Quality, Need for FTC Antitrust Investigation Into Android Questioned

Experts agree the FTC antitrust investigation into Google’s alleged monopoly with its Android business is an easy case, but they differ on what the outcome should be. While some academics and antitrust attorneys argued Apple’s influence in the market should be considered and proves Android doesn’t dominate the smartphone operating system market, industry experts said antitrust law has already clearly defined what constitutes an operating system market. If so, that would mean Apple shouldn't be included, and that a lack of action against Android is evidence the relationship between Google and the FTC and Obama administration is too close.

This is an easy case because there's a direct analogous precedent, said NetCompetition Chairman Scott Cleland, which has many Google rivals as members. It’s rare for one monopoly to be replaced by another in the same business, which is what happened with Microsoft and Google, Cleland said. Android has a 90 percent plus share in the market, and Google is a monopoly at the core, Cleland said.

The FTC began investigating Android only because the Justice Department Antitrust Division had begun looking at Android, said David Balto, a former DOJ antitrust attorney who has held several senior-level positions at the FTC. The investigation will most likely lead to nothing, Balto said, saying the FTC opened its investigation to ensure the DOJ didn’t steal its turf.

Allegations that Android’s practices have led to significantly fewer choices for consumers have been challenged and dismissed by private antitrust attorneys, Balto said. That those lawyers were willing to voluntarily dismiss the case shows there's no merit to the allegations, Balto said. The FTC will likely decide there's no merit to the claims Android is a monopoly, he said.

International Center for Law and Economics Executive Director Geoffrey Manne said he doesn’t think anything will come out of the FTC investigation. There isn’t a real market problem, Manne said. The idea that there's a problem is because the likes of FairSearch, comprised of Google rivals, and Microsoft, which have a vested interest in the outcome of the case, are doing a good job with their PR efforts, Manne said.

When the FTC concluded earlier Google as a whole didn’t violate antitrust law, those groups started trashing the FTC, saying the agency was biased, Manne said. The groups created a perception there's a real problem that hasn’t been assessed or addressed properly due to political shenanigans, Manne said. It’s possible, Manne said, but he said his sense is those claims have “no basis in reality.”

There are very serious and valid concerns regarding Android, said FairSearch Legal Counsel Thomas Vinje. Those who say there's no problem likely have their bread buttered by Google, Vinje said. FairSearch isn't suggesting structural changes be made to Google, but has asked for contractual changes, he said. For example, Google imposes a requirement on manufacturers and telecom companies that prevents them from modifying Android devices, Vinje said. Another contractual problem is that Google requires manufacturers to place Google apps on all handsets, he said. The purpose is to generate enough data that Google can profit from its advertising business, Vinje said. Changing the Android system to become open will take a more creative remedy and is something FairSearch has asked antitrust authorities to consider, Vinje said.

Android is an open-source operating system that can be used for free by anyone on phones, tablets, watches, TVs, cars and more, wrote Android Vice President-Engineering Hiroshi Lockheimer in a Google blog post in April after the European Commission’s decision to investigate Android on antitrust grounds. “Apps that compete directly with Google such as Facebook, Amazon, Microsoft Office, and Expedia are easily available to Android users,” Lockheimer wrote. “And in comparison to Apple -- the world’s most profitable (mobile) phone company -- there are far fewer Google apps pre-installed on Android phones than Apple apps on iOS devices.” Google had no additional comment.

Apple doesn’t sell its operating system to the public, Cleland said. The only way to get iOS is if an individual buys an Apple product, Cleland said. Under the existing definition of an operating system used by courts in both Europe and the U.S., Apple isn't part of this market, Cleland said. Google may contest that, he said. Google offers Android to everyone, but to use it and be compatible with its devices, app makers have to use Android branding and agree to the Android contract, Cleland said.

The Microsoft decisions are extremely important precedent for cases like this, but it would be a mistake to not acknowledge the different factors in the cases, Manne said. In the Microsoft cases, Apple was excluded from being considered to have a role in the market because of legal activist and Harvard Law professor Lawrence Lessig’s influence, but even Lessig himself later said it was a mistake to underestimate the importance Apple had on the market, Manne said. Apple and Lessig didn’t comment.

The FTC is going to investigate the Android market power and “if allowed” is going to do a very good investigation, Cleland said. As evidenced by previous attempts to investigate Google as a whole, the FTC commissioners aren't independent when it comes to Google and have to answer to someone else, Cleland said. The 2016 presidential election could affect the investigation, he said.

How thorough he civil investigative demands (CID) are will indicate the seriousness of the FTC investigation, Cleland said. A CID that is short and asks unsophisticated questions signals the agency isn't really investigating the company, Cleland said. If the CID is well-researched and thought-through, it can be concluded the investigation into Android is serious, Cleland said.

Google’s control of the base operating system “makes it difficult for any other company to launch a competing app for Maps, E-Mail, cloud storage, etc.,” and is evidence of an unfair market advantage, said Leo Sun, analyst for The Motley Fool, which owns shares of Microsoft. “Cyanogen, Microsoft, and Samsung are all scheming together to put an end to ‘Google-controlled’ Android” because they believe Google will release all meaningful apps on Android, load them on Android devices by default, and make it nearly impossible for anyone else to compete, Sun said. Cyanogen, Microsoft and Samsung didn’t comment.

Android gives away the guts of its system so developers can make compatible apps, Balto said. If antitrust law prevents people from giving things for free, someone needs to stop those people at Costco from giving away free food samples, Balto said.

Taiwan recently issued a ruling clearing Google of wrongdoing in an antitrust investigation, Manne said. Brazil, India, South Korea are also investigating Google, as is the EU. Russia recently found Android guilty of operating a monopoly. Manne said it’s common for other jurisdictions to investigate a company, and that one country’s findings don’t really mean anything for the other countries. He said there's an ongoing rivalry between EU and U.S. antitrust authorities as they compete to be viewed as the world’s antitrust police as well as to influence antitrust law in China.