Russia finds Google guilty of violating the anti-monopoly law

Google violates competition laws say Russia’s anti-trust watchdog

Russia’s Federal Anti-Monopoly Service (FAS) on Monday said that Google was exploiting its market position in the country and would face penalties, in a case filed by local competitor Yandex.

The FAS said Google has violated Russian antitrust laws by requiring that manufacturers pre-install its services on their devices and could face penalties totaling up to 15 percent of its 2014 revenue in this part of the Russian market. After the ruling, Yandex’s stock rose as much as 13 percent in New York, and later settled for a 6.9 percent gain at the close of trading.

Earlier this year, Russian search engine, Yandex had complained to the FAS, requesting that its competitor be ordered to unbundle its services from the Android operating system and application distribution platform Google Play. Yandex said that Android’s default options push mobile users to Google services including search and maps, limiting consumers’ ability to choose such services from Yandex or other vendors.

Saying that it is a trade secret, the FAS refused to mention the revenue in question. However, it said that it would make a decision on the exact value of the fine after September 28. It also added that Google must then pay and change its ways, or risk more fines if violations continue.

Welcoming the decision, Yandex who had filed a complaint against Google with the FAS in February said “We hope that the antitrust decision will help to restore competition in the market. While the European Commission has already started a preliminary probe into similar practices, Russia is the first jurisdiction to recognize these practices as uncompetitive.”

Recently, Yandex has been losing market share to Google who is strongly positioned on devices running Android. Last month, Yandex’s share of Russian searches fell to 50 percent in comparison to 54 percent in January of 2014, according to LiveInternet.ru, while Google’s share soared to almost 42 percent from 34 percent.

“It’s a violation that Google required equipment makers to pre-install its services, including search, to get the Google Play application store on their devices,” Vladimir Kudryavtsev, head of the IT department of the FAS, said by phone on Monday. He also said that the regulator will be providing detailed instructions on solutions to Google within 10 days.

However, Google Russia said that they would examine the decision and until then refused to comment.

“This is good news for Yandex, which has been losing market share as smartphones powered by Google’s Android gained popularity,” said Konstantin Belov, an analyst at UralSib Capital. “A lot of users have been using Google services by default, and Yandex may get a chance to win them back.”

Since its founding in 2000, Yandex has dominated the Russian market. Much of that initial success came thanks to an advanced search engine that provided much more accurate results for entries made in Russian. It also offered its own map and traffic-tracking services and has recently entered the web advertising market.

However, when Google introduced Android as its answer to Apple’s and Microsoft’s operating systems in 2008, the company looked to expand beyond internet searches into mobile phones. As a result, Yandex has faced stiff competition in mobile phones, as consumers have adopted Android-based handsets that come pre-loaded with Google products that compete directly with Yandex applications.

In April, the European Union escalated its probe into Google, claiming that the company has abused its dominance of the search-engine market. The EU is also investigating Google’s strategy of bundling software such as YouTube, Maps and Chrome with Android and whether the practice harms device manufacturers as well as rival app developers that have to take the whole package.

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