“Below cost” Android licensing seen as anti-competitive by competitors, EU probe underway

June 13, 2013
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Android

European regulators are again looking at Google’s business in the region, this time investigating alleged anti-competitive practices related to its mobile business, namely Android.

Yes, the EU wants to know more about Google’s Android licensing deals, and whether the company used its position to impose certain condition to business partners.

While the probe is informal, it looks like the commission has sent out questionnaires to various companies that work with Google to figure out whether the allegations have any basis. The commission has issued a 23-page document containing 82 questions it wants answers to, with various device makers and mobile operators having to answer them.

It appears that several companies, including Microsoft, Nokia and Oracle have complained that Android is licensed “below cost” and that Google may have asked partners to “cancel and/or delay the launch of smartphone devices” running other mobile operating systems than Android.

The commission will also investigate whether Google signed any exclusivity deals with OEMs in order for its web services to be pre-installed on Android devices made by those OEMs.

Commenting on the matter, Google said:

Android is an open platform that fosters competition. Handset makers, carriers and consumers can decide how to use Android, including which applications they want to use.

The Financial Times tells us that the investigation into Android “has been open for more than a year,” but it took a “sharper focus” when 17 companies including the three mentioned above sent a formal complaint in April about “Google allegedly abusing its dominance” (see second Source link below).

Nexus 4

The commission has also investigated Google for its business practices – a settlement between the EU and Google has been reached – and while the two probes may overlap, these two investigations should be separate.

The FT says that Joaquin Almunia, the EU’s competition chief, “is under intense pressure” from Google’s competitors to either serve charges to Google or change the proposed settlement in the search-related matter. Therefore, it will be interesting to see where this Android investigation is heading.

In case you don’t know it by now, Android is licensed free of charge to OEMs, which is one reason that helped it grow in popularity, as pretty much anyone interested in creating a smart mobile device was able to do so by using Android.

Comparatively, Microsoft is licensing Window Phone to its partners, Nokia included, so it’s more than obvious to anyone that Google “sells” Android “below cost” because Android is, well, free of charge. However, Google has always offered Android for free to OEMs, and it’s a business decision it took for its own reasons – without going into too many details about why Google chose this path, it’s enough to remind you that Google makes its money from search and ads (mobile Internet traffic included) and needs to have a strong presence in the mobile world, which is done via Android.

Luckily for Google and unfortunately for its competitors, the OS was well received by OEMs, carriers and the public, and the decision to license it for free has paid off. It could have always worked against Google, but that didn’t happen. Should it be punished for that? Why didn’t competitors complain in a similar manner in the previous years about Android licensing? Of course, we’re only commenting on that “below cost” licensing argument, and we’re not trying to defend Google here, as the company has a legal team that will do just that. There are other allegations on the table in this investigation, which are out of our reach, so we’ll have to wait for the commission to release its findings on whether Google indeed abused its position in relationship with OEMs and carriers or not.

That said, it’s too early to draw any conclusions, or speculate on how this new EU probe into Google’s business will conclude. These sort of investigations will take a while to complete, so chances are we’re going to hear more details about it as we move along.

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