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Google’s failure to quash EU anti-trust ruling has broad implications for tech companies

Google’s failure to quash EU anti-trust ruling has broad implications for tech companies

Tech giants currently under investigation by the EU are unlikely to be calmed by the General Court's judgment, especially with the Digital Markets Act (DMA) set to come into force next year.

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The EU General Court's decision to largely uphold the ruling of the European Commission that fined Google €4 billion (US$3.9 billion) for anti-trust violations could have wide-ranging implications for other technology companies.

The case dates back to 2018, when the EU’s competition chief, Margrethe Vestager, issued a ruling that Google used its Android mobile operating system to undermine competitors.

The ruling dealt with three types of agreements that involved Google’s mobile application distribution agreements (MADAs), anti-fragmentation agreements (AFAs), and revenue sharing agreements (RSAs).

According to the case, Google’s MADAs required smartphone manufacturers to pre-install Google search and browsers to carry the Play Store, while its AFAs forced smartphone makers not to run alternative versions of Android. 

Finally, under the company’s RSAs, mobile operators and smartphone manufacturers earned revenue if they agreed not to pre-install a competing search engine to Google’s, what are known as "exclusivity rebates."

The General Court this week upheld the finding that Google’s MADAs and AFAs were anticompetitive but struck down the infringement relating to RSAs. As a result, the court cut the fine to be paid by Google from €4.34 billion to €4.125 billion to “better reflect the gravity and the duration of the infringement.”

Google's fine remains a record for anti-trust

However, even with the reduction, the final sum was still a record fine for an anti-trust violation. Google has been fined a total of €8.25 billion by the EU for anti-trust violations stretching back more than a decade and across three separate investigations.

"This, of course, is really good. Now, we have the second Google judgment and for us, it is really important as it backs our enforcement efforts," said Vestager, according to Reuters.

Google is separately appealing a €1.49 billion fine that was handed down in March 2019 for abusing its market dominance by imposing restrictive clauses in contracts with third-party websites to prevent its rivals from placing search adverts on these websites.

Zach Meyers, senior research fellow at the Centre for European Reform, said the decision poses significant questions for the wider tech sector as it does not only challenge a particular business practice, but potentially Google’s underlying business strategy of offering services, such as Android -- which make no revenue -- to drive consumers towards services which Google can monetise, like Google search.

“Many other large tech firms like Amazon and Meta adopt similar practices, producing an ecosystem of services -- only some of which are profit-making -- but which mutually reinforce each other,” Meyers said, noting that although their situations are not directly comparable, these firms will be keeping a close eye on proceedings in order to not fall foul of the same accusations.

Apple’s App Store rules, Meta’s marketplace and data use, and Amazon’s online selling and market practices, are all currently under investigation by Vestager.

The impact of the Digital Markets Act

Meyers said that with regards to Google’s appeal, the wide-ranging implications of the EU’s Digital Markets Act are perhaps more significant than the outcome as, even if the Commission had lost this case, the DMA is still set to force behavioural changes for several of the big tech platforms operating within the EU.

Passed by the European Parliament in July 2022, the Digital Markets Act (DMA) enables a range of anti-trust action while also addressing issues of interoperability. These include the right to uninstall software on devices, greater personal data access controls, enhanced advertising transparency, an end to vendors self-preferencing their own services, and stopping certain restrictive app store requirements for developers.

“The DMA limits how big tech platforms can integrate their different services together, and it would ensure consumers have 'choice screens' when they first use mobile devices, rather than starting with a single pre-installed default search engine, browser or virtual assistant," Meyers explained. "That would undermine much of what Google was trying to do with the agreements at issue in this case."

However, he said it is worth noting that the Commission’s remedies in previous cases against big tech have rarely achieved significant market changes, at least in the short term.

Google is not the first tech company this year to have challenged a fine handed down by the Commission for anti-trust violations. In January 2022, Intel successfully appealed against a €1.06 billion fine that was handed down 12 years ago for giving rebates to Dell, HPE and Lenovo for buying their chips instead of those made by AMD.

In that case, judges said: "The (European) Commission's analysis is incomplete and does not make it possible to establish to the requisite legal standard that the rebates at issue were capable of having, or likely to have, anticompetitive effects.”

Chipmaker Qualcomm was also successful in overturning a €997 million fine imposed by European Union regulators in 2019. The fine was originally given after the European Commission ruled that between 2011 and 2016, the chipmaker had paid billions of dollars to Apple to exclusively use its chips in all of its iPhones and iPads, an act that breaks EU anti-trust laws.

However, in June 2022, the General Court found that “a number of procedural irregularities affected Qualcomm’s rights of defence,” ultimately invalidating the Commission’s analysis.

Meyers said that given this is the third time an exclusivity rebate decision has been overturned, it is clear the court is now closely scrutinising the Commission’s decisions when it alleges that “exclusivity rebates” are anticompetitive.

The court also remains critical of the Commission’s processes and procedures, saying in its ruling this week that in some instances the Commission did not afford Google a fair hearing, a charge that was also levied against the Commission during the Qualcomm appeal.

Despite this, Meyers said that “the Commission has been intensely focused recently on cases where digital services are tied together, and in this part of the case the court upheld the Commission’s analysis and found this sufficient to keep the fine at nearly the same level the Commission wanted.”

As a result, Meyers believes that other big tech firms are unlikely to be calmed by the judgment.


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