EU investigating Google’s contracts with phone makers, operators

Competition Commissioner Margrethe Vestager said big companies shouldn’t use their power to hold back innovation

The European Commission is still investigating whether Google’s Android operating system and Amazon’s contracts with e-book publishers have broken antitrust rules, its Competition Commissioner said Monday in Amsterdam.

Margrethe Vestager’s remarks come amid reports that the European Commission could formally press charges in the form of a "statement of objections "against Google as early as this week. Her speech suggests that formal charges into both Google’s Android operating system and Amazon could still take some time.

“Of course, our investigations into Google and Amazon are still going on,” Vestager said in the text of a speech set to be delivered Monday at a conference held by the Dutch competition authority. “So I can't yet say if either of them has broken the rules.”

The European Commission is looking closely at Google’s contracts with phone makers and operators which use the mobile Android operating system. The Commission began its investigation into Android in April last year on the same day it announced formal charges against Google in an investigation that its Internet search in Europe favored its own comparison shopping product.

The Commission said it was investigating Google of abusing its dominant position by, among other things, requiring device manufacturers to pre-install its own services and applications with the open-source Android operating system. In Vestager's speech the focus was on preloaded apps and services.

“We need to be sure that big companies don't try to protect themselves by holding back innovation,” Vestager said.

While the EU antitrust chief expects that a smartphone should be ready to go when removed from the box, with its own basic apps such as a search engine app pre-installed by the vendor or network operator, her concern is that, by requiring phone makers and operators to preload a set of Google apps, rather than letting them decide for themselves which apps to include, "Google might have cut off one of the main ways that new apps can reach customers."

Android has an over 66 percent share of the European mobile device market in March, according to StatCounter.

If found guilty, Google may have to pay up to 10 percent of its annual worldwide revenue in fines, which could go to as high as US$7.5 billion on its last year revenue of close to $75 billion.

"Anyone can use Android, with or without Google applications," said a Google spokeswoman in response to Vestager's speech.  "Hardware manufacturers and carriers can decide how to use Android and consumers have the last word about which apps they want to use on their devices. We continue to discuss this with the European Commission."

In June last year, the European Commission also started an investigation into Amazon.com's contracts with e-book publishers that require them to inform the online retailer if they offer a better or even a different deal to its competitors. Publishers have to offer "at least as good" terms to Amazon, Vestager said.

“That could discourage e-book sellers from coming up with innovative business models that could compete with Amazon,” Vestager said. “Because they know that any deal they strike with publishers will immediately be offered to Amazon as well.”

Amazon could not be immediately reached for comment.

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