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Competition watchdog fines Google for INR 1337.76 crore- India

November 10, 2022
Competition watchdog fines Google

By Rupin Chopra and Apalka Bareja

The Competition Commission of India (herein after CCI) passed an order dated October 20, 2022, imposing a monetary penalty of INR 13,37,00,00,000 (USD) on Google for abusing its dominant position in multiple markets in the Android Mobile device ecosystem under Section 27 [1] of the Competition Act, 2002 (hereinafter the Act). Apart from the monetary penalty, CCI had additionally issued a cease and desist order against Google for indulging in any acts in contravention of Section 4 [2] of the said Act.

Brief background to the matter

In the present information filed by the Informants i.e. Mr. Umar Javeed, Ms. Sukarma Thapar and Mr. Aaqib Javeed under Section 19(1) (a) of the Competition Act, 2002 against Google LLC and Google India Private Limited (herein after Google) alleging abuse of dominant position by Google in the mobile operating system relating to markets by entering into restricting agreements contravening the provisions of Section 4 [3] of the said Act.

Understanding ‘Abuse of Dominant Position’ with context to the said matter [4]

Dominant Position: a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to-

  • Operate independently of competitive forces prevailing in the relevant market; or
  • Affect its competitors or consumers or the relevant market in its favor.

Section 4 of the Competition Act provides that an abuse of dominant position arises when an enterprise-

  • Impose unfair or discriminatory condition in purchase of sale of goods or services or price in purchase or sale of goods or services;
  • Limits or restricts the production of goods or services or technical or scientific development relating to goods or services to the prejudice of consumers;
  • Indulges in practice resulting in denial of market access;
  • Predatory pricing;
  • Uses its dominant position in one relevant market to enter into, or protect, other relevant market.

In violation of the above conditions, Google has dictated its terms to app developers compelling them to mandatorily use its own ‘discriminatory practices’ by imposing unnecessary/ restrictive contractual clauses on app developers and OEMs regarding Play service APIs, Anti- fragmentation obligations, thereby severely impacting the underlying competition in the market.

Allegations alleged by the Informants

  • Google’s mandatory installation of its own applications in order to get any part of smartphones manufactured/sold/exported/marketed in India is a clear violation of Section 4 [5] read with Section 32 [6] of the Act by hindering the development of rival mobile applications in the market;
  • Google’s attachment with other applications is an illegal prevention of the rival applications in the business thus jeopardizing its dominant position in the domestic market in contravention of Section 4 [7] read with Section 32 of the Act;
  • Google’s disabling feature of developing competing versions of Android on other devices restrict access to competitive mobile devices on the basis of alternative, potentially superior versions, in contravention of Section 4 read with Section 32 of the Act, hereby misusing its dominant position to limit competition in the market .
  • Anti- fragmentation Agreement (AFAs) ensured the dominance of Google by prohibiting OEMs from offering their services to Android forks disabling them to develop or offer any device outside the control of This led to non- availability of distribution channels for their forks since majority of them were tied with Google.
  • Similarly, Revenue Sharing Agreements (RSAs) secured exclusivity of search services of Google from its competitors guaranteeing the protection of advertisement revenue and networking effects. These agreements never paved the way for competitors to compete effectively in the presence of Google resulting in elimination of choices for its users.

Arguments raised by Google

  • The competitive constraints being faced from Apple: Google’s Android ecosystem and Apple’s iOS ecosystem put a tough competition for each other and its competitors. Since, Apple’s business is primarily based on a vertically integrated smart device ecosystem which focuses on sale of high-end smart devices with state of the art software components. Whereas Google’s business was found to be driven by the ultimate intent of increasing users on its platforms so that they interact with its revenue earning service e., online search which directly affects sale of online advertising services by Google.
  • Android is an open- source mobile operating system for smartphones and tablets freely used and developed by anyone. Majority of these Indian manufacturers tend to use the Android operating system in alliance with the Google Mobile Services (GMS) supported by a collection of applications and Application Program Interface (APIs) for smooth functionality across devices. In order to obtain the right to install in favor of these applications on Android devices, a mutual agreement is consented with Google to avoid any unnecessary haphazard from end- users.
  • The mandatory pre- installation of apps and services in the default screen of Mobile Application Distribution Agreement (herein after MADA) acts a promotional incentive for compensation in Android platforms.
  • Further, the end users have a discretion to download or not any competing apps from Play Store for which the process has also been smoothened. The rival applications are unable to overcome the status quo bias of the users reluctant to download their apps.

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Findings of the Director General

  • Pre- installation of an entire GMS suite under MADA led to the violation of Section 4(2)(a)(i) [8] and Section 4(2)(d) [9] of the Act by imposing unfair conditions on the device manufacturers.
  • Pre- installation of Google’s proprietary apps upon signing of AFA/ ACC for all manufacturers/ distributors has substantially affected the market for device manufacturers thereby limiting their technical and scientific development.
  • Google’s Play Store policies were held to be one- sided, ambiguous, vague, biased and arbitrary as held by the Director General. However, Google’s behavior of imposing unfair discriminatory practices by restricting the development of apps to the prejudice of its users were clear violations of Section 4(2)(a)(i), Section 4(2)(b) [10], and Section 4(2)(C) [11] of the Act.

The Director General thereby found Google to be in dominant position than the rest of rivalries in the market and found to be contravening the provisions of Section 4(2)(a)(i), Section 4(2)(b), Section 4(2)(c), Section 4(2)(d) [12] and Section 4(2)(e) [13] of the Act.

Observations made by the Competition Commission of India

The Competition Commission of India conducted a detailed analysis of the information and passed certain observations regarding the below mentioned allegations:

  • Establishment of Portal

Besides the monetary penalty, CCI has also directed Google to establish a portal providing options for default search engine in the initial phase in order to avoid speculations arising in the future.

  • Third party billing services

The CCI has further directed Google to put forward a transparent policy for the data collected on this platform, its usage and risk of sharing this information with other entities and app developers.

  • Revenue Sharing Agreements (RSA)

It was also held by the CCI that the existence of Revenue Sharing Agreements (herein after RSA) between the OEM’s and Google acted as an advantage for the latter to secure exclusive information veiling from its competitors.

  • Licensing of play store

Apart from these, various other direction have been issued regarding the anti- fragmentation obligations and licensing of Play Store to OEMs such as flexible default settings and easy distribution of apps through plat store  in order to ensure market correction and interest of justice at the earliest.

The CCI has been given a time period of thirty days to provide the required financial details and supporting documents.

Mistakes to avoid

Google search attachment
Conclusion

The CCI decision can act as a major setback for its Indian users since Android has provided ample number of opportunities to support and promote business transactions in India.

Moreover, risk for security at such reasonable prices can be another drawback that can tag along with the recent order of CCI.

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[1] Orders by Commission after inquiry into agreements or abuse of dominant position

[2] Abuse of dominant position

[3] ibid

[4] Case No. 39 of 2018

[5] Abuse of dominant position

[6] Acts taking place outside India but having an effect on competition in India

[8] condition in purchase or sale of goods or services; or

[9] Predatory Pricing

[10] Limits or restricts production of good or services or technical or scientific developments

[11]  indulges in practice or practices resulting in denial of market access; or

[12] Predatory Pricing

[13] Abuse of dominant position

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Niyati Pathak, Intern at S.S. Rana & Co. has assisted in the research of this article.

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