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Market Definition in the Google Android Case http://lib.ulg.ac.be http://matheo.ulg.ac.be Market Definition in the Google Android Case Auteur : Lamesch, Joé Promoteur(s) : Gautier, Axel Faculté : HEC-Ecole de gestion de l'ULg Diplôme : Master en sciences économiques, orientation générale, à finalité spécialisée en Economic Analysis and Public Governance Année académique : 2015-2016 URI/URL : http://hdl.handle.net/2268.2/1812 Avertissement à l'attention des usagers : Tous les documents placés en accès ouvert sur le site le site MatheO sont protégés par le droit d'auteur. Conformément aux principes énoncés par la "Budapest Open Access Initiative"(BOAI, 2002), l'utilisateur du site peut lire, télécharger, copier, transmettre, imprimer, chercher ou faire un lien vers le texte intégral de ces documents, les disséquer pour les indexer, s'en servir de données pour un logiciel, ou s'en servir à toute autre fin légale (ou prévue par la réglementation relative au droit d'auteur). Toute utilisation du document à des fins commerciales est strictement interdite. Par ailleurs, l'utilisateur s'engage à respecter les droits moraux de l'auteur, principalement le droit à l'intégrité de l'oeuvre et le droit de paternité et ce dans toute utilisation que l'utilisateur entreprend. Ainsi, à titre d'exemple, lorsqu'il reproduira un document par extrait ou dans son intégralité, l'utilisateur citera de manière complète les sources telles que mentionnées ci-dessus. Toute utilisation non explicitement autorisée ci-avant (telle que par exemple, la modification du document ou son résumé) nécessite l'autorisation préalable et expresse des auteurs ou de leurs ayants droit. Market Definition in the Google Android Case Jury Mémoire présenté par Promoteur : Joé Lamesch Axel Gautier Lecteurs : En vue de l’obtention du diplôme de Master en Nicolas Petit sciences économiques Sébastien Broos Année académique 2015-2016 ABSTRACT The definition of a relevant market is crucial in many antitrust cases. The assessment whether a firm is in a dominant position or not depends highly on the market that has been defined as comprising all competitive constraints to its behaviour. The ongoing case of the European Commission against Google’s mobile operating system Android is an example of such a case, which additionally includes a very specific type of product: multi-sided platforms. The particular nature and functioning of such platforms leaves most common methods of market definition useless and inappropriate. This thesis will use the growing literature on multi-sided platforms to assess the functioning of these products. Further, a prominent precedent case and a close consideration of the general business strategy of Google will help to reveal and to understand how Android works. What role it and other adjacent software play in this wider business strategy of Google. And what the competitive environment is in which these products are operated. The main insights will be that it makes little sense to consider these products without taking into account their interdependent relationship and the competition they face from firms operating with a different business model. It are in fact these various business models that are competing with each other on a higher level, rather than the single products with each other. Comparing these findings with the markets the European Commission has defined as being the relevant markets in this case, hints that the Commission might possibly be missing important aspects of the competition that is taking place between these products and their parent firms. La définition du marché est un élément crucial pour la plupart des procès touchant les lois de la concurrence. L’évaluation d’une éventuelle position dominante dépend fortement du marché pertinent sur lequel se fond l’analyse suivante. Le procès actuel de la Commission européenne contre le système d’exploitation Android de Google constitue un exemple d’un tel cas. En plus, des produits d’une nature très spécifiques sont impliqués : des plateformes bifaces. La nature et le fonctionnement particulier de ces derniers rend la plupart des méthodes du marché traditionnels inutiles et inaptes pour la définition du marché. Le présent mémoire va utiliser la littérature croissante des marchés bifaces pour évaluer le fonctionnement de ce type de produit. De plus, un fameux cas précédent et une considération précise de la stratégie d’entreprise générale de Google vont aider à révéler et à comprendre comment Android fonctionne, quel rôle le système et d’autres systèmes liés jouent dans le contexte de cette stratégie d’entreprise et à établir l’environnement concurrentielle dans lequel ces produits sont exploités. Les conclusions principales seront que, une considération isolée ignorant les interdépendances de ces produits entre eux est inadéquate afin d’évaluer la concurrence à laquelle ils font face car cette concurrence peut provenir de firmes suivant un modèle d’entreprise tout à fait différent. En fait, la concurrence se déroule entre ces différentes stratégies d’entreprise à un niveau plus élevé qu’entre ces produits en question. En comparant ces résultats avec la définition actuelle du marché effectuée par la Commission européenne, on constate qu’il y manque plusieurs aspects importants à l’égard de la concurrence entre ces produits et leurs sociétés mères. CONTENT I. Introduction ...................................................................................................................................................................... 2 II. Multi-Sided Platforms ................................................................................................................................................. 4 1. Definition and Aspects of Multi-Sided Platforms ........................................................................................ 5 2. Antitrust Implications ............................................................................................................................................ 9 III. The Microsoft Precedent ....................................................................................................................................... 13 1. Legal Proceedings and Antitrust Accusations ........................................................................................... 13 2. Microsoft’s Windows Software ........................................................................................................................ 14 3. The Market Definition ......................................................................................................................................... 15 IV. Google’s Strategy ...................................................................................................................................................... 19 1. The Google Universe and Business Model .................................................................................................. 19 2. The Android Software ......................................................................................................................................... 20 3. Antitrust Concerns and European Commission’s Investigation ........................................................ 22 V. Market Definition in the Android case .............................................................................................................. 26 1. Android as an Multi-Sided Platform .............................................................................................................. 27 2. The Whole Picture ................................................................................................................................................. 30 3. Markets for different Platforms ....................................................................................................................... 33 4. Competition between Systems......................................................................................................................... 37 5. Comparison to the Market Definition of the European Commission and Differences to the Microsoft Case ............................................................................................................................................................. 39 VI. Concluding Remarks ............................................................................................................................................... 41 Rerences.............................................................................................................................................................................. 42 1 I. INTRODUCTION When talking about the economic reality we live in, the word ‘market’ figures surely among the most used words. It is used to describe sets of economic transactions of more or less one specific kind and in some geographical area. As a synonym for words like industry, branch, sector or field of activity, this economic term has entered our everyday language. In contrast, however, to this mostly vague use of the word, the term has a very specific and precise meaning in the sphere of competition policy. A market includes all products in a geographic area which exert competitive constraints on each other. In merger cases or alleged abuses of dominant position, the definition of the market relevant for the case is often of considerable importance. Whether a firm can be found as being dominant depends highly on the market which it is found to operate in. A metaphorical illustration would be the question whether
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