Google's Smartphone OEM Deals Under Antitrust Scrutiny in Japan

The Japan Fair Trade Commission (JFTC) has taken decisive action against Google, issuing a cease and desist order that challenges the tech giant's practices regarding its Android operating system and related mobile application distribution agreements (MADAs). This marks the first time that Japan has acted against a major American tech company for antitrust concerns. The JFTC's move underscores a growing global trend of increased scrutiny of large technology firms and their potential monopolistic behaviors.

At the heart of the JFTC's concerns are Google's MADAs, which require Android handset manufacturers to pre-install Google's Chrome browser, Google Search, links to other Google apps, and the Google Play Store. The regulator also expressed disapproval of revenue-sharing deals between Google and some manufacturers tied to search advertising revenue. The JFTC argues that these conditions violate Japan's Antimonopoly Act by restricting competition and creating barriers for new entrants in the market. Specifically, the JFTC found that Google was leveraging these agreements to ensure preferential treatment for its search engine and browser on Android devices, disadvantaging rival services. These agreements reportedly affect approximately 80% of Android phones sold in Japan.

Under the JFTC's order, Google is now mandated to cease requiring the pre-installation of its apps and search services. The company must also allow the installation of competing apps and provide users with the option to choose their default search engine. Furthermore, Google is barred from offering financial incentives or other benefits to OEMs in exchange for favoring Google's search functionality, default browser, or browser homepage settings. To ensure compliance, the JFTC requires Google to develop an action plan, provide regular antitrust law training to its employees, and undergo third-party compliance monitoring for five years, with annual reports submitted to the commission.

Google has expressed its disappointment with the JFTC's findings, asserting that its agreements with Japanese partners are pro-competitive and have fostered product innovation and consumer choice. The company has stated that it will thoroughly review the order to determine its next steps. However, this scrutiny from Japan adds to a growing list of antitrust challenges Google faces worldwide. Regulators in the United States, the European Union, South Korea, and India have also investigated or penalized Google for anti-competitive practices related to Android and its associated services.