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Tech giant Google is facing a potential penalty of $55 million after previously admitting to the Australian Competition and Consumer Commission (ACCC) that it had engaged in anti-competitive behaviour with Telstra and Optus regarding the pre-installation of Google Search on Android mobile phones.
The ACCC has filed proceedings in the Federal Court against Google Asia Pacific, which has co-operated with the competition regulator’s investigation, to determine if the agreed penalty is appropriate.
The ACCC says the telco agreements, which were in place between December 2019 and March 2021, required Telstra (ASX: TLS) and Optus to only pre-install Google Search on Android phones they sold to consumers, and not other search engines.
Telstra and Optus received a share of the revenue Google generated from ads displayed to consumers when they used Google Search on their Android phones.
Google has admitted that this agreement was likely to have had the effect of “substantially lessening competition”.
Google Asia Pacific and its US parent company, Google LLC, have also signed a court-enforceable undertaking in which the ACCC says the group has accepted to address its broader competition concerns relating to contractual arrangements between Google, Android phone manufacturers and Australian telcos since 2017.
However, the ACCC notes that while Google does not agree with all of the regulator’s concerns it has acknowledged them and offered the undertaking to address these concerns.
Among these undertakings, Google has committed to removing certain pre-installation and default search engine restrictions from its contracts with Android phone manufacturers and telcos.
Last year, Telstra, Optus and TPG, which are not parties to the proceedings launched today, also provided court-enforceable undertakings to resolve the ACCC’s concerns about their agreements with Google.
“Conduct that restricts competition is illegal in Australia because it usually means less choice, higher costs or worse service for consumers,” says ACCC chair Gina-Cass Gottlieb.
“Today’s outcome, along with Telstra, Optus and TPG’s undertakings, have created the potential for millions of Australians to have greater search choice in the future, and for competing search providers to gain meaningful exposure to Australian consumers.
“Importantly, these changes come at a time when AI search tools are revolutionising how we search for information, creating new competition.”
Telstra, Optus and TPG last year agreed that they would not renew or make new arrangements with Google that require its search services to be pre-installed and set as the default search function on an exclusive basis on Android devices they supply.
The three telcos can configure search services on a device-by-device basis, and in ways that may not align with the settings set by Google. They can also enter into pre-installation agreements with other search providers.
“With AI search tools becoming increasingly available, consumers can experiment with search services on their mobiles,” says Cass-Gottlieb.
The proceedings filed today follow a lengthy ACCC investigation after broader concerns about Google’s contractual arrangements for Google Search emerged during the ACCC’s Digital Platform Services Inquiry’s report into search defaults and choice screens.
“Co-operation with the ACCC is encouraged; it can avoid the need for protracted and costly litigation and lead to more competition,” says Cass-Gottlieb.
“More competition in markets drives economic dynamism, but the reverse is true when markets are not sufficiently competitive.
“The ACCC remains committed to addressing anti-competitive conduct like this, as well as cartel conduct. Competition issues in the digital economy are a current priority area.”
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