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Top Ten Questions about FTC-Google-Android Antitrust Probe

The U.S. FTC has opened an antitrust probe of Google’s Android mobile operating system per Bloomberg reporting to investigate allegations that Google has anti-competitively limited competitive services on the Google-Android platform and extended its market power by favoring Google services over competitors’.

Top Ten Questions Raised by FTC’s Google-Android Probe     

  1. What is Android antitrust enforcement all about?
  2. Why is Google-Android a mobile operating system monopoly? 
  3. Why does mobile operating system competition matter?
  4. How does this case compare with the Microsoft antitrust operating system precedent?  
  5. Are any non-antitrust issues implicated?
  6. Is the FTC independent from the White House?
  7. Is the FTC too cozy with Google?
  8. Is the FTC conflicted on Android?
  9. Is the FTC probe real or does it have other purposes?
  10. How relevant is the FTC in this case at this stage?

What is Android antitrust enforcement all about?

Android is Google’s gatekeeper power over the free app economy, to advantage Google’s apps over competitors’ apps and to centrally control the collection and monetization of the data/metadata that apps generate. It is very similar to Google’s Search and search advertising gatekeeper power over the free content economy, to advantage Google’s info/ads over competitors’ info/ads and to centrally control the collection and monetization of the data/metadata that search and search advertising generate.

Android antitrust enforcement is all about whether Google will be allowed to dominate app usage and monetization, like it has been able to dominate search information use and monetization. Like Google knows that the top two search results generate 50% of Internet traffic, Google also knows that smartphone users spend 78% of their time using only three apps, and 94% on the top eight apps, so it is no surprise that 5 of the top 10 most popular apps are Google’s: YouTube, Search, Play, Maps, and Gmail. Just like Google has learned the key to search dominance is controlling what people see on the first search results page, the key to app dominance is controlling what apps people first see on their Android home screen.     

Why is Google-Android a mobile operating system monopoly? 

If the FTC respects U.S. and EU court antitrust precedents United States v. Microsoft Corp. and Microsoft v. European Commission in the analogous Microsoft operating system decisions, Apple’s un-licensable iOS will be excluded from the relevant market definition of licensed mobile operating systems, making Android’s share >90%, a market share most antitrust authorities consider a monopoly.  Simply, the evidence is clear that Apple’s un-licensable iOS is not a direct competitor to licensed Android.  

Why does mobile operating system competition matter?

Operating systems are strategic because they are the controller, integrator, and prioritizer of hardware and software resources on a device. If an OS is a monopoly, it has ecosystem chokepoint or gatekeeper power over much of the mobile Internet ecosystem: OEM device manufacturers, developers/apps, metadata monetization, and what content users most discover and use. As rapidly as Google extended its market power into Android, Android is poised to extend its mobile OS dominance into the nascent automotive, home and enterprise Internet of things markets of the future. Simply, Google-Android is on path to be the singular bearing point on which most of the global web will be built and operated.    

How does this case compare with the Microsoft antitrust case?

This Android case is eerily similar to the Microsoft case in charges, theory, and harms, as both revolve around anti-competitive tying and bundling monopoly operating systems to other services to foreclose competition. The only big difference here is how much broader Google-Android has been able to extend its dominance than Microsoft did. While Microsoft extended its operating system dominance to Office software dominance, vigilant DOJ antitrust enforcement effectively blocked extension of Microsoft’s market dominance beyond the PC software market into the overall economy. In stark contrast, lax antitrust enforcement has enabled Google to leverage and extend its core dominance throughout the economy in substantial part via Android tying and bundling of search, YouTube, Maps, Play, Chrome, Gmail, etc.

What other issues are implicated here?

Undermining Google’s expected antitrust defenses -- that free Android only benefits consumers with lower prices and innovation -- is the fact that Google-Android’s first priority of scaling fast meant a low priority for consumer security. Thus Android has become a leading source of security and privacy risk for consumers. Blackberry, famed for the security of its own operating system and devices, is now a poster child of Android’s monopoly as Blackberry has had to capitulate much of its security-first business model by offering its product on security-challenged Android to survive.

Will the FTC investigation be independent from the White House?

Public evidence to date suggests not. A WSJ Freedom of Information Act (FOIA) request for information about the FTC’s closure of the Google search bias investigation exposed that FTC commissioners overruled staff findings. WSJ’s series of articles: Inside the U.S. Antitrust Probe of Google;” “How Google Skewed Search Results;” andExcerpts from FTC Staff Report on Google Search Practices.”  Another WSJ investigative story entitled “Google Makes Most of Close Ties to the White House,” showed Google’s extraordinary access to White House officials concerning its top corporate priorities. Precursor research catalogued the unprecedented appearance of conflicts of interests in that Google has former employees or consultants encamped in senior positions in most every major policy area of corporate importance to Google. Finally, Precursor fact-checked the FTC’s claims of no irregularities in the closing of the Google investigation and showed them inaccurate.

Has the FTC been too cozy with Google?

A Buzzfeed article exposed a March 23, 2015 email from a top Google lobbyist to the FTC Chairman’s Chief of Staff that urged the FTC to issue a press release to explain the FTC’s closure of its Google antitrust investigation. Two days later, the FTC dutifully complied with a press release doing exactly what a top Google lobbyist urged the FTC do in its email. Ironically, in furiously trying to rebut analysis that Google wields “undue political influence” with the U.S. Government, Google’s email directive to the FTC, and the FTC’s prompt compliance, provides exceptionally incriminating contemporaneous evidence that Google does in fact wield “undue political influence” with at least the FTC on Google antitrust matters.

Is the FTC conflicted on Android?

When the FTC approved Google’s acquisition of #1 display ad server DoubleClick 4-1, it promised to be vigilant that Google would not become anti-competitive. When the FTC approved Google’s acquisition of #1 mobile advertiser AdMob with no conditions, despite “serious antitrust issues,” it again promised to be vigilant Google would not be anti-competitive. When FTC commissioners closed its investigation of Google’s search bias abuse of dominance emanating in part from the market power they acquired from DoubleClick; and when the FTC did not complete its initial investigation of alleged Android abuses of dominance emanating in part from the market power they acquired from AdMob’s mobile advertising subsidy of free Android, it did not mention either of its DoubleClick or AdMob promises of FTC antitrust vigilance. The FTC appears to be conflicted in that finding antitrust problems with search or Android would require the FTC to admit it made mistakes in approving DoubleClick and AdMob.  

Is the FTC probe real or does it have other purposes?

The answers and evidence above suggest healthy skepticism is warranted on how serious FTC commissioners will turn out to be in investigating Google-Android. In addition, if past experience is any guide for what the FTC Android probe could be like, the FTC could become Google’s behind the scenes advocate for a negotiated settlement between the EU and Google, like they quietly did in the three Almunia-proposed settlements, which all proposed that the EU: find Google was not-dominant, require no admission of any wrongdoing, and close related antitrust investigations into Google for five years.

How relevant is the FTC in this case at this stage?

Fair or not, most company complainants have concluded that U.S. antitrust enforcers are unlikely to be interested in enforcing antitrust law against Google in this Administration, and thus have pursued redress in the EU and other foreign jurisdictions, for Google’s global anti-competitive practices in this global market. In addition, Google’s exceptional global success also has made FTC antitrust enforcement relatively much less relevant, in that Americans represent only about 10% of Google’s global user base and an increasing majority of Google’s revenues come from overseas jurisdictions.

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.

 

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