Smartphone suit against Google plays into rivals' hands

By Reuters

Jul 18, 2014 09:59 AM EDT

(Reuters) - A U.S. consumer lawsuit accusing Google of monopolizing prime real estate on Android smartphones will help mobile rivals like Microsoft make their antitrust case with European regulators should damaging secrets emerge in court.

The suit, filed in California federal court in May by two smartphone consumers, said Googlerequires handset manufacturers such as Samsung Electronics Co Ltd (005930.KS) to restrict competing apps like Microsoft's Bing search on Android phones, partly by making Google's own apps the default.

Google argued last week the proposed class action should be dismissed because consumers still are free to use the other apps. The plaintiffs counter that most consumers either don't know how to switch default settings, or will not go to the trouble.

If a judge lets the lawsuit proceed, plaintiffs' attorneys would be allowed to delve into internal Google emails and contracts with smartphone companies, and could interview Google executives under oath, said Steve Berman, who represents the consumers.

"I'm confident we will get into juicy stuff, and I think that will up the pressure on Google as some of the material we discover becomes public," he said.

Google declined to comment. A hearing on Google's bid to dismiss the case is scheduled for October.

Any damaging evidence from the class action would play into the hands of Google's rivals.Microsoft spokesman Jack Evans said the company "is not a party" to the consumer lawsuit, but last year a group of companies - including Microsoft (MSFT.O), Oracle (ORCL.N), Nokia (NOK1V.HE), Expedia (EXPE.O) and TripAdvisor (TRIP.O) - filed a complaint with European antitrust regulators over some of the same issues in the U.S. lawsuit.

Google apps "are widely used on Android by requiring default placement and other mechanisms for disadvantaging competing apps," the companies said in a summary of their complaint.

Google last year said it was working cooperatively with European regulators, who have yet to decide whether to formally investigate.


Berman has a long history of taking on large U.S. companies. He reached a settlement for consumers suing Apple (AAPL.O) over its e-book sales practices that could reach $450 million, and settled for $1.6 billion a lawsuit on behalf of Toyota (7203.T) car owners with unintended acceleration claims.

But the Seattle-based plaintiffs' lawyer also has represented one of Google's main rivals. Berman defended Microsoft when it faced its own antitrust investigations over Windows. Berman said he has had "conversations with Microsoft over the years about Google's conduct," but not about this lawsuit.

No stranger to antitrust inquiries, Google was scrutinized by U.S. and European regulators over allegations that it improperly manipulated search results to rank its own services higher than competitors.

U.S. authorities ultimately closed their investigation without filing a lawsuit, and Europe's competition commissioner negotiated a settlement earlier this year which is awaiting approval by the broader European Commission.


The main issue for U.S. courts will be whether Android and mobile services like search are "technically separate, or tied in ways that impedes competition for consumers," said Michael Cusumano, a professor at the MIT Sloan School of Management.

Cusumano has extensively researched Microsoft, which unsuccessfully sued the professor in the 1990s for access to his notes. This year Microsoft has sought to hire him to write an expert opinion in an unrelated proceeding.

The U.S. consumer lawsuit is based largely on contracts between Google and Android manufacturers Samsung and HTC (2498.TW) that became public during Oracle's separate 2012 trial against Google.

If Samsung or HTC wishes to use Google apps on its phones, the consumer lawsuit said, they must preload a suite of services - including YouTube and Maps - on "prime screen real estate" on the phones, and set Google search as the default.

It also argues that Google's deal with Apple to be the default search on iPhones and iPads locks out competitors across the mobile universe. Apple does not have its own search engine, has lower market share worldwide than Android and is not a defendant in the case.

Google's deals with handset makers do not prevent rival search engines "from reaching consumers through the various distribution channels available to them," Google wrote in its motion to dismiss the U.S. lawsuit.

Cusumano said the U.S. class action could hurt Google if a judge finds that it improperly pushes its mapping and location services, which is embedded across the Android system.

It's "kind of a Pandora's Box to look inside what Google does, and the relationship it has with all these smartphone and handset manufacturers," he said.

(Additional reporting by Bill Rigby in Seattle; Editing by Howard Goller)

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