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Mobile Matters in Reviews of Google Antitrust Violations

With the Federal Trade Commission and the European Commission nearing the end of the investigative stage in their investigations of allegations that Google’s business practices violate consumer protection and competition laws, it is very important to understand the role mobile plays in the Internet search and services marketplaces.

First, it is important to understand that Google is the world’s largest Internet advertising company. The company’s activities, whether in the desktop environment or in mobile computing, are aimed at attracting traffic to display advertisements and thereby generate revenues.

When it comes to smartphones and other wireless devices, Google dominates in mobile search and mobile search advertising with market shares in both categories exceeding 96%. Google was able to achieve this in large part because it offers the Android operating system for free, thereby undercutting existing smartphone OS suppliers. This is a strategy Google finances with its dominant (desktop) search advertising revenues derived from business practices currently under scrutiny for potential antitrust violations.

In less than four years, Google has taken over the market for smartphone operating systems in a record time, with Android the OS in a majority of smartphones shipped in the first quarter of 2012. Google is fond of saying that Android is an “open” platform, but the search giant uses “compatibility as a club,” as the New York Times has quoted an Android manager saying. Danny Sullivan, editor-in-chief of Search Engine Land recently pointed out, “A funny thing happened to the openness of Android as years have passed. It started to feel less open.”

Sullivan also pointed out that Google worked to prevent handset manufacturers from using location-based services from Skyhook Wireless. Locking out Skyhook and requiring all other innovative companies to collect payment through Google’s app marketplace to gain access to the Android ecosystem hurts consumers, deprives them of choice, and the benefits that only real competition delivers. It also makes Google less susceptible to market demands for greater consumer privacy or control over the use of their personal information.

Google Search and Google Play (formerly Android Market) apps are preloaded onto all Google-certified Android smartphones. Importantly, at least since Android version 2.2 Google requires wireless carriers and handset makers to use Google Search as the default search service in order to be a branded “Android” phone, which is necessary to include Google Play, among other things. Such a strong economic incentive makes it extremely difficult for other search services to gain access to the search default setting on Android devices.

And when it comes to search results, like in desktop search, mobile search results point to Google-owned verticals. Of course, mobile search results also list more of Google’s ads, too. Links to competing verticals are thereby effectively demoted. If links to competing services appear at all, they are farther down the search results page, where click rates are much lower, particularly with mobile search results.

Google’s abuse of its dominance in mobile search threatens to deprive consumers of new providers and innovations in mobile search and services. Effective, legally binding and enforceable remedies are needed to restore a truly competitive landscape to this crucial market.