Android Antitrust Case: Diving into Effect-Based Approach of CCI

[By Aryan Rawat]

The author is a student of National Law University Odisha.

 

Introduction

At the outset, the competition watchdog of India has booked Google, the creator of Android operating system for a barrage of anti-competitive restraints and abuse of dominant market mechanisms in the licensable mobile operating systems. As its zenith, Google has dominance in India with a monopoly of 99.74% share in the web search market raising concerns over the level playing field for other players. In this discussion, the test of effect-based analysis for establishing dominance by Google in relevant markets has been implemented and its relevance in India and the EU has been brought to light. The article implores the probe by CCI and NCLAT’s orders against Google while examining the way forward for antitrust suits for big techs in India.

Test for Dominance: Checks and balances

Through a series of decided cases, it has been a common judicial norm to use effect analysis to prove the dominance in digital markets. In Indian National Shipowners’ Association (INSA) v. ONGC Case No. 01 of 2018, a reasonability and fairness test has been instrumented to find out how the conditions lead to the dominant power of an enterprise and also examine the objective necessity for an enterprise to impose such conditions. The test of dominance need not be proved individually for every unit of an enterprise and the existence of abuse by parent company is enough to establish the liability for abuse. However, while dealing with cases like Faridabad Industries Association v. Adani Gas and GHCL Ltd v. Coal India, the effects-based approach was not adopted which marks the inconsistency in the application of the effects analysis test.

In the European Union, under the ambit of the Treaty on Functioning of the European Union (TFEU), the courts have adopted the effect-based approach while dealing with dominant position and exclusionary abuse created by an entity.

Precisely, Article 102 of the TFEU deals with abuse of dominance in relevant markets and is in cohort with Section 4 of the Indian Competition Act of 2002. Also, the European Couts of Justice have booked Google for anti-competition practices in compliance with Article 102 in 2018.  ‘Dominance’ as referred to in Article 102 of TEFU would mean “a position of economic strength on the relevant market by giving it the power to behave independently to an appreciable extent of its competitors and ultimately of its consumers.” The effect-based approach has been implored to develop a comprehensive framework to identify consumer harm and point out anti-competitive foreclosures. In the Intel v. Commission case, it was held that ‘exclusionary abuses’ can be considered only after a conclusive process of effect analysis to decide on the dominance factor of an entity in the market. This indicates that conduct will be termed as abusive and illegal only if it will deter competition, have anti-competitive effect and reproduce exclusionary effects.

One of the issues that arose in the Google Android case was the application and necessity of an effects-based test and NCLAT, in appeal has decided in the affirmative regarding the usage of the effect-based perspective to check the dominance of Google in the market. The step is in adherence to establishing semblance with EU Competition law. In past, Indian antitrust adjudicating authorities have been lukewarm and inconsistent in adopting the effect-based approach, unlike EU. The approach is evolving towards the effects of dominance and not only protecting the competition but also the competitors.

Facts deciding the faith of Google

The parent company of Google, Alphabet has been faced with numerous antitrust investigations and proceedings in jurisdictions across the globe. With advancements in technology, Google has diversified its services and developed the Android Operating System, which is used by about 80% of smartphones worldwide, further widening the consumer reach by launching breakthrough applications and software in the Android smartphone industry.  However, these numbers serve as a trembling disadvantage to original equipment manufacturers operating in the Android market. The competition watchdog of India has condemned dominance created by Google services like Chrome, YouTube, and Google Play Store in contravention of Section 4 of the Act and imposed a penalty of INR 1337.76 crore vide Section 32 of the Act. The investigation was conducted by Director General and the final report chalked out the issues pertaining to anti-competitive practices.

The dynamic nature of digital markets has  called in new forms of competition by creating network effect and multi-sided markets which are challenging to analyse under the traditional competition law jurisprudence. The tendency of consumers to not shift to new systems due to high switching costs or limited portability of data causes barriers to entry in digital markets.  The issues framed by the CCI are evidently similar to the antitrust proceeding by the EU where Google was fined 4.34 billion euros for strengthening the dominance of Google’s search engine. For the analysis of the anti-competitive practices and Google’s dominant position, CCI has delineated five relevant market(s) which are (i) licensable OS for smart mobile devices, (ii) apps stores, (iii) general web search services, (iv) non-OS mobile web browsers and (v) market for online video hosting platforms (OVHP) in India. Under Section 27 of the Act, the Commission has ordered Google to modify the agreements in contravention of fair coemption and innovation.

The lawsuit can be traced back to 2018 when CCI adjudicated a complaint case in Mr. Umar Javeed & Ors. v Google LLC , where the Google services were called into question for scrutiny under section 4 of the Act. Although the paramount position in occupied by Google by owning Android’s governance model, deciding the roadmap, restrictive compatibility of Google forks and charging a commission of 30% for all in-store purchases.

Appeal to NCLAT against CCI Orders

The orders and penalty imposed by the CCI have been appealed by Google in National Company Law Tribunal (NCLAT) and the tribunal has admitted the appeal on submitting 10% of the imposed penalty. CCI imposed INR 1337.76 crore for violation of Section 4 and directed Google within 60 days of the order.  In turmoil of such hefty penalties and discontentment towards orders of Appellate Tribunal, Google appealed the case before the Hon’ble Supreme Court whereby the court rejected to admit the request and refused to interfere with the actions taken by Appellate body.

Google contested the conclusions and measures delineated by CCI in terms with Section 27 of the Act. The pre-installation of Google apps and conditional imposition for signing the Anti Fragmentation Agreement (AFA) puts a developmental barrier on device manufacturers and sales of alternative services operating systems i.e., Android Forks. Google has claimed that MADA is not mandatory to be signed but it has been not the commercial reality so far. The marketability of the devices is eroded due to pre-installation of Google Play Store in the Android mobiles construing anti-competition.

The Tribunal has concluded that the signing of AFC and pre-installation of the GMS suite is against Section 4(2)(b)(ii) of the Act. The tying up of Google Chrome with Google Play Store has led to further violation of Section 4(2)(e) of the Act. The signing of the agreement and the restrictions imposed by pre-installation are testimonial and direct the presence of dominance of Google in Anti- Competitive manner.

Way Forward

Google has been in crossroads of paying the penalty and appealing the matter to Supreme Court. The vast dominance of Google in Android market has been justified by the proponents by claiming “Big is not Bad’. A tech giant like Google whose dominant size in market can be the result of successful innovation and effective business model, which led to vast network among consumers. However, this falls short of probable reasons for negating non-antitrust nature of Google as the app developers and other electronic manufacturers for Android have faced restrains in developing android systems without Google’s indulgence.

The approach of CCI has been inconsistent in adopting test for dominant position but the stance of authorities has become crystalline with enforcement of effect-based analysis. The tech giant has claimed the right of natural justice and was sceptical in sharing the private database but this defence was rejected by Tribunal. By observing the orders of NCLAT intrinsically, it can be said that Google has secured a partial victory. In total, ten measures were given by CCI and NCLAT that have set aside four of them and the rest of the measures have been upheld. The case of Android antitrust comes at the right moment when there has been increased focus on surveillance of competition and regulation of Big Tech companies.

According to the news reports, Google has approached the Supreme Court against the orders of NCLAT. The matters are expected to be clubbed as CCI is also considering to approach the Apex court regarding the application of ‘effect analysis doctrine’. The Android antitrust case is a saga not yet completed and there is more to the story. The appeal to the Supreme Court will decide the faith of Google and other stakeholders of Android market. Till then, the instance of signing of agreements in nature of AFA and MADA holds a conclusive and strong ground against the claims of Google.

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