Update: EU files antitrust charges against Google over search, launches Android probe

The European Commission opened a separate investigation into Google's mobile OS

The European Commission has charged Google with abusing its dominant position in Internet search services in Europe by systematically favoring its own comparison shopping product, Google Shopping. It also opened an antitrust investigation into Google's Android mobile operating system.

Such conduct infringes EU antitrust rules because it stifles competition and harms consumers, the Commission said Wednesday, adding that it has formally notified Google of the charges in a so-called Statement of Objections. Google now gets a chance to defend itself before the Commission makes a final decision, which could include a fine of up to 10 percent of the company's annual turnover.

Google, responding to the charges in a blog post, said it believes there is thriving competition and innovation in Europe's online search market. "We respectfully but strongly disagree with the need to issue a Statement of Objections and look forward to making our case over the weeks ahead," Amit Singhal, senior vice president of Google Search wrote.

The decision was welcomed by complainants Foundem and ICOMP, an industry association representing Google opponents including Microsoft.

At the same time, the Commission also opened a separate antitrust investigation into Google's Android mobile operating system. It suspects Google of abusing its dominant position by, among other things, requiring device manufacturers to bundle Google's own services and applications with the open-source operating system.

The Commission has received two complaints concerning Android and will focus on three allegations. First, Google is said to have required that smartphone and tablet manufacturers exclusively pre-installed Google applications on their devices, which could be anti-competitive as it would prevent rivals from being successful.

Second, Google is suspected of having prevented manufacturers who want to use Google apps from developing and marketing modified and potentially competing versions of Android on other devices. This practice would be illegal as it would be prevent rival operating systems from entering the market, the Commission said.

Google is also suspected of having illegally prevented the success of rival apps by bundling its own apps and services on Android devices with other Google applications.

The EU investigation follows proceedings started against Android by the Federal Antimonopoly Service of the Russian Federation (FAS Russia) in February after Russian search company Yandex filed a complaint over Android app bundling.

Google's vice president of engineering, Hiroshi Lockheimer said in a blog post that all Google's partner agreements are voluntary. Android can be used without Google but using Google provides benefits to users, developers and the broader ecosystem, he said.

Anti-fragmentation agreements ensure that apps work across all sorts of different Android devices, he said, adding that Google's app distribution agreements make sure that people get a good experience when they first switch on their new device.

Offering apps like email to be pre-installed also lets Android devices compete with Apple, Microsoft and others that also come with a set of pre-installed apps, he said, adding that Google is looking forward to discuss these issues in more detail with the Commission.

Competition Commissioner Margrethe Vestager, who initiated both actions, said it is the Commission's objective to apply EU antitrust rules to ensure that companies operating in Europe, wherever they may be based, do not stifle innovation or artificially deny European consumers as wide a choice as possible. In the case of Google she said she has concerns that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules.

The decision to send Google a Statement of Objections is the next step in an antitrust investigation that has been dragging on since November 2010, when the Commission decided to open an inquiry.

The first complaint against Google's alleged abuse of market dominance was filed in November 2009 by Foundem, which offers a vertical search engine for market categories including flights, computers, appliances and hotels. The complaint claimed that Google exploits its overwhelmingly dominant search engine to systematically promote its own specialized services while demoting or excluding those of its competitors. Foundem was later joined by a broad range of other complainants, including Microsoft, Expedia, TripAdvisor and the German Publishers Association.

Google has tried to settle the case several times. In February last year, it proposed to give equal prominence to rivals' services. The Commission seemed willing to take the deal but was slammed by Foundem and other companies, which accused the regulatory body of adopting Google's proposal wholesale without giving complainants an opportunity to express their views on the settlement.

In the following months, the negative reaction from Google's competitors grew and forced the Commission to revise its plans. In September last year, the Commission said it wanted more concessions from Google. This was shortly before Vestager took over from Joaquín Almunia as Competition Commissioner. Since then, Vestager has been talking to all parties again to get an overview of the case.

Google has ten weeks to respond to the Statement of Objections and the Commission said it will carefully consider its comments before taking a decision. As to the investigation into Android, no deadline to complete inquiries has been set. As antitrust investigations can vary wildly in complexity and scope the Commission does not have to set a time frame in which it has to complete an investigation.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, online payment issues as well as EU technology policy and regulation for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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