Google(s goog) requires Samsung, HTC and other mobile device makers that use the Android operating system to reserve prime screen real estate for the search giant’s own applications, according to a new class action complaint filed this week in California.
The lawsuit, filed by the same lawyer who recently won a high profile price-fixing case against Apple(s aapl) and book publishers, claims Google harms consumers by forcing the device makers to sign secret deals known as “MADA’s” — for Mobile Application Distribution Agreements — in order to perpetuate a search engine monopoly.
This Android arrangement has allegedly helped Google achieve an 87 percent market share in the mobile search market (while Yahoo(s yhoo) has under 8 percent), and in turn caused consumers to overpay for Android devices. The lawsuit claims this amounts to a violation of the Sherman Act and other antitrust laws, and seeks unspecified damages on behalf of everyone in the U.S. who owns an Android device.
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(s msft) to feature their search engine instead. As a result, the devices cost more and search innovation is stagnating, the lawsuit claims.
In an email statement, Google disputed the claims:
“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 lawsuit also claims that Google pays Apple “hundreds of millions if not billions” for default search engine status on the iPhone as part of its larger effort to maintain its illegal “tying” arrangements. It also alleges that Google bought the domain name “duck.com” as a way to divert traffic from rival search engine DuckDuckGo, and points to the following comments by Google VP Jonathan Rosenberg to argue that Google has created a self-perpetuating monopoly in search:
So more users more information, more information more users, more advertisers more users, it’s a beautiful thing, lather, rinse, repeat, that’s what I do for a living. So that’s what someone alluded to the engine that can’t be stopped.
Despite the MADA’s and Google’s commanding market share, the lawsuit’s chance of success is far from certain. Under U.S. antitrust law, it is not enough to show that a company has a monopoly — it is also necessary to show that it has abused that monopoly to the detriment of consumers, which is not readily apparent.
Meanwhile, it is also notable that the Federal Trade Commission pursued a lengthy investigation into Google’s search practices, but ultimately decided in early 2013 not to take Google to court. The investigation, however, focused primarily on what Google does with its search rankings, and not on Android and the mobile market.
Here’s a copy of the complaint with relevant parts underlined. It contains a purported copy of a “MADA” at the end.
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