Sakshi Sharma

Introduction

Google LLC and Google India Private Limited (‘Google’) filed a competition appeal [Competition Appeal (AT) No. 01 of 2023, new delhi] challenging the order passed by the Competition Commission of India (CCI), which had found Google to have abused its dominant position in violation of Section 4(2)(a)(i), Section 4(2)(b)(ii), Section 4(2)(c), Section 4(2)(d) and Section 4(2)(e) of the Competition Act, 2002 (‘Act’). The CCI, in its order dated 20.10.2022, had directed Google to stop engaging in anti-competitive practices that were found to be in contravention of Section 4 of the Competition Act. Further, it had imposed a penalty of INR 1337.76 crore on Google under Section 27(b) of the Act. Aggrieved by this order of the CCI, Google filed an appeal in National Company Law Appellate Tribunal (‘NCLAT’).

In this case, the NCLAT had refused to grant interim relief to Google and directed it to deposit 10% of the INR 936 crore penalty in an order dated 04-01-2023. Google challenged this decision before the Supreme Court, but the court refused to interfere with the NCLAT’s order in an order dated 19-01-2023.

Upon exercising its competition appeal jurisdiction, the division bench of Justice Ashok Bhushan and Dr. Alok Srivastava upheld the penalty of INR 1337.76 crore imposed by the CCI on Google for its abuse of dominant position in the Android mobile device ecosystem. However, certain key directions issued by the CCI were set aside by the bench.

Background of the case

On August 28, 2018, Umar Javeed, Sukarma Thapar, and Aaqib Javeed filed a complaint under Section 19(1)(a) of the Act, 2002 with the Competition Commission of India, claiming that Google is dominant in India’s market for android-based smartphones and that they engage in anti-competitive practices. The complaint outlined four relevant markets, including Licensable Smart Mobile OS, App Stores for Android Mobile OS, Online Video Hosting Platform (OVHP), and Online General Web Search Service, with India as the relevant geographical market.

After reviewing the complaint, the CCI held a preliminary conference on January 8, 2019, and issued an order on April 16, 2019, directing the Director General to conduct an investigation under Section 26(1) of the Act. After listening to all involved parties and reviewing the evidence, the Commission determined that Google had violated several provisions of Section 4(2) of the Act. Consequently, Google was fined Rs.1337.76 Crore for breaking Section 4 of the Act. The Commission instructed Google to pay the penalty within 60 days of receiving the order.

Decision by CCI

The Commission had identified several anti-competitive practices by Google, such as the mandatory pre-installation of the entire Google Mobile Suite (‘GMS’) on devices, which denied device manufacturers the option to uninstall these apps, thus imposing unfair conditions on them. Google’s dominance in the online search market also resulted in the denial of market access for competing search apps. Moreover, Google leveraged its dominant position in the app store market for Android OS to protect its position in online general search and to enter and protect its position in the online video hosting platform (OVHP) market through YouTube. By making the pre-installation of Google’s proprietary apps, particularly Google Play Store, mandatory, Google reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android.

In order to modify its conduct, the Commission issued several directions to Google, including that OEMs should not be forced to pre-install a bouquet of applications and shall not be restrained from deciding the placement of pre-installed apps on their smart devices. Additionally, licensing of Play Store to OEMs shall not be linked with the requirement of pre-installing Google search services, Chrome, YouTube, Google Maps, Gmail, or any other app. Google shall not offer any monetary or other incentives to OEMs for ensuring exclusivity for its search services and shall not incentivize or obligate OEMs for not selling smart devices based on Android forks. The users shall be allowed to uninstall pre-installed apps and choose their default search engine for all search entry points during the initial device setup. Users should have the flexibility to easily set as well as easily change the default settings.

Issues Involved in the Appeal

1. Whether for proving abuse of dominant position under Section 4 of the Competition Act, 2002 any ‘effect analysis’ of anti-competitive conduct is required to be done? If yes, what is the test to be employed?
2. Whether pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs, which is an abuse of dominant position by the Appellant resulting in breach of Section 4(2)(a)(i) and 4(2)(d) of the Act?
3. Whether the Appellant has perpetuated its dominant position in the Online Search Market resulting in denial of market access for competing Search Apps in breach of Section 4(2)(c) of the Act?
4. Whether the investigation conducted by the Director General is vitiated due to DG framing leading questions to elicit information?
5. Whether the penalty imposed on the Appellants by the Commission in exercise of its power under Section 27(b) was not based on the relevant turnover of the Appellants, disproportionate and excessive?

Contention of Google

Google argued that the CCI’s order suffered from confirmation bias and was based on a similar order of the European Commission in 2018. The company claimed that its agreements did not prevent equipment manufacturers from pre-installing competing apps with similar functionality. Additionally, Google argued that dominance in a market does not necessarily constitute abuse of dominance, and its popularity among users is due to its effectiveness.

Contention of CCI

On the other hand, the CCI contended that Google’s policies in India could be summarized as “digital feudalism,” “digital slavery,” “technological captivity,” “chokepoint capitalism,” and “consumer exploitation.” The regulator claimed that the companies that did not sign Google’s contract had gone extinct, and that Google abused its dominant position in the Android Operating System (OS) market by restricting the entry of other applications in its Play Store.

Since Google controls almost 98% of the smartphone market in India, the CCI believed that if Google was found to be violating competition laws, the regulator had a duty to direct the company to mend its ways. Thus, the CCI exercised its powers under Section 27 of the Competition Act and directed Google to cease and desist from indulging in anti-competitive practices that were found to be in contravention of the provisions of Section 4 of the Competition Act.

Decision by NCLAT

Having heard the arguments of involved parties and considering the relevant evidence, NCLAT held that:

1. The Tribunal addressed the first issue and stated that for proving abuse of dominance under Section 4, effective analysis was required to be done and the test to be employed was whether the abusive conduct is anti-competitive or not. The Commission had considered the materials on the record and submissions of the parties with respect to each of the market and recorded findings and conclusions after considering the evidence on record. Hence, the submission of the appellant that the order of the Commission was replete with confirmation bias was not accepted by the Tribunal.
2. The pre-installation of the entire Google Mobile Services (‘GMS’) Suite amounted to imposing an unfair condition on (‘OEMs’) which was an abuse of dominant position by the appellants resulting in the breach of Section 4(2)(a)(i) and 4(2)(d) of the Competition Act. The CCI, while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d) of the Competition Act had considered the evidence on record and had returned a finding that the conduct of the appellant harms the competition.
3. The appellants, by making pre-installation of GMS Suite conditional to signing of Anti Fragmentation Agreement (‘AFA’) or Android Compatibility Commitment (‘ACC’) for all Android device manufacturers, had reduced the ability and incentive of devices manufacturers to develop and sell self-device operating or alternative versions of Android and Android Forks, thereby limiting technical and scientific development, which was a breach of provisions of Section 4(2)(b)(ii) of the Competition Act.
4. The CCI while returning its finding considered the evidence on record in respect of Section 4(2)(b)(ii) of the Competition Act and also returned a finding on the anti-competitive conduct of the appellant. The appellant had perpetuated its dominant position in the Online Search Market resulting in the denial of market access for competing Search Apps in breach of Section 4(2)(c) of the Competition Act. It was noted that CCI while returning its finding on the breach of Section 4(2)(c) of the Competition Act had considered the evidence on record and had also recorded a finding regarding the appellant’s conduct being anti-competitive.
5. The appellant had leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Competition Act, as per the Tribunal’s view. CCI while returning its finding had considered the evidence on record and had also returned a finding regarding the appellants conduct being anti-competitive. The appellant had abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated the provisions of Section 4(2)(e) of the Competition Act, as per the Bench. CCI while returning its finding had considered the evidence on record and had also returned a finding regarding the appellants conduct being anti-competitive.
6. The appellant had also abused its dominant position by tying up of YouTube App with Play Store and thereby violated provisions of Section 4(2)(e) of the Competition Act, as per the Bench. CCI while returning its finding had considered the evidence on record and had also returned a finding regarding the appellants’ conduct being anti-competitive.
7. The investigation conducted by the Director General did not violate the principle of natural justice, according to the Bench. The investigation conducted by the Director General would not be vitiated due to the Director General framing leading questions to elicit information. The impugned order by CCI was not vitiated on the ground that CCI did not consist of a Judicial Member, as per the Bench. The Bench upheld the other directions issued by CCI which were in accordance with the findings.
8. The Tribunal has issued an order directing the removal of specific directions outlined in paragraphs 617.3, 617.7, 617.9, and 617.10 from the previous order passed by the CCI. However, the Tribunal has upheld other directions stated in paragraph 617, which were found to be in line with the CCI’s findings.
9. The Directions which have been ordered to be removed are:

Paragraph 617.3: Google to not deny access to its play services Application Programming Interface (API) to disadvantage OEMs, app developers, and existing or potential competitors.

Paragraph 617.7: Google to not restrict users from uninstalling pre-installed apps.    Paragraph 617.9: Google allows app store developers to distribute their app stores through Google Play Store.

Paragraph 617.10: Google to not restrict app developers in any manner to distribute their apps through side-loading.

Way Forward

The Bench has affirmed that the CCI had accurately calculated the “relevant turnover” by considering the total revenue generated in India from various segments or heads of Google India’s operations of Android OS based mobiles. It agreed with the CCI’s decision to determine the monetary penalties based on the data presented by Google. Therefore, the appellant has been instructed to deposit the penalty amount after adjusting the 10% already deposited under the order dated 04.01.2023, within 30 days from the date of this order i.e. 20.03.2023.