How Russia’s leading search engine beat Google in court

Apart from Yandex, Google in effect has no other competitors on the Russian market. Source: Reuters

Apart from Yandex, Google in effect has no other competitors on the Russian market. Source: Reuters

Reuters
The Russian Federal Antimonopoly Service (FAS) has found Google guilty of violating the Russian law on competition, in response to a complaint filed by Russia’s leading search engine Yandex. Now Google has until Nov. 18 to authorize manufacturers of Android devices to pre-install applications of its competitors, including Yandex.

What happened?

In February 2015, following a complaint from Russia’s largest search engine Yandex, Russia’s Federal Antimonopoly Service (FAS) started proceedings against Google. The Russian company accused the U.S. internet giant of abusing its dominant position on the Android market.

 

How did Google break competition rules?

Android is Google’s free mobile operating system, which – with a share of 85 percent – dominates the mobile OS market. In December last year, Google introduced a drastic change to how it works with the manufacturers of Android devices, banning them from pre-installing competitor applications, including search engines.

If the ban was breached, Google threatened to prevent the offending devices from being able to use some of its most popular services, like Google Maps, Youtube, Gmail, and the Google Play store, the main source of apps for any Android user.

As a result, several smartphone manufacturers – such as Fly, Explay and Prestigio – that used to work with Yandex had to give up their partnership with the Russian company.

 

Why does it matter to Yandex so much?

For Yandex, Russia is its key market. At the same time, its share of the search market in Russia is steadily falling, while that of Google is rising. Unless this trend is broken, in two to three years’ time, the U.S. giant may become Russia’s most popular search engine.

In September 2015, Yandex accounted for 57.4 percent of the Russian search market, with Google’s share at 34.9 percent (Liveinternet data). In September 2013, their shares were 62.2 and 26 percent respectively.

That is why it is essential for the Russian company to retain the opportunity to pre-install its apps and search engine on mobile devices. Especially since Fly, Prestigio, and Explay have a considerable share of the Russian market.

 

Who will now decide which search engine is to be installed on mobile devices?

Yandex’s victory will reinstate the old rules of the game. All companies willing to pre-install their applications will have to agree directly with the manufacturers of smartphones and tablets, by offering them better terms.

In addition, Google must inform Android users of the functionality to deactivate pre-installed applications, replace Google Chrome as the default search engine and offer them competitor search widgets and services.

 

How much money could Google lose on the Russian market?

Apart from Yandex, Google in effect has no other competitors on the Russian market. According to SPARK-Interfax data, in 2014 Google’s main legal entity in Russia made 18 billion rubles, or about $300 million (at the current exchange rate), while Google’s revenue globally amounted to $66 billion. In other words, Russia accounts for just 0.5 percent of the company’s profits. It is unlikely that the loss of 0.5 percent would be critical for the company.

Having said that, the FAS ruling sets an interesting precedent for the international community and in future could become a starting point for lawsuits by other companies. For example, the EU has for a long time been collecting evidence of Google violations and the story with Yandex sets a precedent. If Google’s guilt is proven, the European Commission has the right to fine the internet giant to the tune of 10 percent of its sales, which would amount to a record-breaking $6 billion. 

Anton Krokhmalyuk is an internet expert and marketing director at e-Legion

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