The European Commission’s decision to fine Google a record €4.3 billion punished the company for its superior product and committed errors that threaten the consistency of EU competition law in the process, Google has argued.
In opening submissions today before the European Court of Justice, Google’s counsel Alfonso Lamadrid de Pablo said the company’s Android platform has led to “unprecedented competitive effects” and accused the agency’s decision, as well as the EU General Court ruling largely upholding it, of incorrectly sanctioning the “most competitive mobile platform in history” with the highest competition fine ever issued by the agency at the time.
“The decision and the judgment under appeal should be of great concern to this court because of the threat they pose to the soundness and consistency of EU competition law,” he claimed.
In seeking to annul the commission’s decision and EU General Court ruling, Google alleges serious errors in the analysis of key tenets such as the as-efficient competitor principle and the notion of exclusionary effects, Lamadrid said, noting these are “relevant across the board to any Article 102 case.”
The agency “punished Google for its superior merits and attractiveness” while relying on these legal errors, Lamadrid claimed. He alleged the commission failed to discharge the burden and responsibility incumbent on it when attempting to reshape markets and imposing multibillion-euro penalties.
However, Fernando Castillo de la Torre, head of the commission’s legal service, said “this case is about how Google uses its Android operating system to extend and cement its overwhelming dominance in internet search,” in his opening statement.
The EU agency sanctioned Google in 2018 for imposing anticompetitive restrictions on Android device makers and mobile network operators, hitting the company with a €4.3 billion fine and ordering it to cease the conduct.
The commission found that Google had unlawfully bundled its search and browser applications to its Play Store app through agreements with device manufacturers.
It concluded the tech company paid manufacturers and mobile network operators on the condition they exclusively pre-install the Google search app on their devices and hindered the development of rival mobile operating systems.
Google was also alleged to have relied on an anti-fragmentation agreement (AFA) to prevent device manufacturers from using any alternative version of Android – known as Android forks – that Google did not itself approve.
In September 2022, the EU’s General Court largely upheld the authority’s decision, but reduced the penalty by over €200 million after finding that the agency incorrectly applied the as-efficient competitor test to its exclusivity analysis relating to Google’s revenue share agreements.
Exclusionary effects
Lamadrid alleged the decision and the court “bypassed the analytical framework” around exclusionary effects established by EU case law when assessing whether the conduct was capable of foreclosing competitors.
He added that “as a matter of logic,” there can be no exclusionary effects where the preinstallation conditions “did not in any way prevent or hinder effective access to any device or user in the market – not even one.”
In response, Carlos Urraca Caviedes, another member of the commission’s legal service, claimed Google was raising issues that it did not invoke before the lower court, while accusing the company of contesting the court’s factual findings.
But he also said Google’s argument was based on an “erroneous” premise. The test is “certainly not” that the conduct should lead to the complete elimination of all competitors, he added.
Google argues the General Court incorrectly upheld the decision despite failing to prove that its conduct foreclosed as-efficient competitors.
The commission and the court’s analysis of the preinstallation conditions “run counter to the well-established principle” that competition law’s purpose is not to shield less-efficient rivals, Lamadrid said.
“Dominant undertakings cannot therefore be punished for their superior efficiency and attractiveness,” he added.
In responding to a pre-written question from the court, Urraca Caviedes said the AEC test does not generally apply to non-pricing cases, such as tying.
Even if it were possible to apply the test in the abstract to such conduct, there would be so many uncertainties and practical difficulties as to make it unreliable in practice, he said.
This would increase legal uncertainty and “make the application of [Article] 102 unworkable,” Urraca Caviedes added.
Causality & Penalty
Google also argued the court mistakenly upheld the decision despite failing to assess whether the company would have realistically maintained its open and free business model absent the alleged conduct.
“This was all the more so given Google’s arguments that such a counterfactual was unrealistic,” Lamadrid said.
But Castillo de la Torre told the court that Google has a “very specific and far-reaching” version of what the counterfactual assessment should entail.
The agency is only required to show the conduct is capable of restricting competition without having to prove actual effects, he said – nonetheless, the commission went “beyond” in this case.
“We have actual elements of comparison,” Castillo de la Torre said, pointing to the evolution of market shares after the conduct was implemented. He accused Google of attempting to convince the court that an “even more complex” counterfactual was necessary.
Google also took aim at the General Court’s reissued penalty on the company.
“One third of the infringement was annulled, yet the gravity was increased,” White & Case partner James Killick said. The court’s decision was “wholly without precedent,” he claimed, adding that Google’s rights of defence had been breached.
During the hearing, advocate general Juliane Kokott requested an explanation as to why third-party intervenor Opera supports Google in the case, given it competes against the company in the web browser market.
The commission claimed that “the more search is done in the platform, the more money Opera gets from Google, so that is why we think that Opera is on that side of the bench.”
Opera’s counsel Marcus Glader, a partner at Vinge, said the preinstallation conditions were not capable of foreclosing competition for rival browsers and in fact allowed Opera to compete.
The hearing concluded today. AG Kokott will deliver her opinion on 12 June.
Counsel to Google
Cleary Gottlieb Steen & Hamilton
Partners Nicholas Levy in London and Brussels and Paul Stuart in London
Garrigues
Partner Alfonso Lamadrid de Pablo in Brussels
White & Case
Partners James Killick, Assimakis Komninos and Genevra Forwood in Brussels
Monckton Chambers
Meredith Pickford KC and David Gregory in London
Counsel to the European Commission
Commission Legal Service
Fernando Castillo de la Torre, Carlos Urraca Caviedes, Anthony Dawes
Counsel to Computer & Communications Industry Association
Baker Botts
Partners Matthew Levitt in Brussels and London, Paul Lugard in Brussels and Riyadh and counsel Brian R. Byrne in Brussels
Counsel to Gigaset Communications
Van Bael & Bellis
Partner Jean-François Bellis in Brussels
Counsel to The European Consumer Organisation
FratiniVergano
Partner Alessandra Fratini in Brussels
Counsel to the Association of German Magazine Publishers, Federal Association of Digital Publishers and Newspaper Publishers and Qwant
Hausfeld
Partner Thomas Höppner in Brussels and Düsseldorf and counsel Philipp Westerhoff
Counsel to Seznam.cz
Clifford Chance
Partners Miloš Felgr and counsel Jan Dobrý in Prague
Counsel to Fairsearch
Clifford Chance
Partners Thomas Vinje and Dieter Paemen in Brussels and counsel Katharine Missenden in Brussels