Class Calls Google an Abusive Monopolist

SAN JOSE (CN) - Google uses its Android system to abuse its monopoly in search engines and handheld wireless devices, a class action antitrust lawsuit claims in Federal Court.

Lead plaintiffs Gary Feitelson, of Kentucky, and Daniel McKee, of Iowa, sued Google under the Sherman and Clayton Acts, the California Cartwright Act and California's unfair competition law.

They claim Google is a monopolist in general search engines and in handheld search devices, and that it restrains competition in markets where there already are high barriers to entry. It does this in part by requiring distributors to "preload" Android phones with Google suites, the class claims.

After describing Google as a monopolist in these two areas, the complaint states:

"Having recognized that personal computing was moving away from the desktop and that Internet searches increasingly are being done on smartphones and tablets, Google purchased the Android OS in 2005. By giving away the Android OS itself for free, Google rapidly built an enormous user base in the United States.

"But Android itself only enables the basic functionality of a handheld device; what brings mobile phones and tablets to life are applications. Some of the most popular handheld device applications, including the YouTube video app and Google Play (which enables shopping in Google's app store) also are Google properties. As Google well knows, customers expect to see these apps on their Android devices. So Google, by way of secret Mobile Application Distribution Agreements ('MADA'), allows Android OS device manufacturers to pre-load a suite of Google apps including the YouTube app and Google Play client, among others, onto a phone or tablet - but only if the manufacturer pre-loads onto prime screen real estate all of the apps in the suite, whether the manufacturer wants them or not. Because consumers want access to Google's products, and due to Google's power in the U.S. market for general handheld search, Google has unrivaled market power over smartphone and tablet manufacturers.

"Among the suite of apps covered by Google's MADAs is the Google Phone-top Search app - a widget for conducting web searches via Google's search engine. This case arises because of recent revelations that Google has restrained trade and abused its market power by requiring distributors to install the Google Phone-top Search app and to 'set' it 'as the default search provider for all Web search access points,' including the Internet browser, on phones or tablets subject to its MADAs. As Google well knows, consumers do not know how to switch, nor will they go to the trouble of switching, the default search engine on their devices, so this practice is a highly effective means of ensuring that consumers will use Google search to conduct general Internet queries rather than one of its competitors' search products. And Google badly wants default search engine status because it results in more paid search-related advertisements, which are the source of most of its billions and billions of dollars in annual profits.

"If device manufacturers bound by Google's distribution agreements were free to choose a default search engine other than Google, the quality of Internet search overall would improve because search engines become more effective as they process more and more search queries. With default search engine status providing access to more searches, Google's competitors in search would become more effective as they processed more queries, and this competition would push Google to improve as well. Also, if Google's rivals were allowed to compete for default status, they would do so in part by offering to pay device manufacturers for that status on various Android smartphones and tablets. Such payments to device manufacturers, maximized by way of competitive bidding, would lower the bottom-line cost associated with production of the covered devices, which in turn would lead to lower consumer prices for smartphones and tablets.

"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. Simply put, there is no lawful, pro-competitive reason for Google to condition licenses to pre-load popular Google apps on making its search product the default search engine on covered devices. By insisting on these contracts with device manufacturers, to the detriment of competition and consumers, Google has violated the Sherman Act, the Clayton Act, California's Cartwright Act, and California's Unfair Competition Act. Plaintiffs seek an injunction prohibiting Google from forcing its unlawful distribution agreements on device manufacturers, and they seek monetary relief to restore the quantum of money they overpaid for their Android handheld devices as a result of the competition foreclosed by these contracts."

Although Apple is not a defendant in this case, the plaintiffs claim that "Google further forecloses competition in the market by entering into exclusive contracts with Apple.

"As part of its strategy to maintain and extend its monopoly in handheld general search, Google also has entered into exclusionary agreements with the largest non-Android phone manufacturer, Apple Inc. ('Apple').

"Google has paid Apple hundreds of millions of dollars, if not billions of dollars over the years, to act as the default search engine on Apple iPhones, iPads, and iPods. It is estimated that it will pay Apple over a billion dollars in 2014 to retain this status. ... This arrangement forecloses competing search engine companies from the best opportunity to break Google's stranglehold on the handheld general search market.

"No pro-competition justification exists for the exclusion of rival search engines from acting as the default search engine on Apple mobile devices." (Citation omitted.)

The plaintiffs seek class certification, damages and an injunction.

They are represented by Jeff Friedman with Hagens Berman Sobol & Shapiro, of Berkeley.

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