Google Loses Most of Appeal of EU Android Decision

The decision came shortly after a federal judge in the United States District Court for the Southern District of New York on Tuesday denied the bulk of Google’s motion to dismiss the claims brought by a coalition of states led by Texas alleging Google abused its dominance in digital advertising tools, allowing the case to proceed to the discovery stage and ultimately toward trial.

The EU ruling means Google will very likely continue applying some of the changes it has made since to comply with the 2018 decision, including offering users in the EU a choice screen of different search engines. The Android case was the biggest of three antitrust fines totaling more than $8 billion that the EU has levied against Google since 2017—and it focused on mobile phones, one of the company’s fastest growth areas.

The ruling is also a vote of confidence for the European Commission, the bloc’s antitrust enforcer, which has been aggressive in targeting big U.S. tech companies and other firms over concerns about anticompetitive behavior. Last week, the Commission blocked

Illumina Inc.’s

$7.1 billion merger with cancer-test developer Grail Inc., two U.S. companies.

In the U.S., Judge P. Kevin Castel’s decision was closely watched because the Justice Department has been preparing a similar antitrust case against Google over its position in the advertising technology industry.

In both cases, Google did score some partial victories.

In the EU, the court annulled one element of the decision that alleged Google had broken competition laws by making revenue-sharing payments to manufacturers to exclusively pre-install only Google Search, not competing search engines. As a result, the court reduced the overall fine by about 5% to €4.13 billion, about the same in dollars.

“We are disappointed that the court did not annul the decision in full,” a Google spokesman said, adding that Android has created more competition in the mobile phone industry. The company has previously said it should be able to recoup the money it spends developing Android by encouraging manufacturers to install Google Search.

The court’s decision can still be appealed to the EU’s top court, the Court of Justice. Google said it would review the decision before deciding whether to appeal.

In the U.S., the judge tossed out claims pertaining to Google’s “Jedi Blue” ad agreement with rival Facebook—now known as Meta Platforms Inc. The plaintiffs alleged the deal was part of a plan to “kill” an alternative ad technology called header bidding that Google executives feared would harm its business. He also knocked down the plaintiffs’ claim that Google’s Accelerated Mobile Pages, or AMP, technology was part of an anticompetitive plot to curtail header bidding, among several other claims from the plaintiffs.

In a blog post Tuesday in response to the U.S. decision, Google called the Jedi Blue allegations the “centerpiece” of Texas’s case, and cited the various allegations that were tossed out as evidence that the case was “deeply flawed.”

In a statement on Wednesday, Texas Attorney General

Ken Paxton

applauded the judge’s decision, calling it “a major step in the right direction to make our free market truly free.”

The 2018 EU Android case has been significant because it focused on Google’s efforts to increase its mobile business, but also because it underscored Google detractors’ arguments that antitrust enforcement takes too long. By the time the commission had issued its decision, those detractors said Android had already helped make Google Search as dominant on mobile devices as it had been on desktops.

Shortening the time it takes to force companies to make changes in the market was a major reason that the EU pursued new digital-competition legislation called the Digital Markets Act, passed earlier this year. The new law will eventually make it illegal for Google and other very large tech companies to engage in a range of practices that the bloc considers to be anticompetitive, including some of the practices the commission has previously issued fines for.

The 2018 decision focused in large part on how Google bundled together the licensing of its apps for Android devices. In that decision, the EU ordered Google to stop requiring smartphone manufacturers to pre-install the company’s search app and Chrome web browser as a condition for licensing Google’s popular Play app store. It also said the company would have to allow manufacturers to install Google apps on systems that run alternative versions of the Android operating system.

The EU argued Google’s practices had made it harder for potential competitors to emerge and were part of a strategy that was meant to ensure that Google’s search engine would remain dominant as consumers began using search engines on their smartphones.

Google quickly appealed the 2018 decision but also had to comply with it while its appeal was under way. Google changed its licensing deals for manufacturers and implemented what it called a Choice Screen on Android devices, allowing users of new phones in the EU to select alternate default search engines. So far that choice screen doesn’t appear to have had an appreciable impact on the market share for Google Search in Europe.

Google’s appeal of the case centered in part on whether its Android operating system is dominant, arguing that the Commission was wrong to consider Android devices as their own market without seeing them as competitors to

Apple’s

iPhone and iPad devices. The company also argued that requirements to bundle Google Search with its app store weren’t anticompetitive, and that restrictions on use of other versions of Android were needed to ensure Android phones would be compatible with the company’s apps. The court dismissed Google’s arguments on all those points on Wednesday.

Google also argued that the revenue-sharing agreements that required phone makers not to pre-install other search engines covered less than 5% of the market and didn’t have an impact on competitors. The court on Wednesday sided with Google, ruling that the Commission didn’t prove its case on that point.

It is the European Commission’s second court victory against Google in as many years. Last year, Google lost its appeal of a separate, $2.42 billion antitrust fine over allegedly directing users of its search engine to Google’s own comparison-shopping ads at the expense of other services. A second appeal to the EU’s top court is pending.

Google was also fined $1.49 billion in 2019 for limiting how some websites could show ads that were sold by the company’s rivals. Its appeal of that case is still under way.

Google continues to attract scrutiny from antitrust regulators in the EU. Last year, the commission opened a formal antitrust investigation into allegations that Google abuses its dominant position in advertising technology. Google said its ad-tech tools are competitive and that it would work with the commission to resolve its questions.

The Wall Street Journal reported earlier this year that Google had offered concessions to try to ward off a potential antitrust lawsuit in the U.S. targeting the company’s ad-tech business.

The Wall Street Journal reported earlier this year that Google had offered concessions to try to ward off the Justice Department’s antitrust lawsuit targeting the company’s ad-tech business, but people familiar with the matter say the offer wasn’t likely to satisfy regulators.

Write to Sam Schechner at sam.schechner@wsj.com and Kim Mackrael at kim.mackrael@wsj.com