A class action complaint was filed against Google yesterday for using secret deals by exploiting their Android monopoly by forcing smartphone OEMs such as Samsung and others to make Google search engine the default choice on their mobile devices. The lawsuit claims that this move by Google harms consumers by making the devices cost more. Because, Apple receives over billion dollar from Google for making Google as the default search engine. If any Android OEM wants to make similar deal with Microsoft or Yahoo for making default search engine, they will lose access to Google Apps and Google Play Store in Android.
Under the secret MADA’s, device makers must allegedly include all of the following applications: Set-up Wizard, Google Phone-top Search, Gmail, Google Calendar, Google Talk, YouTube, Google Maps for Mobile, Google Street View, Contact Sync, Android Market Client (not products downloaded from Android Market), Google Voice Search, and Network Location Provider.
The theory of the case is that, under the MADA’s, Google requires any device maker who wants to include popular apps for YouTube and Google Play to also include Google as the default search tool — this, in turn, means that the device makers can’t realistically accept payments from other companies like Microsoft to feature their search engine instead. As a result, the devices cost more and search innovation is stagnating, the lawsuit claims.
Google has now responded the following,
“Anyone can use Android without Google and anyone can use Google without Android. Since Android’s introduction, greater competition in smartphones has given consumers more choices at lower prices.”
The case could become interesting if Microsoft and Yahoo joins the lawsuit. What do you think?
Find full press release below,
SEATTLE – 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 lawsuit, filed in the U.S. District Court for the Northern District of California, alleges that 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.
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’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,” said Steve Berman, attorney representing consumers and founding partner of Hagens Berman. “Simply put, there is no lawful, pro-competitive reason for Google to condition licenses to pre-load popular Google apps like this.”
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.
“The more use an internet or mobile search engine gets, the better it performs based on that use,” Berman said. “Instead of finding a way to legitimately out-compete other internet and mobile search providers, they instead decided to choke off competition through this cynical, anti-consumer scheme.”
The complaint notes that Google’s monopoly not only suppresses its competition but also keeps the company itself from improving.
“This comes down to a combination of Google’s power in the U.S. general mobile search market and their power in the realm of tablet and smartphone manufacturers,” Berman said. “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.”
According to the lawsuit, Google’s MADAs are contracts in restraint of trade that are designed to maintain and extend its monopolies in general search and handheld general search.
The lawsuit claims Google is in violation of a variety of federal and state antitrust laws, including the Sherman Act, the Clayton Antitrust Act, California Cartwright Act and California Unfair Competition Law.
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.
The lawsuit seeks to represent all U.S. purchasers of any Android OS mobile telephone or tablet as to which Google and the manufacturer of such device has entered into a contract or contracts, including the MADA, by which Google has conditioned the right to pre-load any application from a suite of Google applications on to manufacturer’s mandatory acceptance.
The lawsuit seeks damages for individuals who have purchased these devices at an artificially high price due to Google’s alleged price-fixing, anticompetitive restrictions.