Google Android: CJEU confirms €4.125bn fine and supports European Commission position on exclusionary abuses

In July 2018, the Commission found that Google had abused its dominant position by imposing anticompetitive contractual restrictions on device manufacturers (OEMs) and mobile network operators (MNOs) to protect and consolidate its dominant position in respect of general search services.

The decision identified four sets of abusive contractual restrictions.

1. Tying the Google Search app with the Play Store, in its Mobile Application Distribution Agreements (MADAs).
2. Tying the Chrome browser with the Play Store and Google Search app (also via MADAs).
3. Making Play Store and Google Search app licences conditional on OEMs accepting anti-fragmentation obligations contained in Anti-Fragmentation Agreements (AFAs), which prevented OEMs from selling devices running modified or “forked” versions of Android that had not been approved by Google.
4. Making “revenue share” payments to OEMs and MNOs conditional on not pre-installing competing general search services on a predefined portfolio of devices (under portfolio-based revenue share agreements, or RSAs).

The Commission treated these restrictions as a single and continuous infringement (SCI) and imposed a fine of approximately €4.34bn, the largest ever fine imposed for breach of EU competition law.

On appeal, the General Court in September 2022 largely upheld the Commission’s decision, but annulled the finding relating to the portfolio-based RSAs. It found that the Commission had made errors in its application of the AEC test to those agreements, and that their market coverage had been overstated. 

The General Court nevertheless confirmed the classification of the remaining three abuses as a SCI and recalculated the fine at €4.125bn.

The CJEU confirmed that a finding of exclusionary abuse does not in all cases require proof that the relevant conduct is capable of foreclosing as-efficient rivals – typically through use of an econometric price-cost analysis based on the dominant undertaking’s own relevant costs. According to the CJEU, some conduct “does not lend itself to a quantitative, price-based analysis”. This includes cases in digital markets involving ecosystems with significant barriers to entry and network effects, where it is “not possible, nor does it make sense” to base the analysis of exclusionary effects on whether a hypothetical AEC could replicate the dominant undertaking’s conduct. 

As a matter of principle, certain behaviour, such as tying, departs from competition on the merits, without the need for an AEC analysis. The CJEU also noted that Article 102 TFEU protects not only against the exclusion of equally efficient competitors already on the market, but also against conduct that effectively prevents potentially competing undertakings from entering the market.

The AEC test remains relevant for conduct that lends itself to a quantitative, price-based analysis, including schemes such as Google’s own portfolio-based RSAs, which the General Court found had not been established as abusive.

Google unsuccessfully argued that the General Court had erred in ruling that the Commission was not required to conduct a counterfactual analysis to establish a causal link between the MADA pre-installation conditions and their alleged anticompetitive effects. While the Commission must establish such a link, it may rely on a range of evidence and is not obliged to follow any particular methodology. A counterfactual analysis is one permissible option, but it is not mandatory.

Google argued that, when assessing whether the MADAs were abusive, the Commission was not allowed to take into account the market impact of conduct found not to be abusive, such as the RSAs, or conduct in respect of which no abuse had been alleged. The CJEU rejected that argument, holding that the Commission was entitled to consider the full economic context, including the RSAs, when assessing the effects of the MADAs, even though the RSA abuse finding had been overturned. Forcing the Commission to distinguish artificially between the effects of complementary agreements would, according to the CJEU, make it impossible to demonstrate the abusive nature of conduct on markets characterised by network effects.

The same contextual approach was applied to the AFAs, with the CJEU upholding the finding that the AFAs were abusive. It confirmed that Google’s policy of restricting access to its proprietary APIs, which was not in itself abusive, could be taken into account as a contextual element reinforcing the AFAs’ exclusionary effects on non-compatible Android forks such as Fire OS. Google’s purported objective justifications, including protecting compatibility, preventing fragmentation, and defending its reputation, were all rejected.

Google argued that the annulment of the portfolio-based RSA abuse finding should have led to the collapse of the SCI as a whole. 

The CJEU disagreed: the partial annulment of one element did not alter the substance of the overall finding. As the General Court had explained, the remaining three abuses (the Google Search app tie, the Chrome browser tie, and the AFAs) formed part of an overall strategy aimed at preserving Google’s dominant position in general search services. And the RSAs were a relevant contextual factor for establishing a SCI, as they contributed to the combined effects of the remaining abusive practices.