Google has been dragged over the coals by the European Union’s competition watchdog, culminating in the European Commission formally charging Google with abusing the dominant position of its Android mobile phone operating system, having launched an investigation in April last year.

Powerful firms are prohibited from engaging in anti-competitive behaviour under Article 102 of the Treaty on the Functioning of the European Union, or TFEU. European law calls this an abuse of dominant position. The EU courts have long recognised that dominant firms have “a special responsibility not to allow [!their!] conduct to impair genuine undistorted competition”.

To violate EU competition law a firm must be dominant in a particular market — just having a large market share indicates dominance, but isn’t sufficient. Other factors need to be studied, such as barriers to market entry and exit, or switching costs. A market that is easy to enter despite one firm having a large share of it may still be contestable by newcomers.

The conduct of firms with dominant positions is subject to scrutiny for evidence of abusive conduct, such as that aimed at eliminating competitors or exploiting consumers. If any abusive behaviour is found, the European Commission has the power to demand changes to contracts and impose fines of up to 10 per cent of the firm’s annual turnover. In the case of Google, this would be US$7 billion, based on its 2015 revenues. Any such sanctions are subject to review by the EU courts.

The European Commission considers that Google is dominant in three markets: general internet search, licensable mobile operating systems as used on smartphones and tablet computers, and stores for Android apps. It considers that Google controls more than 90 per cent of each market.

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