Lecture 3: Abuse of Dominace
I. Recent examples
1. 3D printer
The first case: there’s a company which is today the market leader in 3D printing. There were the first to
actually believe in 3D printing and no one believed at the time. Now, hey are leader in their field. Today, they
make their money writing software for traditional manufacturers, for traditional printers. They say: “we write
software for you, so your old-fashioned printer can communicate with my 3D model printer”. Such combination
programs are individual to such combination: one software for each old-fashion printer. The company: “I’m not
going to invest in that communication software if I don’t know that it will be used, my only way to recover my
investments is for you to sell my product with your printer, I will grant you, if you promise to bundle with each
printer my software, I will grant you a rebate”. That’s an exclusivity rebate. The other party says that this is an
abuse of dominance.
2. Google Shopping
When you search something on Google (for example a Samsung phone model), we immediately see a
comparative shopper, telling you where you can get this product. It was not really successful up the moment
they decided that each time you are googling for a product, they would put their comparison shopper product
on top. Since they have a dominant position in the search engine market, their comparative shopping service
became the market leader.
The Commission ordered Google to comply with the principle of equal treatment with rival services: you cannot
systematically put your products on top. It may be that Google has this devious strategy, but it may also be that
it was not aware that this was an abuse of dominance and they learn about it through the finds. Should we
learn it through the fines?
Market: provision of general online search services
Power: market shares above 90% in most EEA countries
Abuse:
Remedy: the EC “orders Google to comply with the simple principle of giving equal treatment to rival
comparison shopping services and its own service”Fine: EUR 2.42 bn on 27.6.2017
3. Google Android
The decision is not available because there’s only a non-public version and there’s a fight on what is
confidential and what is not. Action for annulment of the fining decision has been fulfilled several weeks ago
but nobody knows what the fining decision is.
,The decision is about the mobile phone operating system Android. It’s open source system and however very
much controlled by google: it makes the investment to update the operating system from year to year, google
controls whether your applications will work on the mobile phone, etc. It’s an open source system, it’s
completely free of charge but very much controlled by google. It’s free of charge because we don’t pay in
money but with data. It’s not free, it’s free of charge.
The commission has three problems with the system:
If an OEM (manufacturer of your phone) wants to install the google play store you force them to also
install google search and google chrome. Everyone wants the play store: it’s a must have. Google says:
you can have google play for free but google search and google chrome come with it. This is a try-in.
This makes it difficult for others like Bing to gain market share. Bing has no change to improve itself, it
can improve itself by being used and if you don’t give it an opportunity to be used, it will always be
inferior to google search
Google doesn’t allow others to “fork” the system: you say: “ok it’s open source, I take it from the
internet, I take the code and I make my own product with it”. Google will not allow this: if you do this,
Google will punish you: you cannot have this product. They say they want to do it because of
consistency but the Commission says that maybe they just do this to make sure that everyone uses
their products and not their own version of Android. This way they are hindering innovation
Google has been paying the manufacturers of phones to only install Android/their search engine: if
you produce a phone and you pre-install my applications, then I will give you money. That is also an
abuse of dominance and illegal. Consumers will use what is pre-installed and thereby you hinder
others from gaining market share.
Market:
• provision of general online search services (super dominant is most countries, 90% of market share)
• ‘licensable smart mobile operating systems’
• ‘app stores for the Android mobile operating system’: there’s only one app store forthat system:
google is a monopolist
Abuse
, Fine: EUR 4.34 bn on 18.7.2018
Google’s arguments:
• All of this was already in place before we became dominant. This has always been our strategy: it’s not
after we became dominant that we started doing this
• Why are we doing this?
o Offering the play store with the search and the chrome engine: this is our business model: we
have an open source free of charge products. There are two others types of business models
in the world:
Complete vertical integration (Apple model): I make the phone, I make the operating
system (IOS) I make the apps and I don’t sell it to anyone
Microsoft model: I have a nice operating system for mobile phones: you can license
it for me and then you pay
We don’t ask you to pay but we do want advertisement and we want data, this is our
form of payment. Long before we were dominant, Apple was dominant and to some
extent, Microsoft and we wanted to bring some competition. If the Commission now
tells us that we should stop bundling these app, you basically tell us to stop our
business model because it’s the bundling that leads to have advertisement and to
have your data. That’s why we have this model. As a consequence of this, Google will
now start to charge the play store.
o This fork issue: are we against improving the product? Of course not, we are the one
investigating in it all the time, but we are against is a fragmentation of the system. That’s
why, everyone using our apps has to sign a “anti-fragmentation agreement”: it forces
everyone to have a system which is compatible with some basic standards, otherwise the
apps would not work on each of these different environments. There was a mobile operating
system called “Symbian” and it was developed by Nokia which died because it was totally
fragmented. Google says: when we wanted to develop an app for Symbian, we had to
develop 36 versions of that app and that’s why we didn’t want to repeat that experience.
I. Recent examples
1. 3D printer
The first case: there’s a company which is today the market leader in 3D printing. There were the first to
actually believe in 3D printing and no one believed at the time. Now, hey are leader in their field. Today, they
make their money writing software for traditional manufacturers, for traditional printers. They say: “we write
software for you, so your old-fashioned printer can communicate with my 3D model printer”. Such combination
programs are individual to such combination: one software for each old-fashion printer. The company: “I’m not
going to invest in that communication software if I don’t know that it will be used, my only way to recover my
investments is for you to sell my product with your printer, I will grant you, if you promise to bundle with each
printer my software, I will grant you a rebate”. That’s an exclusivity rebate. The other party says that this is an
abuse of dominance.
2. Google Shopping
When you search something on Google (for example a Samsung phone model), we immediately see a
comparative shopper, telling you where you can get this product. It was not really successful up the moment
they decided that each time you are googling for a product, they would put their comparison shopper product
on top. Since they have a dominant position in the search engine market, their comparative shopping service
became the market leader.
The Commission ordered Google to comply with the principle of equal treatment with rival services: you cannot
systematically put your products on top. It may be that Google has this devious strategy, but it may also be that
it was not aware that this was an abuse of dominance and they learn about it through the finds. Should we
learn it through the fines?
Market: provision of general online search services
Power: market shares above 90% in most EEA countries
Abuse:
Remedy: the EC “orders Google to comply with the simple principle of giving equal treatment to rival
comparison shopping services and its own service”Fine: EUR 2.42 bn on 27.6.2017
3. Google Android
The decision is not available because there’s only a non-public version and there’s a fight on what is
confidential and what is not. Action for annulment of the fining decision has been fulfilled several weeks ago
but nobody knows what the fining decision is.
,The decision is about the mobile phone operating system Android. It’s open source system and however very
much controlled by google: it makes the investment to update the operating system from year to year, google
controls whether your applications will work on the mobile phone, etc. It’s an open source system, it’s
completely free of charge but very much controlled by google. It’s free of charge because we don’t pay in
money but with data. It’s not free, it’s free of charge.
The commission has three problems with the system:
If an OEM (manufacturer of your phone) wants to install the google play store you force them to also
install google search and google chrome. Everyone wants the play store: it’s a must have. Google says:
you can have google play for free but google search and google chrome come with it. This is a try-in.
This makes it difficult for others like Bing to gain market share. Bing has no change to improve itself, it
can improve itself by being used and if you don’t give it an opportunity to be used, it will always be
inferior to google search
Google doesn’t allow others to “fork” the system: you say: “ok it’s open source, I take it from the
internet, I take the code and I make my own product with it”. Google will not allow this: if you do this,
Google will punish you: you cannot have this product. They say they want to do it because of
consistency but the Commission says that maybe they just do this to make sure that everyone uses
their products and not their own version of Android. This way they are hindering innovation
Google has been paying the manufacturers of phones to only install Android/their search engine: if
you produce a phone and you pre-install my applications, then I will give you money. That is also an
abuse of dominance and illegal. Consumers will use what is pre-installed and thereby you hinder
others from gaining market share.
Market:
• provision of general online search services (super dominant is most countries, 90% of market share)
• ‘licensable smart mobile operating systems’
• ‘app stores for the Android mobile operating system’: there’s only one app store forthat system:
google is a monopolist
Abuse
, Fine: EUR 4.34 bn on 18.7.2018
Google’s arguments:
• All of this was already in place before we became dominant. This has always been our strategy: it’s not
after we became dominant that we started doing this
• Why are we doing this?
o Offering the play store with the search and the chrome engine: this is our business model: we
have an open source free of charge products. There are two others types of business models
in the world:
Complete vertical integration (Apple model): I make the phone, I make the operating
system (IOS) I make the apps and I don’t sell it to anyone
Microsoft model: I have a nice operating system for mobile phones: you can license
it for me and then you pay
We don’t ask you to pay but we do want advertisement and we want data, this is our
form of payment. Long before we were dominant, Apple was dominant and to some
extent, Microsoft and we wanted to bring some competition. If the Commission now
tells us that we should stop bundling these app, you basically tell us to stop our
business model because it’s the bundling that leads to have advertisement and to
have your data. That’s why we have this model. As a consequence of this, Google will
now start to charge the play store.
o This fork issue: are we against improving the product? Of course not, we are the one
investigating in it all the time, but we are against is a fragmentation of the system. That’s
why, everyone using our apps has to sign a “anti-fragmentation agreement”: it forces
everyone to have a system which is compatible with some basic standards, otherwise the
apps would not work on each of these different environments. There was a mobile operating
system called “Symbian” and it was developed by Nokia which died because it was totally
fragmented. Google says: when we wanted to develop an app for Symbian, we had to
develop 36 versions of that app and that’s why we didn’t want to repeat that experience.
