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Friday 30 September 2016

Everything you need to know about Google and its EU battle

Published 21/04/2016 | 08:52

Google
Google

Google is currently embroiled in a battle with the European Commission, after it was formally charged with monopoly abuse over claims that it has been crushing competition to its Android operating system.

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Margrethe Vestager, the European Commissioner for competition has  accused Google of having "an overall strategy on mobile devices to protect and expand its dominant position in internet search." Therefore she believes Google is in breach of European antitrust laws.

Here's everything you need to know about the charges. 

What has Google been charged with?

The Commission has three main concerns about Google's activities with respect to Android.

Firstly, they allege that Google Search is pre-installed and set as the default, or exclusive, search service on most Android devices sold in Europe because the company "[requires] manufacturers to pre-install Google Search and Google's Chrome browser and [requires] them to set Google Search as default search service on their devices, as a condition to license certain Google proprietary apps."

They also claim that manufacturers cannot sell mobile devices running on competing operating systems based on the Android open source code, and that they give financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.

How does Android work?

About 80pc of smartphones worldwide run on the Android operating system. The smartphones aren't made by Google themselves but third parties such as Samsung or Huawei. In contrast, Apple runs iOS only on its own devices.

Anyone can download Android for free and use it to run a smartphone. Some companies run a version of Android independently of Google, such as Amazon which uses it on its phones and Fire tablets. This means they don't offer Google apps or the Google Play Store.

Other manufacturers pre-install Google's suite of 11 apps, such as Google Search, Drive and Photos, for free. They can also choose to install other apps such as Facebook or Skype, if they want to. The average number of pre-installed apps in Europe is 47.

How does Google make money from Android?

Google offers Android for free, but makes money through advertisements in Google apps used on Android phones, and also through paid apps that are bought on the Google Play store. 

According to the European Commission, the Play Store accounts for more than 90 per cent of apps downloaded on Android devices in the European Union.  However, Apple's App Store made double the revenue in 2015 alone. 

The database giant Oracle, which has sued Google over the rights to the technology behind Android, told a court earlier this year that the mobile operating system had indirectly delivered $31bn in sales and $22bn in profit since its launch in 2008.

Reuters reported that Google generated an estimated $11 billion last year from sales of ads running on Android phones featuring Google apps. 

So what's the problem?

Because Android runs on most of the world's smartphones, including handsets made by other companies, Vestager said: "Our concern is that by requiring phone makers and operators to pre-load a set of Google apps, rather than letting them decide for themselves which apps to load, Google might have cut off one of the main ways that new apps can reach customers."

Google does have revenue share agreements with companies where they will pay a manufacturer (like Samsung) to have Google Search as the default search provider. These are the "financial incentives" to which the Commission is likely referring. 

Google has to win these deals by bidding against other providers, say like Microsoft or Russian search giant Yandex.

Once you - the customer - buys this phone, you are free to download an alternative if you please -  although most people will stick with their default because they aren't aware of how to get to other options.

Why is Apple's iPhone not facing charges?

Apple doesn’t licence its operating system to other phone makers, according to Ms Vestager.

Hence, it does not have to compete with any company to make money off its mobile operating system.

Are the charges true?

This is just a preliminary view, and there will be a full investigation to see if Google has caused any real harm. They have a chance to respond to the charges over the next 3 months.

Thomas Vinje, spokesman for FairSearch, a lobby group funded by Google's critics, said: "Virtually every phone maker using Google Android in the European Union has bowed to Google’s demands, suppressing competition by other app makers and preventing free choice for consumers."

What happens next?

The Californian company has 12 weeks to respond, and faces fines of up to $7.4 billion or 10 percent of 2015 revenue or a change in operations, if found guilty.

The deadline date is still unclear because the 12 week countdown only begins from the date that Google receives a full breakdown of the allegations from the EC.

Ms Vestager said: “The remedy in the case is quite simple. It is to stop these practices which we find to be damaging to innovation and competition.”

Will it affect my Android device?

It shouldn't affect your phone or how you use it in the short term.  

The case could drag on for years, just as the European Commission's first formal antitrust probe of Google's search business, which continues since 2010. 

Telegraph.co.uk

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