Google can’t seem to catch a break in Russia. In September, that country’s Federal Antimonopoly Service (FAS), the agency in charge of overseeing and enforcing competition-related legislation, found Google guilty of stifling alternative search engines and services, such as Russian search engine Yandex, in connection with the management of its Android operating system. And on Monday, the Moscow Arbitration court upheld that decision, dealing a blow to the Mountain View company’s power-broker status among phone manufacturers in the region.
The court agreed with the FAS’s findings, holding that Google abused its dominant position in the Russian mobile industry to advertise its own apps and services at the expense of local competition. In its decision last year, the agency said that Google’s compulsory bundling policy — phone manufacturers must sign an agreement with the company to pre-install its services in exchange for access to its Play Store app market — was illegal under Russian anti-monopoly law.
In counter-arguments before the FAS last year, Google emphasized that its Android partners are free to opt for alternative apps instead of the company’s own. But regulators concluded that most manufacturers found the Play Store an irresistible carrot; the market touts more than two million apps and a billion active users worldwide. That has led most to, for example, adopt Google as the default search engine on their handsets despite the popularity of Yandex (over 80 percent of Russians report using Yandex for most Internet searches).
As a result of the Arbitration court’s ruling, Google will have to pay a revenue fine and allow Russian device makers to omit Google services and apps of their choosing. That presents a challenge to Google’s traditional sources of mobile revenue. Android has generated $31 billion in revenue and $22 billion in profit for the company since 2008, largely from advertisements shown on Android phones and transactions from the Google Play Store. In light of the FAS’s decision, manufacturers may decide to supplant the company’s add platform and app store with alternatives.
And the implications of the ruling extend far beyond Russia. The European Union’s European Commission began a line of inquiry regarding the company’s Android practices last year, and in April accused the company of boosting its own services and apps in its search rankings to the detriment of rival services.
And in the U.S., Google narrowly dodged a similar bullet: the Federal Trade Commission considered suing the company over similar practices in 2012, but scrapped those plans after officials failed to reach a consensus. The Arbitration court could embolden agencies elsewhere to pursue investigations of their own.
Yandex, whose FAS complaint last February was the impetus for today’s decision, said it was pleased with the court decision. “After careful consideration of all the facts in the case against Google’s anti-competitive practices, the court has upheld FAS’s judgment,” a spokesperson told VentureBeat. “We are satisfied with the court’s decision to uphold FAS’s judgment in the case against Google.”
Google has yet to issue a formal response to the order, but in the past has vociferously denied accusations of anti-competitive behavior. In response to the European Union’s accusations last year, vice president of Google search Amit Singhal said, “While Google may be the most used search engine, people can now find and access information in numerous ways — and allegations of harm, for consumers and competitors, have proved to be wide of the mark.”