Google Hit With EU Predatory Pricing Complaint Backed by Microsoft

By Todd R. Weiss  |  Posted 2013-04-09

Google Hit With EU Predatory Pricing Complaint Backed by Microsoft

Google is now being hit on a second regulatory front in Europe as a group of competitors, including Microsoft, has filed a complaint with European authorities that argues that Google's free Android mobile operating system is illegally trying to dominate the market through deception and predatory pricing.

The new complaint was filed by a group called FairSearch Europe with the European Commission, the antitrust arm of the European Union, even as the EU continues its almost two-year-long probe into Google's search practices in Europe.

The group alleged in its complaint that Google is following an "anti-competitive strategy to dominate the mobile marketplace and cement its control over consumer Internet data for online advertising as usage shifts to mobile."

The complaint before the EC comes as the marketplace rivalry between Google and Microsoft appears to be growing exponentially.

Just last month, reports surfaced that it was Google that had turned Microsoft in involving a recent case in which Microsoft had failed to offer a choice of Web browsers to early users of its Windows 7 computer operating system, which the company must do as part of a 2009 settlement regarding the same issue. In that case, the EU fined Microsoft $732 million. Microsoft apologized for what it called a "technical error" that led to the problem in about 28 million PCs that were using early versions of Windows 7 with Service Pack 1, and also took "full responsibility" for the issue. Under the 2009 settlement, Microsoft was required to display a Browser Choice Screen (BCS) on PCs in Europe, where Microsoft's Internet Explorer is the default browser, and while it did in some cases, it failed to do so in others.

The latest charges from FairSearch Europe are adding more fuel to the fires that are being generated by the two tech titans around the world.

"Google is using its Android mobile operating system as a 'Trojan Horse' to deceive partners, monopolize the mobile marketplace, and control consumer data," said Thomas Vinje, the counsel for the FairSearch coalition, in a statement. "We are asking the Commission to move quickly and decisively to protect competition and innovation in this critical market. Failure to act will only embolden Google to repeat its desktop abuses of dominance as consumers increasingly turn to a mobile platform dominated by Google's Android operating system."

The group cites market statistics from Strategy Analytics that show that Android is the dominant smartphone operating system, running on 70 percent of units shipped at the end of 2012.

FairSearch, which is made up of 17 search and technology companies around the world, including Expedia, Microsoft, Nokia, Oracle and TripAdvisor, argues that Google reached that market domination by giving Android for free to device makers. "But in reality, Android phone makers who want to include must-have Google apps such as Maps, YouTube or Play are required to pre-load an entire suite of Google mobile services and to give them prominent default placement on the phone," according to the group. "This disadvantages other providers, and puts Google's Android in control of consumer data on a majority of smartphones shipped today."

By giving Android away for free, it "makes it difficult for other providers of operating systems to recoup investments in competing with Google's dominant mobile platform," according to the complaint.

"European consumers deserve a rigorous investigation of Google's mobile practices, and real protections against further abuses by Google," Vinje said in the statement. "Given Google's track record of ignoring the law, mobile Internet users should be very concerned."

Google Hit With EU Predatory Pricing Complaint Backed by Microsoft

Meanwhile, Google has already been dealing with its own EU investigations in recent years as the EC has been looking into antitrust concerns involving Google's search practices and the company's dominant position in search.

Google officials are under investigation in Europe regarding the company's search engine, which holds more than 60 percent of the search market, with Microsoft's Bing being a distant second. Competitors have claimed that Google works its search algorithms to favor its own products and results over those of others, giving it an unfair advantage in search and Web advertising.

A similar antitrust probe into Google in the United States was resolved in Google's favor in January. Instead of an antitrust prosecution in United States, Google entered into a voluntary agreement with the Federal Trade Commission to change some of its business practices to resolve the complaints of some competitors about Google's practices.

In the U.S. case, Microsoft led a fight with other technology companies to argue for strong FTC actions against Google to punish it for what they believed were unfair business practices.

In a reply to an eWEEK inquiry, a Google spokesperson declined to answer specific questions about the latest complaint. "We continue to work cooperatively with the European Commission," the spokesperson wrote in an email reply.

Several IT analysts said that the latest move against Google by FairSearch is not a shock.

"This is not necessarily revenge, but Microsoft is trying to stop Google from getting more market penetration in Europe," Dan Maycock, an analyst with Slalom Consulting, told eWEEK. "They have 5 percent of the market, and Google has something like 70 percent. It used to be all Nokia, and now it is not. I think Microsoft is playing it smart."

Interestingly, Microsoft's actions are similar to those of its competitors when it was Microsoft that was under the microscope of regulators in legal battles involving the company's Internet Explorer Web browser and its inclusion in the Windows operating system, said Maycock.

"This is an obvious move for Microsoft, given that Google is allegedly doing the same thing, involving the same monopolistic products that Microsoft was accused of doing in those days," said Maycock.

Google shouldn't be too surprised about such complaints and potential regulatory actions nowadays, he said, because the company is large enough to be a target for regulators.

Also a target are Google's rules that tell device vendors that they have to load all of Google's offerings on their devices to use Android, said Maycock. "It's obvious that Microsoft is going after Google for that."

Charles King, the principal analyst with Pund-IT, told eWEEK that the irony of Microsoft going after another company in connection to allegations of anti-competitive behavior is notable.

"There's never a shortage of irony in the technology business, but in Microsoft's case there may be some sort of irony tolerance going on," said King, "especially with the argument that giving away something for free is the equivalent of anti-competitive behavior. But then Microsoft did attempt to do something very similar with Explorer, so maybe that's something they're citing here."

The issues are not the same in the two cases, however, said King. "The subtext coming from Microsoft is the suggestion that they had trouble competing for their 5 percent of the mobile market compared to Google's 70 percent of the market because of Google holding them back. But most analysis of Microsoft's situation in the mobile space is that most of their problems have been self-inflicted," he said.

"There have been delays in the products, and the products have not always worked particularly well," said King. "The latest Windows Mobile version is pretty good, but it has followed one subpar version after another," which allowed competitors, including Google, to grow and take advantage of Microsoft's stumbles.

"I'm not defending everything that Google does, but this seems to be more than a bit of a stretch to me," he said of FairSearch's argument to the EC.

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