android OS dominance affords Google the market power to dominate additional strategic markets like browsers, maps/location services, advertising, etc.
Third, an impetus that adds urgency and gravity to a potential Android antitrust case is that Google is now poised to eerily repeat the core offense of the Microsoft case. Google’s current plans to integrate/bundle its Android OS with its Chrome browser-based OS is a potential eerie replay of Microsoft illegally-bundling a dominant operating system with a browser, this time with a monopoly Google-Android mobile operating system bundled with a world-leading browser commanding a fast-growing 57% share that is on path to ~80-90% global market share in relatively short order — given the effectiveness of Android’s contractual tying behavior to date.
Google claims technology and innovation are inherently “disruptive” and dismiss complainants as those who can’t keep up and thus deserve no redress. This is a classic self-serving, straw man argument.
The illegal behaviors that Google has already been charged with, and will likely be charged with again in the future, are not a result of technology or innovation, but of Google leaders deciding to override their technology and manipulate their algorithms to favor Google content over rivals content, because they could, and by deciding to negotiate hundreds of Android-OEM contracts to systematically tie/bundle their dominant search services and apps to override market forces and favor Google apps over rivals apps on smartphones’ home screens, because they could.
Via search and Android, Google at core is an intermediary/broker between most everyone and most everything on the Internet. And Google established their intermediary dominance by consistently promising that they worked for user interests and that they never would manipulate search rankings for profit.
Damningly, the EU is enforcing antitrust law against Google because Google has not acted as the ‘honest broker’ that they have publicly represented themselves to be to gain user trust globally, but in actuality have acted systematically as a biased-broker, which non-transparently and monopolistically favors its own products and services over rivals’ offerings in a way that forecloses competitive choice and innovation.
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.