Consumer rights group Hagens Berman has filed a new class-action lawsuit against Google alleging that the company’s rise to dominance in the search market was only driven by its inclusion as the default search option in Android, and that Google’s insistence that corporate Android licensees include the company’s first party software has artificially driven up the price of mobile phones.
To better explain exactly what the company is actually claiming, let’s break down a few quotes from the official press release on the lawsuit.
Hagens Berman, a consumer rights class-action law firm, today announced it has filed a nationwide antitrust class-action lawsuit against Google (NASDAQ:GOOG) claiming the search engine giant illegally monopolized, and financially and creatively stagnated the American market of internet and mobile search.
The claim being brought against Google here is that because of its dominance in the area of desktop and mobile search, competitors in the market have become stagnant and the entire search market has been harmed as a result.
[…] Google’s monopoly of these markets stems from the company’s purchasing of Android mobile operating system (Android OS) to maintain and expand its monopoly by pre-loading its own suite of applications onto the devices by way of secret Mobile Application Distribution Agreements (MADA). According to the suit, these agreements were hidden and marked to be viewed only by attorneys.
Google’s search monopoly, according to the lawsuit, exists because the company purchased Android and now requires handset makers to pre-loads apps such as YouTube and the Play Store on new devices. The agreements that state these requirements are kept secret from the public.
This bit doesn’t really make much sense, since Google was sitting at the top of the search market before a single Android device hit the market. There’s no way the release of Android led to the establishment of a search monopoly. Google was the default search engine on Apple’s iPhone due the Mountain View company’s popularity long before Android phones were available.
Based on those facts, it seems hard to argue that Google’s search monopoly “stems from the company’s purchasing of Android mobile operating system.”
According to the suit, Google’s role in placing this suite of apps, including Google Play, and YouTube, among others, has hampered the market and kept the price of devices made by competing device manufactures like Samsung and HTC artificially high.
It doesn’t cost handset manufacturers a dime to include the bundled applications, so it seems bizarre to say that enforcing the inclusion of these free apps on all devices has somehow impacted the price of devices across all manufacturers.
As noted by GigaOm, one potential argument here is that other companies like Microsoft and Yahoo! could pay manufacturers to include their own search engines as the default. In the event that one of those companies was actually able to do that, however, one can only assume someone would bring a similar suit against that company.
“It’s clear that Google has not achieved this monopoly through offering a better search engine, but through its strategic, anti-competitive placement, and it doesn’t take a forensic economist to see that this is evidence of market manipulation[…]”
I don’t even believe this statement needs to be addressed. To allege that Google’s search dominance came about for any reason other than the company having built a better search engine seems laughably ill-informed.
“Simply put, there is no lawful, pro-competitive reason for Google to condition licenses to pre-load popular Google apps like this.”
Be that as it may, even the attorney who gave this quote acknowledges that the apps in question are popular. It makes business sense for Google to want first-party software included on an operating system it makes, and there’s nothing stopping users from switching to third-party apps once the phone is purchased.
The complaint claims that if device manufacturers bound by Google’s distribution agreements were free to choose a default search engine other than Google, the overall quality of Internet search would improve.
As previously mentioned, Google has held a majority share of the search market since before mobile devices were as ubiquitous as they are now. If competitors have been unable to overtake Google thus far, it seems hard to believe that simply switching Bing or Yahoo! to the default search engine on mobile devices would really drive those companies to vastly improve their services to the point that they could truly best the current king of the hill.
Search is more than just mobile. Sure, mobile is a big part of search today, but it hasn’t always been. Even when it wasn’t all about mobile, Google was dominating.
“As a result of the pricing conspiracy, everyone loses. Google and its competitors face an uncompetitive, stagnant market, and consumers are forced into one option.”
As mentioned above, users are not “forced” into any option at all, and can freely switch out the apps and services on Android devices for others as they want.
The named plaintiffs include Gary Feitelson, a resident of Louisville, Kentucky and owner of an HTC EVO 3D mobile phone, and Daniel McKee, a resident of Des Moines, Iowa and owner of a Samsung Galaxy S III mobile phone. According to the complaint, in both situations, the owner’s phones should have cost less and had better search capabilities as the result of competition that would have ensued, had Google’s MADA restraints not existed.
Both phones in question can be set to use one of several search engines out of the box. As addressed above, the argument could be made that requiring Android devices to default to Google’s search site could have stopped other companies from paying for the same position, but whether that would actually drive down the prices of these devices is completely unproven.
Overall, the suit does make a few fair points regarding Google’s forced inclusion of its services preventing competitors from taking those spots, but to suggest that Google is only where they are today because of Android or that another company could be dominating search right now if only they could be the default Android search engine seems unfounded. The idea that handset prices would be driven down if third parties could pay for a spot in the default settings seems equally ludicrous.
We’ll have to see how this one plays out, but I’m not that convinced Hagens Berman has a very strong case here.
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