Google Found Guilty in Russia Antitrust Probe -- Update
September 14 2015 - 4:10PM
Dow Jones News
By Olga Razumovskaya And Alistair Barr
MOSCOW-- Google Inc. has been found guilty in a rapid Russian
antitrust probe, a spokesperson for the country's antitrust
regulator told The Wall Street Journal.
In February, Russia's Federal Antimonopoly Service opened a
probe into Google for alleged anticompetitive practices related to
how the company bundles apps with its Android mobile operating
system.
The company was found guilty of "abusing its dominant market
position," but not of "unfair competition practices," the regulator
told The Wall Street Journal.
The Russian agency will have 10 business days to issue its
ruling on the case in full. "We haven't yet received the ruling,"
Google's Russia spokeswoman said. "When we do, we will study it and
determine our next steps."
Google has been tied up for several years in an antitrust probe
in Europe. The Russian regulator's decision, however, comes just
under seven months after the probe was initiated.
The probe follows a complaint from Russia's biggest Internet
firm, Yandex NV, which accused Google of unfair practices. Yandex
said that it "welcomes the positive decision by FAS which has
figured out this complicated case and having studied the proof, has
confirmed Google's violations."
A spokesman for Yandex said the company "believes that [the] FAS
decision will help restore competition on the market."
Following the ruling, Google faces possible mandates to change
its agreements with phone and other device manufacturers to
accommodate the concerns of Yandex and other developers. Google
could also face an as-yet-unspecified fine.
Google's share of Russian online search is lower than in most
over countries, with Yandex controlling more than half of the
market, according to data from Liveinternet.ru. So the adverse
Russian antitrust ruling may not have a big impact on Google's main
search advertising business.
"The EU is a much bigger market for Google and their market
share is much larger there so you have to take those comments more
seriously than Russia's," said Ken Sena, an analyst at Evercore
ISI. "For Yandex this is probably more of an event than for
Google."
However, Google has been gaining share and its Android operating
system has more than a 60% market share in the country, according
to data firm Statista Inc. Android is an important distribution
tool for Google Search, especially as more people get online with
smartphones rather than desktop personal computers.
The ruling comes as Russia and several other countries have
cracked down on U.S. Internet companies, launching investigations
into their market power and introducing new regulations that give
them more access to and control of information and user data stored
by these companies.
Google shut its engineering office in Russia in late 2014 ahead
of a controversial law requiring Internet companies to store
Russians' personal data within the country's borders. Some U.S.
politicians and technology executives have warned that this may be
about protecting homegrown technology companies or limiting
dissenting political speech and protest online.
Still, Monday's decision highlights regulation as one of the
biggest risks facing Google. The company has been in the cross
hairs of antitrust regulators for more than five years. In the
U.S., the company settled with the Federal Trade Commission in
early 2013 and agreed to change some business practices giving
advertisers more flexibility to use other ad platforms along with
its main search advertising service AdWords.
Later that year, South Korea's Fair Trade Commission ruled
Google had not harmed competition by requiring smartphone makers
that offer Android to load Google's search engine on their
products.
The company is in the midst of an antitrust investigation by the
European Union, which charged the company with abusing its
dominance of the European online search market to favor its own
shopping search service over those of rivals. The EU also launched
an investigation of Android, including the rules Google imposes on
phone makers to get access to Google services and apps.
Any phone maker can use Android. But if a phone maker wants to
use popular Google services like Gmail or Maps, or wants access to
Google's Play app store--with millions of apps that make phones
more useful--it must preinstall a package of these Google apps.
This helps Google distribute its services widely to the more than
one billion Android device users, but it can also mean phones come
loaded with some apps that some users and phone makers may not want
on the gadgets.
Google said in February that device makers "are free to install
the apps they choose, and consumers always have complete control
over the apps on their devices."
Several device manufacturers that pre-install Yandex apps
notified the company in 2014 that they were "no longer able to
pre-install Yandex services," such as Yandex's search and map apps
on Google's Android devices, prompting Yandex to make a complaint
to the antitrust authorities.
Google's bundling practices have put Yandex "under threat," the
company said, hurting its search share on mobile devices in favor
of Google. Yandex shares soared over 7% on the Nasdaq following the
regulator's decision.
Write to Olga Razumovskaya at olga.razumovskaya@wsj.com and
Alistair Barr at alistair.barr@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 14, 2015 15:55 ET (19:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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