Abuse of dominance: An analysis of CCI order in Google case

[By Aneesh Raj & Chirantan Kashyap ]

The authors are students of  National Law University and Judicial Academy, Assam.

 

Introduction

The world’s biggest search engine has received a great shock from the country’s top court. The Supreme Court of India has rejected Google’s petition challenging the NCLAT ruling dated January 4, 2023. The Competition Commission of India (hereafter CCI) fined Google a large sum for abuse of dominance. Google sought remedy from the NCLAT initially, but once they refused, it turned to the Supreme Court of India for relief; however, this court also refused to entertain its petition. Aggrieved by the decision of the court, Google has agreed to comply with the order of CCI and to deposit the 10% penalty amount.

The CCI has levied a fine of over ₹ 1337 crore on Google for abuse of its dominant position in India’s smartphone operating system market. Google, in its appeal, has termed the decision of CCI as “patently erroneous” and ignoring “the reality of competition in India, Google’s procompetitive business model, and the benefits created for all stakeholders.” The CCI order has been described as “fraught with substantive, analytical, and procedural errors, including inter alia ignoring exculpatory evidence and statements from Indian OEMs and developers.” Google has also accused the CCI’s investigating arm, namely the Director General’s Office, of mindlessly copying and pasting the order from the foreign authorities.

The aim of this article is to analyse the order and also explain what it means for the general population.

Facts of the case:

The controversy arose following the disclosure of information by Mr. Umar Javeed, Ms. Sukarma Thapar, and Mr. Aaqib Javeed under Section 19(1)(a) of the Competition Act, 2002 (hereinafter the “Act”), alleging that Google LLC and Google India Private Limited (collectively, “Opposite Parties”/”Google”) violated Section-4 of the Act. It is believed that these informants are Android smartphone users. They had said in their submission that Android is an open-source mobile operating system that anyone may create and use freely. The Android Open-Source Project (AOSP) is the source code for Android that is subject to a basic licence. An interesting point that is stated by the informants is that the smartphones and tablets in the Indian market are being run on the Android operating system, which itself is being developed by Google. Google also offers various applications and services in the form of Google Mobile Services (GMS).

Informants have described GMS as a suite of Google services that can be used to enhance a device’s performance. According to the experts, GMS includes a variety of Google services that can only be accessed through GMS and not downloaded independently by device manufacturers. These services include Google Maps, Gmail, and YouTube. Android device manufacturers must enter into certain agreements with Google before these apps and services can be installed. The informants further stated that end users would not be able to directly use these services.

According to the informant, Google has been engaging in a number of anticompetitive practices, both in the core market and in peripheral areas, in order to further solidify their dominant position as the preeminent provider of online general web search services and online video hosting platforms (through YouTube).

The informants made the following allegations against Google in their claims:

  1. Google requires that manufacturers of smartphones and tablets only pre-install Google’s apps or services if they want to get any part of GMS in smartphones made, sold, exported, or marketed in India. It was said that this action made it harder for rival mobile apps or services to develop or get into the market, therefore violating Sections 4 read with section 32 of the Act.
  2. Google combines or bundles various Google applications and services, such as Google Chrome, YouTube, Google Search, etc., with additional Google applications, services, and/or application programming interfaces. This conduct made it harder for people to get smart mobile devices that used different, possibly better versions of the Android operating system.
  3. Google doesn’t let smartphone and tablet makers in India make and sell “Android forks,” which are different versions of Android for other devices. This regulation made it harder for people to get access to new, smart mobile devices that might run on better versions of the Android operating system.

Based on the information received, the commission forms a prima facie opinion that there is a contravention of Section 4 of the Act. So, using its power under Section 26(1) of the Act, it directed the investigating arm, which is the office of the Director General (DG), to do an investigation. Based on its investigation, the DG submitted a report addressing certain issues highlighted by Google.

Investigation by the DG:

 An investigation was laid out by the office of the director general in order to gather material. The office of director general contacted Google and other concerned parties. Other parties include mobile phone makers (both Indian and foreign brands), who install Android OS and Google apps and services on their phones; third parties active in the Indian market for Android OS app stores, an online general web search service, and a web browser; key players in the online video hosting platform; key Indian app developers, etc.

Based on the said investigation, five relevant markets have been identified as being important to the resolution of the challenges at hand. These are the markets in India for licensable operating systems for smart mobile devices such as smartphones and tablets, the market for an app store for Android smart mobile OS, the market for general web search services, the market for non-OS-specific web browsers, and the market for an online video hosting platform (OVHP). As previously indicated, the DG has determined that Google dominates the aforementioned key markets. While compiling the investigation report, the DG also took into account the other apps and services that are considered core apps under Mobile Application Distribution Agreement (MADA).

After examining the conduct of Google, the office of the director general reaches the conclusion that preinstallation of the whole GMS suite under MADA constitutes an unfair condition imposed on device manufacturers, and the same is in contravention of Section4(2)(a)(i) and Section 4(2)(d) of the Act. Google’s action has hampered technological and scientific advancement, causing consumers to suffer. Therefore, Google has abused its dominant market position, denying other app developers access to the market.

Arguments Put Forth by Google and subsequent rebuttal by the office of director-general:

Google, in its reply against the said allegations, said that it faces competitive constraints from Apple. Google has argued that Android competes directly with ‘closed’ mobile operating systems such as Apple’s iOS, as well as other operating systems and platforms. The DG has thoroughly analysed this issue for the purpose of defining the relevant market and has decided that all licensable smart mobile operating systems belong to the same product market, while non-licensable OS do not belong to the same relevant market. Google further contended that the DG’s appraisal of market definition and dominance in general search services does not meet its abuse theory.

Google has also claimed that their search services are free, and hence there is no purchase or sale of products or services. While rejecting this claim, the Commission noted that in markets characterised by more than one side, any market assessment that relies solely on the side where service is provided free of charge to consumers distorts the truth and leads to a biased assessment of the nature of competition in such markets. When a user requests a search for a particular keyword or phrase through a search engine, the search platform collects additional information, such as the user’s IP address, device information, location, operating system information, etc., in addition to the date and time of the search and the keyword or phrase searched for. The vast quantity of data produced by each and every search made on such networks. With the use of “big data,” search platforms are able to attract advertisers, target relevant advertisements, and operate their search businesses. Therefore, it held that online search falls within the ambit of Secion-4 of the Act.

Google in its submission before the DG further argued that the mandatory pre-installation of its apps and services, including Google Search, on the default home screen of MADA smartphones is a promotional strategy that pays Google for its investment in the Android ecosystem. Google has also stated that end users can get alternative applications from the Play Store with relative ease. In this regard, the DG has examined the data on numbers of competing search app downloads from the Google Play Store in India and reached the conclusion that, with the preinstallation of the Google Search app on Android devices, mobile users rarely download the competing search app on Android.

The Director General’s office examined at the annual revenue generation of Google, Bing, and Yahoo—the three main competitors in general web search—in India from 2011 to 2018. They found that compared to Google, Bing and Yahoo’s revenue is negligible.

Therefore, based on this data, DG reached the conclusion that Google is much ahead and in a stronger position than its competitors. Google’s increased revenue from the search business allows it to invest in R&D to improve the user and advertising experience, reinforcing its dominance in the online general web search market in India. This gives a significant and overwhelming competitive edge to Google over its competitors.

Analysis

The Competition Commission of India was of the view that Google has abused its dominant position in the market. There has been an alleged abuse of its dominance position by Google in mobile operating systems and relevant markets, which is in contravention of Section 4 of the Act. Google had placed several agreements that placed it in a unique position, and the company should have used that position more carefully. The whole GMS forces people who use Android devices to use Google services, and through its ad revenue sharing system, Google is earning huge revenues. And the agreements themselves make other competitors’ entry into the market impossible.

The mandatory requirement to install Google apps on smartphones is unfavourable for both smartphone manufacturers and the general public. Such installation would imply that smartphone manufacturers are paying for apps they do not require while also limiting the entry of other apps. For example, one of the country’s largest smartphone makers, Xiaomi, has their own app store, but due to the mandatory installation of the Google Play Store, the company’s own app has very few users. And these apps are uninstallable, giving even fewer options to users. These violations by Google are in direct contravention of Section 4(2)(a)(i) and Section 4(2)(a)(e) of the Act. The whole idea behind Android was to provide an experience where the users are free to use the code of Android and develop software based on this open code, but Google even denied that when, in its contract, it refused to allow smartphone makers to develop apps based on these open codes because it seems that such apps would be out of Google’s control.

Conclusion

The internet, as it is, is a medium where people from different backgrounds can come and share ideas. The internet was free, and people had a choice, but nowadays certain companies are dictating the choice of the general public. This decision has an impact on the general public because having a market position is acceptable as long as it is not abused. Simply by using this example, you can see how Google abused its position. Suppose you have a smartphone. The application that you use the most on your phone, which you bought with your own money, is most likely produced by Google. Now suppose A is a company that needs to advertise its products. Now where will A go? A will go to the company that has the biggest reach in the market, and in this case, that is Google. Thus, by simply introducing an app on your phone that you cannot uninstall, Google has reaped benefits.

Another way that Google has abused its position is by not giving you a choice. Your personal Android is a thing that you bought with your own hard-earned money. Now imagine a situation where your own phone is tracking your every step or you are using outdated apps or services. In reality, there would have been apps and services that were superior to the ones you are currently using, but due to Google’s embargo on app development and the mandatory installation of the GMS suite, such apps will never see the light of day.

This is why the order issued by the Competition Commission of India, which correctly identified and fined this abuse of dominance, is critical. The whole reasoning behind such abuse by Google was not inherently right.

Right to the Internet is a movement that basically says people should have freedom as to how they want to use the internet and should not be compelled to see or use things that big companies want them to see or use. This decision by the CCI is a welcome step in this direction, and hopefully the future will not be that bleak.

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