Recent Antitrust penalties imposed by CCI against Google – A Critical analysis By - Lakshya Kandpal Introduction In modern day era, App stores have come up to be an essential means for app developers to share their applications to end users, and the accessibility of app store is directly dependent upon the Operating System installed on a smart device. Google’s Play Store is the prime market place for app developers in the ecosystem of Android mobile. This allows Google to earn profit on the applications brought to the market. Android Operating System, which is an exclusive product of Google is licensed to those who manufacture devices. Google bundles or ties certain Google applications and services such as YouTube, Google Search, Chrome, etc. that are shared on Android devices with other Google applications, services and/ or Application Programming Interfaces (APIs) of Google. A percentage of Google’s search revenue is given to the device manufacturers from their devices as consideration for pre-installation of Google apps. This helps device manufacturers in bringing down the costs for device and also allows Google to increase its user-base. In-app digital goods sales are a notable method for app developers to profitise their innovations or creations. However, in order to provide in-app digital goods to purchasing users, developers must necessarily configure their apps so that all digital goods purchases are processed by Google’s payment system. Primarily, Google’s Play Store policies requisites App developers to utilise Google Play’s Billing System (GPBS) not only for the purpose of receiving payments for Apps (and other products such as video, audio and games) shared/distributed through the Google Play Store but also for certain in-app purchases, which are purchases made by users after they have purchased /downloaded the App from the Play Store. It has also come to light that Google is favouring Google Pay over other similar apps through its dominance and control over the Play Store and the Android Operating System which is unfavourable for both the users and apps facilitating payment through UPI. Moreover, app developers may also not be able to provide users with a direct link to a webpage featuring an alternate payment option in substitution within an app, nor may they use a language that desires that a user should purchase the digital item from outside of the app. Google Pay is linked with intent flow methodology1, whilst other UPI apps can be used with collect flow methodology. It was seen that intent flow technology is more user-friendly and superior than collect flow technology, with intent flow providing major benefits to both merchants and customers, and due to lower latency, the success rate with the intent flow methodology is higher. 1 https://razorpay.com/docs/payments/payment-methods/upi-intent/ Issues involved § The Commission has ordered for an investigation into Google’s Unfair Business Practices in 2019 after the consumers have complained about Android smartphones2. § The complaints against Google were based upon two agreements between Google and the Original Equipment Manufacturers (OEMs) of Android OS — the AntiFragmentation Agreement (AFA) and the Mobile Application Distribution Agreement (MADA). § It was stated by CCI that Google acted in contravention to the competition law due to mandatory pre-installation of the entire Google Mobile Suite (GMS)3 under MADA and that there was no choice to uninstall the same. § Google was adopting anti-competitive practices in its payment processing and app billing by encouraging Google Pay over other players. Play Store charges a commission of 30 percent from app providers for permitting them to use the Play Store’s payment system and In-App Billing of Google Play . Mobile Application Distribution Agreement (MADA) Google has imposed strict restrictions and limitations on the OEMs in order to dominate the app distribution market space using smartphone manufacturer’s Mobile Application Distribution Agreements. This agreement limits smartphone manufacturers from including other app stores in the User Interface or allowing side loading of applications. Google’s licensing process requires OEMs to sign MADA with the company and includes strict rules and standards for handling Android. Some of them are as follows• Every Android manufacturer has to necessarily include the entire line of Google apps (GMS); no manufacturer has liberty to install any particular app such as Google Maps or Google contacts. • Google strictly has to be the default search engine for web, and the OEMs must include the Google’s search widget on the home screen of the OS. • OEMs need to submit the sales data to Google on monthly basis and help the company in keeping track of all the devices running its OS. Anti-Fragmentation Agreement (AFA) The anti-fragmentation deal makes it nearly impossible for OEMs to utilise the Android’s source code for the purpose of creating a different OS. Android manufacturers are not Umar Javeed and Ors v. Google LLC and Anr. CCI 39/2018 GMS is a collection of Google applications and Application Programming Interface (APIs) that help support functionality across devices. GMS includes Google’s key offerings such as Google Search, Google Chrome, YouTube, Play Store, and Google Maps. 2 3 allowed do anything that can disintegrate or fragment Android; this clause covers a wide range of actions, but it especially bans OEMs from generating Android forks4. If an OEM tries to generate a fork and it gains due acknowledgement, there are chances that Google can lose its mark on the smartphone market. Google constantly works its best in restricting any OEM from generation of forks of Android and using it commercially. Competition Commission of India Competition Commission of India (CCI) is a statutory body of the Government of India responsible for enforcing the Competition Act, 2002, it was duly constituted in March 20095. Composition The Commission consists of one Chairperson and minimum two and maximum six Members6 who shall be appointed by the Central Government. The commission is a quasijudicial body which gives opinions to statutory authorities and also deals with other cases. The Chairperson and other Members shall be whole-time Members. The Chairperson and every other Member shall be a person of ability, integrity and standing and who, has been, or is qualified to be a judge of a High Court, or, has special knowledge of, and professional experience of not less than fifteen years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which, in the opinion of the Central Government, may be useful to the Commission7. Functions 1. Ensuring that the benefit and welfare of the customers are maintained in the Indian Market. 2. An accelerated and inclusive economic growth through ensuring fair and healthy competition in the economic activities of the nation. 3. Ensuring the efficient utilization of the nation’s resources through the execution of competition policies. 4. The Commission also undertakes competition advocacy. 5. It is also the antitrust ombudsman for small organizations. Forking is the process of creating a new variant from the source code of open-source software mca.gov.in/aboutmca/affiliatedoffices/competitioncommisssionofindia 6 Section 8 Competition Act 7 Section 9 Competition Act 4 5 The Competition Act, 2002 The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of the Raghavan committee8. The Act: o Prohibits anti-competitive agreements o Prohibits abuse of dominant position by enterprises and o Regulates combinations (acquisition, acquiring of control, and M&A), which can cause or is likely to cause an appreciable adverse effect on the competition within India. Section 4 – Abuse of dominant position (1) No enterprise or group shall abuse its dominant position. (2) There shall be an abuse of dominant position [under sub-section (1), if an enterprise or a group].—(a) directly or indirectly, imposes unfair or discriminatory— (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. Explanation.— For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in subclause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or (b) limits or restricts— (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access [in any manner]; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. Explanation.—For the purposes of this section, the expression— 8 High Level Committee on Competition Policy & Law in 1999 chaired by Mr S. V. S. Raghavan with eight other competent members. (a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to— (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. (b) “predatory price” means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. (c)“group” shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5. Violation of Section 4 by Google as per CCI9 CCI indicated following five relevant markets in the present matter10: a. b. c. d. e. Market for licensable OS for smart mobile devices in India Market for app store for Android smart mobile OS in India Market for general web search services in India Market for non-OS specific mobile web browsers in India Market for online video hosting platform (OVHP) in India. • Google manages and operates the Android OS and licenses other Google exclusive applications. For using and accessing these applications in their mobile phones, manufacturers have to enter into agreements with Google that govern their rights and obligations. CCI held that by way of these restrictions in agreements, Google made certain that the manufacturers who wanted to use Google’s exclusive apps had to use Google’s version of Android. Thus, the developers of Android fork could not find sale/distribution channels for their forks as almost all the OEMs were tied-up with Google. More distinctively, it ensured that the most prominent search entry points i.e., widget, search app, Chrome, and the whole Google Mobile Suite (GMS) came necessarily pre-installed on Android devices with no alternative to un-install the same through MADA restrictions. • Google is the dominant player in the app store market for Android OS around the world (except for China)11. The Google Play Store accounts for more than 90 per cent of the downloaded apps globally on Android devices. The CCI held that through the Umar Javeed and Ors v. Google LLC and Anr. CCI 39/2018 Section 19(7) of The Competition Act 11 https://www.theverge.com/2018/9/26/17903788/google-android-history-dominance-marketshare-apple 9 10 mandatory pre-installation of the Google Suite (which includes Play Store), end users did not have the option of side-loading or downloading apps which are outside the play store. • By having Revenue Sharing Agreements (RSAs) with handset manufacturers, Google had been able to “secure exclusivity” for its search services to the “total exclusion of its competitors”. The CCI held that Google was found to be dominant in all the above-mentioned relevant markets and through its practices, acted in contravention to various subsections of Section 4 of the Competition Act. The Commission imposed a penalty of Rupees 936.44 and Rupees 1338 crore respectively on the company for “abusing its dominant position in market in relation to its Play Store policies” and for engaging in anti-competitive practices with respect to Android mobile devices. Conclusion Smart phone devices require an operating system to run applications and programs. Android is one of such mobile operating systems which was acquired in 2005 by Google. In the present matter, the CCI has perused various practices of Google with respect to licensing of the Android operating system and Google’s various exclusive mobile applications. MADA secured that the most distinguished search entries are pre-installed on Android devices violating Section 4(2)(a)(i) of the Act, which granted Google’s search services, a significant competitive advantage over its competitors. AFA assured that the distribution channels for competitive search services is totally eliminated by restricting OEMs from offering devices based upon Android forks which is violative of Section 4(2)(b)(ii) of the Act. At the same time, RSAs assisted Google in securing exclusivity for its search services to the exclusion of competitors violating 4(2)(c) of the act. The united results of these agreements secured a continuous access to search queries of mobile users which not only helped in protecting the advertisement revenue but also to gain the network effects through improvement of services continuously, to the exclusion of competitors. Markets should be granted to compete upon merits and the onu or burden of proof is on the dominant players that its conduct does not infringe this competition on merits. Due to the reason of the agreements discussed above, Google made sure that users continue to use its search services on mobile devices which promoted un-interrupted growth of advertisement revenue for Google. Further, it also assisted Google in further investment and to improve its services to the exclusion of others. The penalty imposed was in accordance with the data provided by google and also well within the purview of Section 27 of the competition act which provides that it shall be not more than ten percent of the average of the turnover for the last three preceding financial years.
