Google's $5B antitrust fine similar to Apple's e-book, App Store woes

Posted:
in General Discussion edited July 2018
Apple can tell the folks at Alphabet just how long these cases can drag on, as it has its own experience in such matters.




Google has been fined $5 billion for breaking antitrust rules but this isn't the first time the European Commission has imposed fines on technology firms. It's not even the first time it's fined Google: last month it ordered the company to pay $2.7 billion in a separate case. Aside from the sums involved, these cases also result in protracted legal appeals -- and Apple knows all about that.

In 2011, just a year after Apple launched the iBooks Store, it faced a class action lawsuit and antitrust investigations by both the European Commission and the US Department of Justice. It was over whether Apple and various book publishers had colluded over pricing.

That short description hides a storm of contention, though, which is one reason the case went on for as long as it did.




For the iBooks Store, Apple proposed and then implemented what's called the agency model of pricing. Publishers were to set the price of books and Apple would not lower them. It wanted e-books to sell for $12.99 or $14.99, typically higher than on Amazon, and then always take the same 30 per cent cut it does now from the App Store.

In his email negotiations with publishers, Steve Jobs was particularly bruising about how Amazon works. He told James Murdoch of News Corp and publisher HarperCollins that the Kindle system wasn't unsustainable.

"As I see it, [HarperCollins can] keep going with Amazon at $9.99," said Jobs. "You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70 per cent of $9.99. They have shareholders too."




HarperCollins was persuaded and agreed to have its books on the iBooks Store along with all the major US publishers. So from January 27, 2010, readers could buy books from the new iBooks Store or from Amazon's Kindle store as they had before.

"Our strong suspicion is that [Apple's plan] was part of a global strategy to restrict competition at retail level and achieve higher prices," European Commission's Joaquin Almunia told The Guardian at the time. "Whatever the publishers' initial concerns about retail prices, dealing with this situation through collusion is not acceptable."

The US Department of Justice similarly seemed to ignore that anyone could choose to buy the cheaper Amazon Kindle versions of e-books. Apple CEO Tim Cook described the whole case as "bizarre."

Ahead of a US court appearance on the case, he said: "We've done nothing wrong there and so we're talking a very principled position on this. We're not going to sign something that says we did something we didn't do. So we're going to fight."

Speaking in response to the European Commission's ruling, most publishers released statements just saying they would comply with the court's requirements. Penguin Books, though, went further and said: "Our position has been -- and remains -- that we have done nothing wrong."

Penguin was then in the process of being acquired by Random House and said that it was complying for pragmatic reasons. "As a practical matter, we are settling [the case] in the interests of clearing the decks before the new company is established."

While that officially concluded the European Commission's investigation into e-book price-fixing, the similar US Department of Justice one wouldn't end for another five years. In 2016, Apple lost and agreed to pay $450 million.

However, that wasn't the end either for as recently as this May the company was still working to conclude the legal case. Apple has informed shareholders of its plans for compliance and a fairness hearing is scheduled for July 20 -- seven years after the case began.

Google is already some years down the line with its most recent case. The European Commission began investigations in April 2015. The issue here was whether the company forced smartphone vendors to install Google apps as a condition of being able to access the Google Play Store.

This wasn't a case of vendors having to install Google's equivalent of Apple's App Store app. It was that they had to also take Google Chrome and Google Search.




Google makes the Android operating system, of course, but many vendors tailor it to differentiate their phones from rivals. With Google, vendors and even cell carriers all having a say in what goes on a particular handset, Android users are typically faced with choosing from multiple different tools that essentially do the same job.

If you have three rival apps on your phone, you are probably going to pick the one you recognize, so Google Chrome and Google Search have an advantage.

That's what the European Commission thinks, claiming that the practice is denying these rivals the chance to innovate.

The previous Google antitrust fine was similarly to do with the company favoring its own products. That time it was specifically to do with search results and promoting its own services for price-comparison shopping.

Google is expected to appeal both cases.

More going forward for Apple

In the meantime, Apple is not clear of legal issues either. Another case begun in 2011 was last month taken up by the Supreme Court. In Apple Inc v. Robert Pepper, the court is examining whether the company has created an unlawful monopoly over iOS apps by requiring them to solely be sold via the App Store.

That's not how the case began, though. Originally Robert Peppe and others claimed that Apple had locked out alternative third-party apps in order to drive up iPhone prices. They also said that Apple had partly stifled competition by signing an exclusivity deal with AT&T, originally the iPhone's sole carrier in the US.

Apple beat that class action in 2014 -- but the decision was reversed in 2017.

While Apple is again trying to convince the Supreme Court to dismiss the case, the current complaint has narrowed down to this issue of the App Store.

It's similar to the iBooks situation in that it ignores the fact you can buy apps from other places too -- though you have to either jailbreak your iPhone or go buy an Android device.

It's also similar in how this one is going to run and run even longer than it has so far. The Supreme Court is pondering technicalities of law and if it decides to refuses to dismiss it, the case will then go back to a lower court to be argued over.

Comments

  • Reply 1 of 11
    nunzynunzy Posts: 662member
    It's about time that they go after Google. Usually it's all about blaming Apple.
    Muntztallest skilwatto_cobra
  • Reply 2 of 11
    bellsbells Posts: 125member
    These cases are not similar at all and the assertion that they are shows a lack of understanding concerning anti-trust Law.  


    Anti-trust is about protecting the consumer by ensuring fair competition. Europe’s rules and the US rules differ, but the principles are the same.  They tend on focusing on preventing monopolists from abusing their power to enter new markets or squeezing out competition.

    In Europe Google has a monopoly when it comes to search and it’s phone operating system. Third party phone makers  have no realistic choice, but to use Android. Google is using this dominance to ensure its other services like email, search, and itsbrowser stay entrenched by forcing hardware manufacturers to bundle these services or else not get a license to use Android.

    microsoft did the same thing with Windows. Pc makers would get very unfavorable licensing terms or no license at all  if they didn’t bundle and make Explorer the default. It put the then dominant Netscape out of business. 

    Apple got a raw deal with e-books. Apple had no market power to force publishers to do anything. The system Amazon favored allowed it to set the prices of ebooks thereby often selling the ebooks at a loss to publishers. Further, Amazon has the monopoly in online book sales and was using that monopoly to force publishers to give favorable terms for ebooks. The government screwed that one up. That is why Apple felt confident it would win at trial.

    with the App Store Apple doesn’t have a monopoly for phone hardware sales. If you don’t like the App Store buy a phone made by somebody else.

    Muntzviclauyycradarthekatchasm[Deleted User]darren mccoybrisancewatto_cobrapropodjony0
  • Reply 3 of 11
    78Bandit78Bandit Posts: 232member
    "The US Department of Justice similarly seemed to ignore that anyone could choose to buy the cheaper Amazon Kindle versions of e-books. Apple CEO Tim Cook described the whole case as 'bizarre.'"

    I seem to remember the agency agreements Apple coerced the publishers into simultaneously adopting provided that the price on Amazon was the same as the price on Apple.  I think the contract actually required the publishers to price Apple iBooks at most equal to the lowest price the publishers promoted through any other service like Kindle or Kobo.  There were no cheaper Kindle versions of e-books under the agency agreements and prices rose considerably, hence the holding of collusion to the detriment of consumers between Apple and the publishers.
    [Deleted User]
  • Reply 4 of 11
    Mike WuertheleMike Wuerthele Posts: 4,415administrator
    bells said:
    These cases are not similar at all and the assertion that they are shows a lack of understanding concerning anti-trust Law.  


    Anti-trust is about protecting the consumer by ensuring fair competition. Europe’s rules and the US rules differ, but the principles are the same.  They tend on focusing on preventing monopolists from abusing their power to enter new markets or squeezing out competition.

    In Europe Google has a monopoly when it comes to search and it’s phone operating system. Third party phone makers  have no realistic choice, but to use Android. Google is using this dominance to ensure its other services like email, search, and itsbrowser stay entrenched by forcing hardware manufacturers to bundle these services or else not get a license to use Android.

    microsoft did the same thing with Windows. Pc makers would get very unfavorable licensing terms or no license at all  if they didn’t bundle and make Explorer the default. It put the then dominant Netscape out of business. 

    Apple got a raw deal with e-books. Apple had no market power to force publishers to do anything. The system Amazon favored allowed it to set the prices of ebooks thereby often selling the ebooks at a loss to publishers. Further, Amazon has the monopoly in online book sales and was using that monopoly to force publishers to give favorable terms for ebooks. The government screwed that one up. That is why Apple felt confident it would win at trial.

    with the App Store Apple doesn’t have a monopoly for phone hardware sales. If you don’t like the App Store buy a phone made by somebody else.

    I don't think you're proving the point you think you are.
    chasmmuthuk_vanalingam
  • Reply 5 of 11
    I hope Google starts making the manufacturers pay for Android.
  • Reply 6 of 11
    ElCapitanElCapitan Posts: 206member
    Well deserved! I stand with the EU on this.  - That company is nothing but a leach, pilfering every scrap of information they can find about a person only to sell it. 
    watto_cobra
  • Reply 7 of 11
    brakkenbrakken Posts: 677member
    I still don’t see the similarity, umless it’s in the ‘anti-trust’ word. These cases are completely different. Goog’s is much more like Microsoft’s multiple anti-trust cases: preventing any competition in a market. iBooks never prevented market competition. Apple was forced to use a different model, and then had some asshole use his position to try gettingt scoops out of staff ie abusing his position. You’re saying Apple can give a heads up to Goog staff on that? Another trashy article from AI. How about some rationality? Please contact Dilger when writing more than a paragraph.
    [Deleted User]brisance
  • Reply 8 of 11
    maestro64maestro64 Posts: 4,520member
    The whole issue with the books and Apple was the fact that Apple was allowing the books seller to set the price on IBooks, This was basically breaking the wholesaler/distributor business model that existed for years. There is case law on the fact once a company sells their product into the wholesale/distribution market they are not allow to have any say over the selling price to the end user. The wholesaler/distributor is free to set the price as they see fit and have a different price for different customers. The books companies did not like the fact Amazon was loosing money to sell books. 

    Apple gave the Book companies a way out of the hole that Amazon created in the market. The two things Apple did that Amazon and the government did not like, one was the MFN clause which said that Apple pay not higher than what Bookseller sold to Amazon or others, This is not illegal, it is done in purchasing contracts all the time. Two the selling price on Ibooks would be no higher than the lower price offered by others like Amazon. These two things together was see as driving pricing up, even before it actual happen since Book seller could chose not to sell E-books only on Apple platform. 

    This is not what is going on with the App store and search with Apple, Apple is like any other retail store in the world, they collect a % of all sales going through their store. From the Google case it sounds like Google was incentivizing hardware makers to only install google apps on their phones even though they could install anyone's app's. This is exactly what Microsoft was doing in the 90's and got in trouble for.
    radarthekatwatto_cobra
  • Reply 9 of 11
    jbdragonjbdragon Posts: 2,071member
    I don't see Google as doing anything wrong. The EU is out to steal billions more from yet another American company to help pay for their failed policy's!!!

    Let me put it like this. ANYONE can get the open version of Android and do ANYTHING they want with it. This is in fact what Amazon has done. They have their own app store and services. This is in fact what they do in CHINA as Google has zero presence in China!!!

    Google has every right to require their services be front and center on any phones using Android. After all that's part of the deal for getting and using the complete version of Android for FREE!!!!!!!!! After all it costs Google Millions of dollars to work on and Improve Android, plus all the FREE Google services, all the Server Farms around the world to make it all work, etc. NONE of these company's are paying for any of that.

    You know what this is really about? Think about it a little bit,...... Android has been a race to the bottom in profits. Most making Android phones are making very little from them, and then are expected to support them after they've been sold which costs more money. Many of them end up installing 3rd party crap-ware to make a little extra money. Something that has never been done on a iPhone. The other is Branding. How much to they get having AT&T or Verizon, etc on the outside of the device? Again, something never done with a iPhone. Only thing on an iPhone it's Apple's LOGO on the back. Never AT&T or Sprint or anyone else.

    Now Apple makes their money selling Hardware. So it's going to cost more money. Also Apple doesn't have competition from others making iOS hardware. No real race to the bottom like Android. Google is making their money by Ads. Mostly Google Search.

    Now tell me, what happens when Company's get rid of Google Search and Google Chrome and replace it with whatever else? Well first thing, Google stops making the money they were from that user(s). Money that pays for them to work on Android and all the FREE services.

    Lets take things to a whole higher level. Google Pays Apple a lot of money to be the Default Search Engine. So if I was LG, or Samesung, or whoever, wouldn't I demand money from Google to be the Default Search? After all you are no longer required for them to be on Android!!! Maybe even the Default Browser? I know I would!!!!! Maybe LG gets Microsoft to pay them to make BING the Default search and Edge as the Default browser!!!!

    So now you have these comings getting money to be the default Search and browser and who knows what else. Google is getting no money from those phones. Yet they are still demanding FREE Support for other Google services like Google Maps and maybe Google's App store. These things cost MONEY to put up and run, and Mapping earth is not cheap. You think they'll pay some company like Garmin or TomTom for Maps? Or just expect Google to give all this other stuff to them for free?

    Remember, You can all ready get the open FREE forked version of Android and do ANYTHING you want. Again, Amazon is doing this and so are a number of Chinese company's for phones there. Nothing is stopping any of these other companies from doing the exact same thing!!!! But see if they have to pay a lot of money for some things, just to get money from company's for other things and you break even or are in fact losing more money. That's not good. That won't work for their plans to make more money.

    So Google has a couple options. Only support and Sell the Pixel phones in the EU. Anyone else that wants to sell phones in the EU can do what they're doing in China. Using the forked version of Android. Having their own App Store and other services. Google being closed like Apple, means no 3rd party selling Full Android phones and so they can't demand anything from Google. They are cut out of the loop completely.

    The other thing that could be done is say, Ok, you can delete Google Apps, but now you have to PAY to put Full Android on your phone. We'll give you support to the App Store and Security Updates, That's it. Anyone who buys the phone and wants to use Google's Services can start paying Google $20 or something per year. Now you're paying, it's no longer Ad supported like it was. After all, we don't want people paying for something they aren't going to use, right!!!

    Google pulled out of China, a 1.4 billion person market. The EU, around 500,000. Google is not going to give them what they want if Google is not making a profit. The simple fact is, You can as a owner delete all the Google Apps, and put anything on you want and make it your default. You can turn a Android phone almost into a Microsoft phone. You can replace Google Search with BING as your Default. You can replace Chrome with the Edge Browser as your Default. You can have Cortana over Google Voice, etc, etc, etc. There is nothing stopping anyone.

    So either the people in the EU are just DUMB and LAZY and really just Children that they need the Parents (EU) to go after Google. Or people in the EU are happy with Google and their Services and don't want to change to anything else!!! Trust me, I'm not a fan of Android for a number of reasons, which is why i have iOS devices like the iPhone. This is just really more EU B.S.

    What's next, the EU demanding Apple allow iOS to be used for 3rd party phones? I think the EU is just crazy enough to do that at some point.
    edited July 2018 muthuk_vanalingamdarren mccoywilliamlondon
  • Reply 10 of 11
    jbdragon said:
    Google has every right to require their services be front and center on any phones using Android. After all that's part of the deal for getting and using the complete version of Android for FREE!!!!!!!!! After all it costs Google Millions of dollars to work on and Improve Android, plus all the FREE Google services, all the Server Farms around the world to make it all work, etc. NONE of these company's are paying for any of that.

    So you know they have this "right" in law do you? Google (or Alphabet) chose this business model of giving everything away for free in return for data harvesting. Outside of the US (in most of the world actually), there are laws against being anti-competitive and abusing a monopolistic position. If google's services are truly as good as they believe they are, there would be no need to force them into the licencing agreement. Users would actively choose them and they would be complying with the law. 
  • Reply 11 of 11
    rcfarcfa Posts: 761member
    It's similar to the iBooks situation in that it ignores the fact you can buy apps from other places too -- though you have to either jailbreak your iPhone or go buy an Android device.

    Well, jail breaking isn’t an alternative, as it’s supposed to be impossible and is actively countered by Apple.
    It would be different, if Apple had settings similar to on the Mac where you can as administrator lower the security profile to install apps and drivers not “properly” signed, then that would be a different issue.

    However, Apple went even so far as to lower the utility of devices after they were purchased. If you bought an iOS device because it made a convenient network admin tool, you were surprised by newer versions of iOS blocking access to MAC addresses, making many a utility less useful for admins.

    Similarly, Apple imposes its version of morality etc. on users by deciding what is or isn’t appropriate content. While it’s fine for them to decide what they want to be associated with their name/brand, it’s not OK if there are no alternative and Apple in essence becomes a censorship authority.
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