Do Free Mobile Apps Harm Consumers?
51 Pages Posted: 11 Oct 2014 Last revised: 10 May 2015
Date Written: May 9, 2015
Google distributes proprietary applications for its open-source Android mobile operating system (OS) free of charge. Some of those applications (apps) are offered together as a suite of apps known as Google Mobile Services (GMS). Manufacturers of mobile devices can agree, pursuant to Google’s Mobile Application Distribution Agreement (MADA), to install the suite of apps on their devices at a price of zero. Some theorize that Google’s policy of offering some applications together as a suite of apps harms competitors or menaces consumer welfare. In April 2015, the European Commission expressed such concerns when it initiated a formal antitrust investigation that will scrutinize Google’s licensing practice with respect to Android, mobile apps, and mobile services. In April 2014, an antitrust class-action complaint filed against Google by individual mobile device owners in the U.S. District Court for the Northern District of California presented similar allegations. However, the theory that the MADA’s requirements have anticompetitive effects is wrong. As a matter of economics, Google’s practice of distributing free mobile apps in the GMS suite benefits consumers (as well as manufacturers, mobile carriers, app developers, and advertisers) by stimulating demand, by reducing the risk of fragmentation of the Android OS, and by preventing Google’s competitors from free riding on its investment to make the Android OS and mobile apps a viable open-source competitor to closed and proprietary — “walled garden” — platforms for mobile devices. As a matter of antitrust law, Google’s distribution of apps as part of a larger whole — GMS — is lawful under the Supreme Court’s four-part test for such arrangements. Google does not force consumers to pay for apps they do not want, and the MADA’s requirements enhance competition overall. The same conclusion holds with even greater certainty under the rule-of-reason analysis for software integration that the D.C. Circuit adopted in its historic Microsoft decision. Although European competition law differs in some respects from American antitrust law, the pertinent economic analysis does not vary by jurisdiction. Google’s licensing practice has invigorated competition among mobile platforms and mobile devices. Google’s distribution of free mobile apps in GMS has produced a market success, not a market failure, and should not be considered anticompetitive.
Keywords: Google, Google Mobile Services, antitrust, tying, software integration, innovation, double-sided markets, free apps
JEL Classification: D4, D42, K21, L11, L12, L41, L86, O34
Suggested Citation: Suggested Citation