Google Android Tie-Ins Prompt Antitrust Law Suit Filed in California

By Peter Bernstein May 05, 2014

For anyone who follows the tech industry even on a casual basis, you are well aware that it is extremely litigious on multiple fronts with two in particular being headline grabbers, patent infringement and antitrust.

Firstly, this past week saw a bit of a split decision in the multi-case, international seesaw battle between Apple and the Android device manufacturers (in this instance, Samsung) to see who can extract billions from the other and hamper their ability to sell in various markets. It is a drama with seemingly no end and appears illogical at times given winners and losers and for how much if infringement is found.

On the antitrust front, these cases can take years. And, in many ways, in the long term they can be more impactful since not only can the financial damages be substantial but as Microsoft found out years ago when it was determined tying in its browser to the exclusion of others on Windows was verboten, such rulings can be market game-changers.

In fact, it is on the antitrust side of things where attention must be paid.  As has been lighting up the web over this weekend, at the end of last week the case Feitelson v. Google, 14-cv-02007, U.S. District Court, Northern District of California (San Jose) was filed by Yesterday’s lawsuit was filed by the owner of an HTC Corp. EVO 3D mobile phone made in 2011 that runs on Android. In his complaint, he argued that Google’s restrictions on Android made the phone more expensive.

The suit claims Google abused its market power by forcing hand-held device makers that use its Android operating system to also provide the search engine company’s applications forcing companies that use the world’s most popular smart device operating system to adopt less popular apps in order to give access to more popular ones like YouTube.

The foundation of the suit, are what are known as “mobile application distribution agreements,” or MADAs. As widely reported, these agreements did not come to light until this year, when Harvard Business School professor Ben Edelman exposed them and voice concerns about their anticompetitive nature.  The suit says the MADAs mean Google’s market dominance is “not merely a function of having built a better search engine,” but according to the complaint they require that each Android device maker “pre-loads onto prime screen real estate all of the apps in the suite, whether the manufacturer wants them or not.”

In simple legal antitrust terms this is known as a “tie-in.” Let’s just say that regulators around the world, including those in Europe who are investigating a similar complaint about Google using Android to illegally leverage its dominant market position do not take kindly to such activities when found to be correct since they do have a chilling effect on competition by locking it out. Tie-ins also raise prices for not just members of the ecosystem in question but downstream on consumers as well. 

For its part, Matt Kallman, a spokesman for Google disputed the claims in an email saying, “Anyone can use Android without Google and anyone can use Google without Android…mail. “Since Android’s introduction, greater competition in smartphones has given consumers more choices at lower prices.”

It should be noted that the only reason the MADAs have come to light, is because copies of them had been filed as exhibits in a 2012 trial between Google and Oracle over Android, and are exhibits in the new case.

Where all of this goes is problematic since Google has been relatively successful in defending its turf against antitrust charges in the U.S. and oversees. However, don’t make any bets since tie-ins are risky business for every stakeholder.

Best to just put this one on your watch list. 

Edited by Maurice Nagle
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