Internet Advertising Platform Wars: Predicting Antitrust Enforcement on Google’s Android Licensing Practices

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Internet Advertising Platform Wars: Predicting Antitrust Enforcement on Google’s
Android Licensing Practices in the U.S. and the EU
by Alex G. Lee1
ABSTRACT
As the global ecommerce sales increases, internet advertising market also continues to
glow. Among the several business models for internet advertising, search engine based internet
advertising became the dominant form of business models. Current smartphone boom also leads
to significant increase in mobile internet advertising market. As Google became a global market
leader by dominating internet advertising platforms such as search engine and operating system
(OS) for smartphones in a highly competitive internet advertising market, Google’s business
practices raise the antitrust disputes in the U.S. and the EU.
The author addresses the legal and policy issues regarding antitrust accusations of
Google’s internet advertising business practice. Especially, the author focuses on antitrust
accusations of Google’s Android licensing practices. The author provides the implications of the
divergence in enforcement of antitrust laws between the U.S. and the EU regarding antitrust
accusations on Google’s search engine business practices and Microsoft’s PC operating system
licensing business practices. Based on the analysis of divergence in enforcement of antitrust
laws between the U.S. and the EU, the author provides the guidelines for predicting the outcomes
of the European Commission’s and the FTC’s hypothetical antitrust investigations on Google’s
1
Alex Geunho Lee, Ph.D., earned his J.D. from the Suffolk University Law School. This paper is a part of the class
project for the “Emerging Issues in Law, Information Technology and Transnational Business” course. He thanks to
Professor Michael Rustad for valuable comments.
*This paper was written in the fall of 2013. In April of 2015, the European Commission launched a formal
investigation into Google’s Android licensing practices.

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Android licensing practices. The author argues that the European Commission will decide that
Google’s free open-source licensing practice of Android OS is potentially anti-competitive and
Google’s bundling of services that are related to internet advertising can subject to antitrust
liability. On the other hand, the author contends that the FTC will more weigh on pro-
competitiveness of the royalty-free licensing of Android OS. The author also argues that the
FTC will order Google to provide some measures that can guarantee fair competition and prevent
the restriction of freedom to choose third party application services.
Table of Contents
I. Introduction
II. Analysis of Divergence in Enforcement of Antitrust Laws between the U.S. and the EU
A. Antitrust Law in the U.S. and the EU
1. The U.S. Antitrust Law
a. Illegal agreements
b. Monopolization
2. The EU Antitrust Law
b. Monopolization
B. Differences in Enforcement of Antitrust Laws between the U.S. and the EU
1. Case studies
a. Google’s search engine business practices
b. Microsoft’s PC operating system business practices
2. Predatory pricing

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3. Burden of proof
C. Implications of Divergence in Enforcement of Antitrust Laws between the U.S. and the EU
III. Antitrust Investigations on Google’s Android Licensing Practices.
A. Predicting Outcomes of Antitrust Investigations in the EU
1. Google’s Android licensing practices
2. Arguments for predatory pricing
3. Arguments for illegal bundling
B. Predicting Outcomes of Antitrust Investigations in the U.S.
IV. Conclusion
V. Bibliography
I. Introduction
The Internet has revolutionized our life style, business activities, and society as a whole.
According to a statistical research by Royal Pingdom in December of 2012, there were 2.4
billion internet users worldwide.2
Globally, total ecommerce sales reached $1.2 trillion in 2012.3
As the ecommerce sales increases, internet advertising market also continues to glow.4
Among
2
Royal Pingdom, U.S. Internet 2012 in numbers, http://royal.pingdom.com/2013/01/16/internet-2012-in-numbers/
(last visited Oct. 10, 2013).
3
Emarketer, B2C Ecommerce Climbs Worldwide, as Emerging Markets Drive Sales Higher,
http://www.emarketer.com/Article/B2C-Ecommerce-Climbs-Worldwide-Emerging-Markets-Drive-Sales-
Higher/1010004 (last visited Oct. 10, 2013).
4
Globally, internet advertising market reached $100 billion in 2012. See, PWC, Internet advertising,
http://www.pwc.com/gx/en/global-entertainment-media-outlook/segment-insights/internet-advertising.jhtml

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the several business models for internet advertising, search engine based internet advertising
became the dominant form of business models.5
Current smartphone boom also leads to
significant increase in mobile internet advertising market.6
In a highly competitive internet advertising market, Google became a global market
leader by dominating internet advertising platforms such as search engine and operating system
(OS) for smartphones. As of September, 2013, Google’s global market share reaches 71 % in
search engine7
and 80 % in smartphone operating system.8
Google’s domination in internet
advertising market, however, has led to recent intensive antitrust investigations on its search
engine business practices in the US and the EU.
The antitrust investigations on Google’s search engine business practices came to a
settlement with Google’s compliance to some corrections in its search engine business practices
in the US.9
In the EU, however, the European Commission requested significant changes in
Google’s search engine business practices.10
Google proposed its commitments two times
5
Id.
6
Globally, mobile internet advertising market reached $8.9 billion in 2012. Search engine based internet advertising
also dominates the mobile internet advertising revenue, which represented 52.8% of total global mobile internet
advertising revenue. See, IAB Europe, Global figures for mobile advertising revenue 2012,
http://www.iabeurope.eu/news/global-figures-mobile-advertising-revenue-2012-revealed (last visited Oct. 10, 2013).
7
Net Applications.com, Global Search Engine Marker Share, http://www.netmarketshare.com/search-engine-market-
share.aspx?qprid=4&qpcustomd=0 (last visited Oct. 10, 2013).
8
Social Media Today, Global Shifts in the Smartphone Platforms Market, http://socialmediatoday.com/david-h-
deans/1677421/global-shifts-smartphone-platforms-market (last visited Oct. 10, 2013).
9
Federal Trade Commission, Google Press Conference, 2013, available at
http://www.ftc.gov/speeches/leibowitz/130103googleleibowitzremarks.pdf (last visited Oct. 15, 2013).
10
European Parliament hearing, The Google antitrust case: what is at stake?, http://europa.eu/rapid/press-
release_SPEECH-13-768_en.htm (last visited Oct. 15, 2013).

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addressing the European Commission’s request.11
As of early October, 2013, a negotiation
between the European Commission and Google is underway for a settlement.12
As the antitrust
debates on Google’s search engine business practices nearly come to a settlement, the European
Commission started preliminary investigations on Google’s Android licensing practices.13
This
paper will address the legal and policy issues regarding antitrust accusations of Google’s
Android licensing practices.
The main purpose of this paper is to predict the outcomes of the European Commission’s
and hypothetical antitrust investigations by the Federal Trade Commission (FTC) 14
on Google’s
Android licensing practices. I provide guidelines for predicting antitrust enforcement on
Google’s Android licensing practices in the U.S. and the EU based on the case studies of
antitrust enforcement on Google’s search engine business practices and Microsoft’s PC operating
system business practices. I contend that antitrust policy generally favors preservation of
incentives to innovation and benefits of dynamic efficiency to consumer welfares over the long
run regarding new products/services and innovative markets in the US. On the other hand, in the
EU, I contend that antitrust policy generally reluctant to adopt the forward looking attitude and
willingly interrupt to monopolists’ conducts to correct market for more competitive environment.
Consequently, the European Commission will decide that Google’s free open-source
licensing practice of Android OS is potentially anti-competitive, and thus, can subject to antitrust
11
Reuters, Google offers new concessions to avoid fine in EU antitrust case,
http://www.reuters.com/article/2013/09/09/us-eu-google-idUSBRE9880D620130909 (last visited Oct. 15, 2013).
12
The New York Times, Google in Deal to Settle Europe’s Antitrust Case,
http://www.nytimes.com/2013/10/02/business/international/google-europe-antitrust-settlement-deal.html?_r=0 (last
visited Oct. 15, 2013).
13
Financial Times, Google faces Brussels probe over Android licensing, http://www.ft.com/cms/s/0/b3da6604-d42b-
11e2-8639-00144feab7de.html#axzz2hsTvBooP (last visited Oct. 15, 2013).
14
The FTC’s hypothetical investigations mean an assumed situation that if the antitrust investigations are started in
the US.

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liability as predatory pricing under Article 101 of the TFEU (Treaty of Functioning of EU). The
European Commission will also assert that Google violate Article 102 of the TFEU by the
bundling of services that are related to internet advertising including YouTube and Android OS
because Google abused its dominance in the mobile OS market to strengthen the position of its
market for services that are related to internet advertising.
On the other hand, the FTC will more weigh on pro-competitiveness of the royalty-free
licensing of Android OS by bring efficiencies into the market, and thus, can benefit consumers
by providing low price products with reach of applications. It is also possible that the FTC will
order Google to provide some measures that can guarantee fair competition and prevent the
restriction of freedom to choose third party application services.
I organize this paper as follows. In Section II, I present a review of current status of the
enforcement of antitrust law in the U.S. and the EU. I then contrast the antitrust enforcement
between the U.S. and the EU on Google’s search engine business practices and Microsoft’s PC
operating system business practices to show the divergence in the antitrust enforcement. I also
contrast the antitrust enforcement between the U.S. and the EU for predatory pricing.
Additionally, I show the difference in burden of proof between the U.S. and the EU. Based on
the analysis of cause of the divergence in the antitrust enforcement between the U.S. and the EU,
I provide guidelines for predicting outcomes of antitrust enforcement on Google’s Android
licensing practices in the U.S. and the EU based on the case studies of antitrust enforcement on
Google’s search engine business practices and Microsoft’s PC operating system business
practices. Finally, I provide the implications of divergence in enforcement of antitrust laws
between the U.S. and the EU.

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In Section III, I present the antitrust investigations on Google’s Android licensing
practices and predictions of outcomes of the antitrust investigations. I present arguments
between the European Commission/FTC and Goggle for the allegations that, because Google
licenses its Android OS at below-cost, it is difficult for other providers of mobile OS to compete
with Google and Google also abused its dominant position in mobile OS market by imposing
certain conditions to business partners. I conclude this paper in Section V.
II. Analysis of Divergence in Enforcement of Antitrust Laws between the U.S. and the EU
A. Antitrust Law in the U.S. and the EU
1. The U.S. Antitrust Law
Under the section 1 of Sherman Act, every combination between separate entities in
unreasonable restraint of trade is illegal. For over one hundred years, courts have developed two
categories of analysis methods for antitrust illegalities: per se illegal method and rule of reason
method. Per se illegal method applies for collaboration practices whose nature and necessary
effect are so obviously anticompetitive. Once courts categorized the collaboration practices as
per se illegal courts ruled them as illegal for violating antitrust law without further detail
investigation. Category of collaboration practices that courts declared as per se illegal are (1)
minimum and/or maximum price fixing; (2) production/supply/output limits; (3) elimination of

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competitive bidding; (4) agreement for dividing territories, customers, and/or products and (5)
concerted refusals to deal or group boycotts.
The rule of reason method applies for collaboration practices whose anticompetitive
effect can only be evaluated by analyzing the facts peculiar to the business. In Chicago Board of
Trade v. United States15
, the court provided several factors to be considered in the rule of reason
analysis: (1) structure of industry; (2) facts peculiar to the firm’s operation in the industry; (3)
history and duration of restraint; (4) reasons why the restraint was adopted (purpose); (5) effects
on the competitive market; (6) other ways to get the same pro-competitive results without the
restraint. In Broadcast Music, Inc. v. CBS, Inc.16
, the court provided a standard of review to
determine illegality of the defendant’s activity after considering the above mentioned factors: (1)
whether the challenged conduct is reasonably necessary to achieve the cost-reducing efficiencies;
(2) whether the restraint that follows is actually necessary to the main purpose of the conduct and
(3) whether the efficiency achieved by the conduct outweighs the adverse effect of the restraint.
b. Monopolization
Under the section 2 of Sherman Act, monopolization or attempt to monopolize or
conspire to monopolize of trade is illegal. In Grinnell Corp. v. United States17
, the court
provided two elements to test illegal monopolization: (1) possession of monopoly power in a
relevant market18
and (2) willful acquisition or maintenance of monopoly power, as
15
Chicago Board of Trade v. United States, 246 U.S. 231 (1918).
16
Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979).
17
Grinnell Corp. v. United States, 384 U.S. 563 (1966).
18
The court ruled that a defendant that has 33% of the market does not have monopoly power. If a defendant has 60%
of the market, it is doubtful that it has monopoly power. If a defendant has 90% of the market, however, a defendant
does have monopoly power.

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distinguished from growth or development as a consequence of a superior product, business
acumen, or historic accident. Here, monopoly can be demonstrated by an ability to raise prices
beyond competitive levels. The relevant market includes product and geographic market. The
conduct of willful acquisition or maintenance of monopoly power includes (1) exclusionary
conduct impairing competition or expansion of unnecessary productivity;19
(2) exclude
competitors without being of great benefit to its customers;20
(3) unnecessarily restrictive way by
the refusal to deal;21
and (4) charging a price below an appropriate measure of cost (predatory
pricing). 22
2. The EU Antitrust Law
EU competition law is stricter and rigid in its applications than American counterpart.
Article 101 of the TFEU prohibits agreements which prevent, restrict or distort competition
among EU member states. Article 101(3) specifies prohibited agreements: (1) fix purchase or
selling prices or any other trading conditions; (2) limit or control production, markets, technical
development, or investment; (3) share markets or sources of supply; (4) apply dissimilar
conditions to equivalent transactions and (5) make contracts subject to acceptance of
supplementary obligations which have no connection with the subject of such contracts.
19
Alcoa v. United States, 148 F.2d 416 (2d Cir. 1945).
20
United Shoe Machinery Corp. v. United States, 391 U.S. 244 (1968).
21
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).
22
Matsushita v. Zenith Ratio Corp. 475 U.S., 574 (1986).

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Exemption, however, is granted under Article 101(3) for agreements that contribute to improving
the production or distribution of goods or to promoting technical or economic progress.
b. Monopolization
Article 102 of the TFEU prohibits the abuse of a dominant market position. Abuses
include (1) imposing unfair or discriminatory terms; (2) limiting production, markets or technical
development; (3) applying dissimilar conditions to equivalent transactions and (4) making
contracts subject to acceptance of supplementary obligations which have no connection with the
subject of such contracts. Generally, a market share in excess of 40% can be considered as
indicate dominant market position.
B. Differences in Enforcement of Antitrust Laws between the U.S. and the EU
1. Case studies
a. Google’s search engine business practices
The antitrust investigations on Google’s search engine business practices clearly show
the divergence in enforcement of antitrust laws between the U.S. and EU. The European
Commission informed Google that four types of its business practices are potentially liable under
EU antitrust laws:23
(1). “The favorable treatment, within Google’s web search results, of links to Google’s own
specialized web search services as compared to links to competing specialized web search
23
European Parliament hearing, supra, note 9.

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services (for instance, services allowing users to search for specific categories of information
such as restaurants, hotels or products).”
(2). “The use by Google, without consent, of original content from third party web sites in its
own specialized web search services. This may reduce competitors' incentives to invest in the
creation of original content.”
(3). “Conditions on publishers preventing them from displaying search advertisements from
Google's competitors on their websites.”
(4). “Contractual restrictions on advertisers preventing them from porting and managing their
search advertising campaigns across Google's and competing search advertising platforms.”
On the other hand, the FTC expressed antitrust liability concern about only two of
accused Google’s business practices:24
(1). “Google will stop misappropriating – or “scraping” – the content of its rivals for use in its
own specialized search results.”
(2). “Google will drop contractual restrictions that impaired the ability of small businesses to
advertise on competing search advertising.”
If I contrast the European Commission’s and the FTC’s antitrust investigations, I can find
that significant divergence in enforcement of antitrust laws especially on Google’s search biasing
activities: The favorable treatment of links to Google’s own specialized web search services as
compared to links to competing specialized web search services.25
Thus, it would be valuable to
find out the causes of this significant divergence in enforcement of antitrust laws between the
24
Federal Trade Commission, supra, note 8.
25
The relevant part of antitrust law that is applicable to this case is the abusive conducts by a company in dominant
market position, as specified in section 2 of the Sherman Act and Article 102 of the TFEU.

12
U.S. and the EU for providing guidelines in predicting outcomes of antitrust enforcement on
Google’s Android licensing practices in the U.S. and the EU.
Figure 1 shows an illustration for Google’s displaying of search results. If you type
Restaurant Boston into Google’s search field, a list of restaurants that you might want to visit in
Boston will appear. The top list, which shows links to restaurants in Boston, is Google’s own
suggestions in respond to the search keywords. In technical term, Google displays links to its
own vertical search services.26
Farther down from the top list, Google displays links to other
vertical search services such as Boston.com, Boston Magazine, Yelp and Tripadvisor. Google
also displays links to AdWords sites just below the top list and to the right of the results
displaying links to other vertical search services. AdWords is Google's main source of
advertising revenue by providing free search services. Because users of Google’s search service
tend to click on the top listed links, advertisers prefer higher placement in the AdWords displays
and willing to pay premium for placing on the top. Google provides the top placement in the
AdWords displays to an advertiser who offers highest payment upon the number of users’ clicks
to the link for certain keywords. Google’s search results also display a mix of Web links, news
links, places, maps, and images.
Google’s competitor claimed that, because users may not recognize whether the displaced
search results is the links to its own or others generally, the favorable treatment of Google’s own
vertical search services can divert traffic away from competitors search services.27
Google’s
competitor also claimed that, because Google manipulates its search engine algorithm to place
26
The vertical search services return results from one specialized categories of information filed (vertical filed).
Amazon for book searching is a typical example of vertical search services.
27
See, e.g., Marvin Ammori & Luke Pelican, COMPETITORS' PROPOSED REMEDIES FOR SEARCH
BIAS: SEARCH “NEUTRALITY” AND OTHER PROPOSALS, 15 No.11 J. Internet L. 11 (2012).

13
the links to its competitors’ sites lower than links to its own services, this kind of search bias
practice can make difficult for the user to find more relevant information for the search keywords
and unfairly promote its own services.28
Figure 1. An illustration for Google’s displaying of search results.
In response to claims that Google’s search engine business practices are potentially liable
for antitrust violation, the FTC investigated the allegations and concluded that the Google’s
28
See, e.g., Andrew Langford, GMONOPOLY: DOES SEARCH BIAS WARRANT ANTITRUST OR REGULATORY
INTERVENTION?, 88 Ind. L.J. 1559 (2013); Geoffrey A. Manne & Joshua D. Wright, GOOGLE AND THE LIMITS
OF ANTITRUST: THE CASE AGAINST THE ANTITRUST CASE AGAINST GOOGLE, 34 Harv. J.L. & Pub. Pol'y,
1 (2011).

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search business practices “could be plausibly justified as innovations that improved Google’s
product and the experience of its users.” On the other hand, for the same allegations, the
European Commission identified Google’s search business practices as “liable to harm
consumers” and can create “a strong case for action under the European antitrust laws.”
Thus, it would be valuable to find out the causes of this significant divergence in enforcement of
antitrust laws between the EU and U.S. to provide guidelines for predicting outcomes of antitrust
enforcement on Google’s Android licensing practices in the U.S. and the EU.
b. Microsoft’s PC operating system business practices
Antitrust enforcement on Microsoft’s PC operating system business practices is also a
good example to show divergence in enforcement of antitrust laws between the U.S. and the EU.
The U.S. Department of Justice claimed that Microsoft violated U.S. antitrust laws by bundling
the Internet Explorer (IE) and Windows Media Player (WMP) with its Windows operating
system (OS).
In Microsoft Corp. v. United States,29
the court applied the test under Jefferson Parish30
and held that the bundling of IE/WMP and Windows OS met the Jefferson Parish conditions for
per se illegality. The Court of Appeals31
rejected per se illegality, on the other hand, and
concluded that rule of reason analysis is appropriate for the consideration of balancing between
anticompetitive effects/loss of consumer choices and efficiencies/consumer benefits that can be
obtained through integration of innovative products to provide new functionality to consumers.
29
Microsoft Corp. v. United States, 87 F. Supp. 2d 30 (D.D.C. 2000).
30
Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1985). The test is whether there are two products for
tying analysis purposes and whether the accused party possessed sufficient power in the tying product market.
31
Microsoft Corp. v. United States, 253 F.3d 34 (D.C. Cir. 2001).

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On the contrary, the European Commission accused Microsoft of infringing Article 82 of
the EC treaty (Article 102 of the TFEU) by the bundling of IE/WMP and Windows because
Microsoft abused its dominance in the PC OS market to strengthen the position of its IE/WMP
market.32
The European Commission reasoned that Microsoft’s business practice could
foreclose competition. The European Commission ordered Microsoft should offer Windows OS
without bundling IE/WMP. The European Commission weighed more on anticompetitive
effects/loss of consumer choices than efficiencies/consumer benefits that can be obtained
through bundling of innovative products. The European Commission also stated that the abuse
by Microsoft hindered innovation in the IE/WMP market and harm to consumers in the long run.
2. Predatory pricing
A monopolist might try to monopolize a market by charging a price that is so low that it
is going to take a loss on its sales. The monopolist is trying to drive its competitors out of the
market because the monopolist believes that it can suffer these losses longer than its competitors
can. Antitrust analysis of predatory pricing is also a good example to show the divergence in
enforcement of antitrust laws between the U.S. and the EU. In the EU, it suffices for predatory
pricing that a dominant party tries to eliminate a competitor with prices below cost. In AKZO
Chemie BV v Commission 33
, the European Court of Justice (ECJ) acknowledged that ‘a
dominant party has no interest in raising its prices by taking advantage of its monopolistic
position after applying unreasonably low prices to eliminate competitors.’ In the U.S., on the
32
Microsoft Corp., Commission Decision COMP/C-3/37.792, 2004 O.J. (L 32) 23.
33
AKZO Chemie BV v Commission, Case 62/86 [1991] ECR I-3359.

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other hand, the courts also require that the dominant party can recoup34
its losses and make the
intended monopolistic profit in addition to pricing below cost.
3. Burden of proof
In the EU, the defendant has the burden of proof that its activity is not anti-competitive
and does no harm consumers. On the other hand, in the U.S., the plaintiff has the duty to show
why the defendant’s activity is anti-competitive and does harm consumers.
C. Implications of Divergence in Enforcement of Antitrust Laws between the U.S. and the EU
The fundamental objective of antitrust enforcement in the U.S. and the EU is the same: it
is for protecting consumer welfares. In practice, however, both side show several divergences
when actually enforcing the antitrust laws as we see in the previous discussions. Most of all,
antitrust agencies and courts in the U.S. willingly consider the pro-competitive effects of
seemingly antitrust activities in appearance.35
Especially, long term consumer benefits from
dynamic efficiencies embedded in innovation are considered to be more important than short
term harms to consumers by deterring static efficiencies.36
By contrast, antitrust agencies and courts in the EU tend to infer antitrust liabilities from
the nature of accused activities rather than their effects. In order to protect competition, antitrust
34
See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. 509 U.S. 209 (1993). High entry barriers
recoupment generally can indicate the recoupment capability.
35
See, e.g., Robert H. Bork & J. Gregory Sidak, WHAT DOES THE CHICAGO SCHOOL TEACH ABOUT
INTERNET SEARCH AND THE ANTITRUST TREATMENT OF GOOGLE?, 8 J. Comp. L. & Econ. 667 (2012).
36
See, e.g., Federal Trade Commission, Promoting Innovation: Just How “Dynamic” Should Antitrust Law Be?,
2010, available at http://www.ftc.gov/speeches/rosch/100323uscremarks.pdf (last visited Oct. 15, 2013).

17
agencies and courts in the EU seek to prevent an interference with the freedom to compete. Thus,
the outcomes of antitrust resolutions in the EU are sometimes blamed to be protecting
competitors rather than preserving competitions. Especially, antitrust agencies and courts in the
EU willingly apply per se rule approach to the case that a part tries abuse its dominant position
against its smaller competitors.
Therefore, in the U.S., one can say that antitrust policy generally favors preservation of
incentives to innovation and benefits of dynamic efficiency to consumer welfares over the long
run regarding new products/services and innovative markets. On the other hand, in the EU, one
can say that antitrust policy generally reluctant to adopt the forward looking attitude and
willingly interrupt to monopolists’ conducts to correct market for more competitive environment.
III. Antitrust Investigations on Google’s Android Licensing Practices.
A. Predicting Outcomes of Antitrust Investigations in the EU
1. Google’s Android licensing practices
Google makes available the source code of Android OS under free and open-source
software licenses.37
Thus, Google allows the user of the software to use the software for any
purpose, to study it, to distribute it, to share it, to modify it, and to distribute modified versions of
the software without paying the royalties. An interesting issue regarding Google’s Android
licensing practices is whether open-source software licensing activity can be liable for antitrust
violation.
37
See, e.g., Wikipedia, http://en.wikipedia.org/wiki/Android_(operating_system) (last visited Dec. 2, 2013).

18
Google’s competitors argued that because Google licenses its Android OS at below cost,
it is difficult for other providers of mobile OS to compete with Google.38
Google’s competitors
also asserted that Google abused its dominant position in mobile OS market to impose certain
conditions to business partners. Specifically, Google’s competitors alleged that Google’s pre-
installation of various Google’s services that are related to internet advertising such as YouTube
can be considered as illegal bundling to monopolized mobile advertising market.39
To prove the allegation of predatory pricing of Google’s free open-source licensing
practice of Android OS, the European Commission must show that Google has a monopolistic
position in a reverent market. The European Commission will contend that Google has a
monopolistic position in the smartphone OS market because its market reached around 70 % as
of 3Q 2013 followed by 20 % of Apple’s iOS and 10 % of Microsoft’s Windows OS.40
Google, however, will argue that 70% market share of Android OS does not necessarily mean
have monopoly power because smartphone manufactures can switch to other OSs. The
European Commission will, however, successfully argue that smartphone manufactures cannot
freely switch to other OSs because consumers’ locked-in to some specific applications can block
the switch to other OSs. Furthermore, the European Commission will strongly argue that there
38
FairSearch, FAIRSEARCH ANNOUNCES COMPLAINT IN EU ON GOOGLE’S ANTI-COMPETITIVE
MOBILE STRATEGY, http://www.fairsearch.org/mobile/fairsearch-announces-complaint-in-eu-on-googles-anti-
competitive-mobile-strategy (last visited Dec. 10, 2013).
39
Id.
40
TechZone360, Windows Phone Breaks 10 Percent Market Share in Europe,
http://www.techzone360.com/topics/techzone/articles/2013/12/02/362113-windows-phone-breaks-10-percent-
market-share-europe.htm (last visited Dec. 10, 2013).

19
exists a high market entry barrier because the free licensing of Android OS makes it difficult for
a new entity to enter the smartphone OS market and compete against Google.
Google will assert that the royalty-free licensing of Android OS can bring efficiencies
into the market, and thus, it is pro-competitive and can benefit consumers by providing low price
products with reach of applications. Google will also contend that Google does not have any
willful intention of driving its competitors out of the market because Google makes its money
from advertising, and thus, has no high incentive by driving its competitors out of the market.
On the other hand, the European Commission will contend that Google’s dominance in
the smartphone OS market can reduce consumers’ choice options, and thus, harm the consumers
in the long run. The European Commission will also argue that the dominance in the OS market
can make Google has a strong presence in the mobile advertising market. Therefore, Google has
high enough incentive by driving its competitors out of the market by abusing its dominant
market position. Consequently, the European Commission will decide that, even if open-source
software licensing practices are generally pro-competitive, Google’s free open-source licensing
practice of Android OS is potentially anti-competitive, and thus, can subject to antitrust liability
as predatory pricing under Article 101 of the TFEU.
Google will argue that Google’s pre-installation of various Google’s services that are
related to internet advertising such as YouTube is a innovative way to deliver high quality
services to consumers because the built-in services on top of the Android OS can perform more
reliable and higher quality applications. Google will also argue that, because Google allows
third-party applications run on the Android OS, consumers can choose any applications that they

20
want. Therefore, Google will argue that it did not abuse its dominant position in mobile OS
market and the integration of various Google’s services into the Android OS is not anti-
competitive and provide the long term consumer benefits.
On the other hand, the European Commission will assert that Google violate Article 102
of the TFEU by the bundling of services that are related to internet advertising including
YouTube with Android OS because Google abused its dominance in the mobile OS market to
strengthen the position of its market for services that are related to internet advertising. The
European Commission will argue that Google could foreclose competition because it can
manipulate its own services over third parties’ services to outperform the competition. The
European Commission will weighed more on anticompetitive effects/loss of consumer choices
than efficiencies/consumer benefits.
Furthermore, the European Commission will contest Google’s imposition of Android OS
licensing integrated with services that are related to internet advertising is an unlawful exclusive
dealing agreement because Google restricted freedom to choose third party application services.
It is also possible that the European Commission will may order Google to open its application
interface of Android OS to the third party application service provides so that they can compete
with Google’s own services under the same conditions as in Microsoft case.41
The European Commission found that Microsoft had abused its dominant position in PC
operating systems in violation of Article 102 of TFEU by refusing to provide interoperability
information for server operating systems to its competitors on a nondiscriminatory basis.42
Even
if Microsoft argued that the interoperability information is the proprietary secret information, the
41
Microsoft Corp., Commission Decision, supra, note 31.
42
Refusing to provide interoperability information for server operating systems is another allegation that the
European Commission investigated for Microsoft’s violation of antitrust laws in addition to the IE/WME bundling
accusation.

21
European Commission ordered Microsoft to disclose the interoperability information so that its
competitors’ servers could achieve full interoperability with Windows PCs and servers.
Consequently, the European Commission will interrupt in order to protect weaker competitors
and preserve the freedom to compete.
B. Predicting Outcomes of Antitrust Investigations in the U.S.
In Wallace v. IBM Corp. et al.43
, the court ruled that the open-source licensing practice
under the terms of the GPL44
is not an unlawful predatory-pricing conspiracy among open source
developers. The Wallace court reasons that because “the GPL keeps the price of software
covered by the license low forever, there is no risk of monopoly and thus no price-fixing claim.”
Contrary to the EU case, in the U.S., the courts required that the dominant party can recoup its
losses and make the intended monopolistic profit to prove the allegation of predatory pricing of
Google’s free open-source licensing practice of Android OS. The FTC will argue that even if
Google license Android OS for free, it can recoup in the mobile advertising market exploiting its
dominant position the smartphone OS market.
Google will contend that, even if its market reached around 80 % as of 3Q 201345
, it does
not have a monopolistic position in the smartphone OS market because smartphone manufactures
can switch to other OSs. Google will assert that the royalty-free licensing of Android OS can
43
Wallace v. IBM Corp. et al., 467 F.3d 1104 (7th. Cir. 2006).
44
Under the terms of the GPL (GNU General Public License), anyone can view the source code of a computer
program covered by the GPL freely and modify it, as long as those modifications are also made available under the
terms of the GPL.
45
IDC, Press Release, http://www.idc.com/getdoc.jsp?containerId=prUS24442013 (last visited Dec. 10, 2013).

22
bring efficiencies into the market, and thus, it is pro-competitive and can benefit consumers by
providing low price products with reach of applications. Consequently, the FTC will more
weigh on pro-competitiveness of the royalty-free licensing of Android OS by bring efficiencies
into the market, and thus, can benefit consumers by providing low price products with reach of
applications.
Even if Google’s pre-installation of various Google’s services that are related to internet
advertising such as YouTube can benefit consumers, the FTC will argue that Google can abuse
its dominance in the mobile OS market to strengthen the position of its market for services that
are related to internet advertising. Especially, the FTC will argue Google can manipulate its own
services over third parties’ services to make outperform the competition. Thus, even if the FTC
will not ordered Google to disclose the application interface of Android OS to the third party
application service provides, it is possible that the FTC will ask Google to provide some
measures that can guarantee fair competition and prevent the restriction of freedom to choose
third party application services.
IV. Conclusion
In this paper, I provide guidelines for predicting antitrust enforcement on Google’s
Android licensing practices in the U.S. and EU based on the case studies of antitrust enforcement
on Google’s search engine business practices and Microsoft’s PC operating system business
practices. Then, I presented predictions of the outcomes of the European Commission’s and

23
hypothetical antitrust investigations by the FTC on Google’s Android licensing practices based
on the guidelines.
I have tried a little contribution to the efforts of devising measures for avoiding violation
of antitrust laws in developing global internet business by providing details about the potential
arguments regarding antitrust enforcement on Google’s Android licensing practices in the U.S.
and the EU.
V. Bibliography
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24
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25
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26
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