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Google Inc. & Ors v. Competition Commission of India, Competition Appeal (AT) No.01 of 2023

Case Comment, Publications

Citation: Competition Appeal (AT) No. 1 of 2023

Decided on: 29th March 2023

Parties:

  • Appellant: Google LLC and Google India Pvt. Ltd.
  • Respondents: Competition Commission of India

Google LLC and Google India Private Limited (collectively, “Google”) filed a competition appeal [Competition Appeal (AT) No. 01 of 2023, New Delhi] to contest the ruling made by the Competition Commission of India (CCI), which determined that Google had violated the Competition Act, 2002 (the “Act”) by abusing its dominant position in violation of Sections 4(2)(a)(i), 4(2)(b)(ii), 4(2)(c), 4(2)(d), and 4(2)(e). Google was ordered to cease anti-competitive actions that were determined to be in violation of Section 4 of the Competition Act by the CCI in a ruling dated October 20, 2022. Additionally, it had fined Google INR 1337.76 crore in accordance with Section 27(b) of the Act. Google filed an appeal with the National Company Law Appellate Tribunal (NCLAT) after becoming enraged by this CCI judgment.

In this instance, the NCLAT issued a decision dated April 1, 2023, directing Google to pay 10% of the INR 936 crore penalty in lieu of receiving temporary relief. In an order dated January 19, 2023, the Supreme Court rejected Google’s objection to this ruling and declined to intervene with the NCLAT’s ruling.

The division bench of Justice Ashok Bhushan and Dr. Alok Srivastava upheld the INR 1337.76 crore penalty levied by the CCI on Google for abusing its dominant position in the Android mobile device ecosystem after using its jurisdiction over competition appeals. Nonetheless, the bench disregarded a few important directives that the CCI had issued.

Background of the Case:

Umar Javeed, Sukarma Thapar, and Aaqib Javeed filed a complaint with the Competition Commission of India on August 28, 2018, alleging that Google dominates the Indian market for smartphones using the Android operating system and that the company engages in anti-competitive behaviour. The complaint was filed under Section 19(1)(a) of the Act, 2002. The lawsuit listed four relevant markets, with India serving as the pertinent geographic market: Online Video Hosting Platform (OVHP), App Stores for Android Mobile OS, Licensable Smart Mobile OS, and Online General Web Search Service.

Following an examination of the complaint, the CCI had a preliminary conference on January 8, 2019, and on April 16, 2019, it issued an order compelling the Director General to carry out an inquiry pursuant to Section 26(1) of the Act. Following hearing from all parties concerned and analysing the available data, the Commission concluded that Google had broken multiple clauses in Section 4(2) of the Act. As a result, Google was penalised Rs. 1337.76 Crore for violating the Act’s Section 4. Within 60 days of obtaining the order, Google was directed by the Commission to pay the penalty.

Decision by CCI:

The Commission had discovered a number of Google anti-competitive actions, including the requirement that the full Google Mobile Suite (or “GMS”) be pre-installed on smartphones. This practice imposed unfair restrictions on device manufacturers by denying them the ability to delete these apps. Due to Google’s hegemony in the internet search space, rival search apps were denied access to the market. Additionally, by using YouTube to enter and maintain its dominance in the online video hosting platform (OVHP) market, Google used its strong position in the Android OS app store market to defend its lead in online general search. By requiring the pre-installation of Google’s proprietary apps—especially the Google Play Store—Google diminished the capacity and motivation of device makers to create and market products running alternate Android versions.

The Commission gave Google a number of directives to change its behaviour, including the prohibition on making OEMs pre-install a pre-installed suite of apps and the allowance to choose where pre-installed apps are placed on smart devices. Moreover, Play Store licensing to OEMs cannot be associated with a mandate to pre-install Chrome, YouTube, Google Maps, Gmail, or any other software. Google will not provide OEMs with financial or other incentives in exchange for guaranteeing exclusivity for its search services, nor will it compel OEMs to sell smart devices that are built on Android forks. During the initial setup of the device, users will have the option to remove pre-installed apps and select their preferred search engine for all search input points. The default settings should be flexible enough for users to configure and modify with ease.

Issues:

  1. Does a “effect analysis” of anti-competitive behaviour need to be completed in order to demonstrate abuse of dominant position as defined by Section 4 of the Competition Act, 2002? If so, which test should be used? 
  2. Is the pre-installation of the full GMS Suite considering an unfair requirement imposed on OEMs, thereby constituting an abuse of the Appellant’s dominant position and a violation of Sections 4(2)(a)(i) and 4(2)(d) of the Act?  
  3. Is it illegal for the Appellant to continue to deny rival search applications access to the online search market by maintaining its dominating position, as stated in Section 4(2)(c) of the Act? 
  4. Is it true that the Director General’s inquiry was compromised because the DG asked pointed questions in an attempt to get information? 
  5. Is it true that the penalty the Commission imposed on the Appellants in the course of using its authority under Section 27(b) was disproportionate and excessive given the relevant turnover of the Appellants?

Contentions by Google:

Google contended that the CCI’s order, which was based on a comparable order made by the European Commission in 2018, was biased towards confirmation. The business asserted that pre-installing rival apps with comparable features by equipment manufacturers was unaffected by its agreements. Furthermore, Google maintained that its popularity among consumers is a result of its effectiveness and that dominance in a market does not always equate to abuse of dominance.

Contentions by CCI:

Conversely, the CCI argued that the practices of Google in India may be summed up as “consumer exploitation,” “chokepoint capitalism,” “digital slavery,” “digital feudalism,” and “technological captivity.” The regulator asserted that Google used its dominant position in the Android Operating System (OS) market by limiting the introduction of alternative applications in its Play Store, and that the companies that refused to sign Google’s contract had gone out of business.

The CCI felt that if Google was found to be breaking competition regulations, the regulator had a duty to order the business to change its methods because it holds about 98% of the Indian smartphone market. As a result, the CCI used its authority under Section 27 of the Competition Act to order Google to stop engaging in anti-competitive behaviour that was determined to be against the terms of Section 4 of the Competition Act.

Decision by NCLT:

After hearing the parties’ arguments and considering the pertinent data, NCLAT determined that: 

  1. In response to the first question, the Tribunal said that in order to demonstrate abuse of dominance under Section 4, a thorough investigation was necessary, and the question to be asked was whether the abusive behaviour was anti-competitive. After reviewing the available information, the Commission recorded its findings and conclusions after considering the materials in the file as well as the parties’ comments regarding each market. As a result, the Tribunal rejected the appellant’s argument that the Commission’s order was riddled with confirmation bias.
  2. The pre-installation of the whole Google Mobile Services (‘GMS’) Suite amounted to the appellants abusing their dominant position by placing an unjust requirement on the OEMs, which violated Sections 4(2)(a)(i) and 4(2)(d) of the Competition Act. After reviewing the available data, the CCI concluded that the appellant’s actions were detrimental to competition and that they violated Sections 4(2)(a)(i) and 4(2)(d) of the Competition Act.
  3. The appellants violated Section 4(2)(b)(ii) of the Competition Act by requiring all Android device manufacturers to sign an Anti-Fragmentation Agreement (AFA) or an Android Compatibility Commitment (ACC) before allowing pre-installation of GMS Suite. This prevented device manufacturers from developing and selling alternate or self-operating versions of Android and Android Forks, which in turn limited technical and scientific advancement.
  4. In addition to considering the information that was submitted in relation to Section 4(2)(b)(ii) of the Competition Act, the CCI also returned a finding about the appellant’s anti-competitive behaviour. In violation of Section 4(2)(c) of the Competition Act, the appellant maintained its dominating position in the online search industry, preventing rival search apps from accessing the market. 
  5. The Bench found that the appellant had also violated Section 4(2)(e) of the Competition Act by linking the YouTube app to the Play Store, abusing its dominant position in this way. The CCI returned a decision that the appellants’ actions were anti-competitive after considering the evidence that was on file.
  6. The Bench found that the Director General’s investigation did not contravene the natural justice principle. The Director General would not have compromised the inquiry by asking pointed questions in order to extract information. According to the Bench, the contested order by CCI was not invalidated on the grounds that it lacked a judicial member. The Bench maintained the other CCI directives that were in line with the conclusions.
  7. The particular instructions listed in paragraphs 617.3, 617.7, 617.9, and 617.10 of the prior order issued by the CCI are to be removed, according to an order made by the Tribunal. The other instructions listed in paragraph 617, which were determined to be consistent with the CCI’s conclusions, have been affirmed by the Tribunal.
  8. The following directives have been ordered to be removed:

Paragraph 617.3: Google shall not, in order to disadvantage OEMs, app developers, and current or prospective competitors, refuse access to its play services Application Programming Interface (API).

Google will not prevent customers from removing pre-installed apps, according to paragraph 617.7. Google permits creators of app stores to distribute their stores via the Google Play Store, as stated in paragraph 617.9.

Google will not in any way prevent app developers from using side-loading to distribute their programs, according to paragraph 617.10.

Conclusion:

The Bench has confirmed that the CCI correctly determined the “relevant turnover” by considering the overall revenue made in India from different divisions or leaders of Google India’s operations pertaining to mobile devices running the Android operating system. It accepted the CCI’s decision to use the information provided by Google to calculate the financial penalty. As a result, the appellant has been given 30 days from the date of this order, or March 20, 2023, to pay the penalty amount after deducting the 10% previously submitted under the order of April 1, 2023.

References:

  • National Company Law Appellate Tribunal, Principal Bench, New Delhi. Competition Appeal (AT) No. 01 of 2023, Order No. 01/2023 (NCLAT Mar. 29, 2023).

Deepali Sharma 

Bennett University.