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Baba’s Explainer – Anti-trust cases against Google

  • IASbaba
  • October 28, 2022
  • 0
Economics, Governance
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Syllabus

  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
  • GS-3: Inclusive growth and issues arising from it.

Context: The Competition Commission of India (CCI) has imposed a provisional fine of ₹1,337.76 crore on Alphabet-owned Google for “abusing its dominant position” in markets related to the Android mobile device ecosystem.

What is Competition Commission of India?
  • It is a statutory body established in 2003 and became fully functional in 2009.
  • It is responsible for enforcing The Competition Act, 2002 throughout India.
    • The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises.
    • The Act regulates combinations (acquisition, acquiring of control and Merger and acquisition), which causes or likely to cause an appreciable adverse effect on competition within India.
  • CCI consists of a Chairperson and 6 Members appointed by the Central Government.
    • Eligibility: Person should be 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, commerce, law, finance.
  • It is the duty of the Commission to:
    • eliminate practices having adverse effect on competition
    • promote and sustain competition.
    • protect the interests of consumers.
    • ensure freedom of trade in the markets of India.

Some of the recent Judgements of CCI

  • Cement companies: CCI imposed a fine of ₹63.07 billion (US$910 million) on 11 cement companies for cartelisation in June 2012.
  • BCCI: CCI imposed a penalty of ₹522 million (US$7.6 million) on the BCCI in 2013 for misusing its dominant position.
  • Telecos: CCI ordered a probe into the functioning of Cellular Operators Association of India (COAI) following a complaint filed by Reliance Jio against the cartelization by its rivals Bharti Airtel, Vodafone India and Idea cellular.
  • Google: The commission ordered an antitrust probe against Google for abusing its dominant position with Android to block market rivals.
How did Google violate the competition law in India?
  • The CCI is empowered to check whether companies especially large tech companies are not eliminating healthy competition in the market and creating a monopoly.
  • The CCI acknowledges that disruptive marketing strategies that come with the digital ecosystem often help remove the inefficiencies in the traditional markets and that regulation should not stifle innovation.
  • CCI has, however, tried to navigate the challenges in antitrust jurisprudence vis-a-vis the emerging digital industry.
  • The current case by CCI against Google started in 2019 and since then the regulator has examined various practices of the tech giant with respect to various relevant markets.
  • The first is regarding the Android operating system (OS).
    • Smartphones need an OS to run applications and programs and one of the most prominent operating systems is Android which was acquired by Google in 2005.
    • It is estimated that 97% of India’s 600 million smartphones are powered by Google’s Android OS.
    • Google operates and manages the Android OS and licenses other Google proprietary applications such as Chrome and Play Store.
    • Original Equipment Manufacturers (OEMs) or smartphone companies like Samsung then use this OS and through it, Google’s apps on their mobile phones.
    • Now, while the Android source code is openly accessible and covers the basic features of a smartphone, it does not include Google’s proprietary applications. To access and use these applications in their mobile handsets, manufacturers have to enter into agreements with Google that govern their rights and obligations.
    • The CCI held that through these agreements Google made sure that the manufacturers who wished to use Google’s proprietary apps had to use Google’s version of Android.
    • The device manufacturers are given a percentage of Google’s search revenue from their devices as consideration for pre-installation of Google apps. This brings down the costs for device manufacturers while also allowing Google to increase its user-base.
    • Thus, the Android alternative developers (remember it is an open source code where anyone can use it) could not find distribution channels for their alternate android OSs as almost all the OEMs were tied with Google.
    • Also, these agreements made sure that the whole Google Mobile Suite (GMS) came mandatorily pre-installed on Android devices with no option to un-install the same.
    • With these agreements in place, competitors never stood a chance to compete effectively with Google and ultimately these agreements resulted in foreclosing the market for them as well as eliminating choice for users
  • Secondly, Google is the dominant player in the app store market for Android OS worldwide.
    • According to the EU, the Google Play Store accounts for more than 90% of apps downloaded on Android devices globally.
    • The CCI held that through the mandatory pre-installation of the Google Suite (which includes Play Store), consumers did not have the option of side-loading or downloading apps outside of the play store.
  • Third is the company’s dominance in the general internet search market and the browser market (meaning engines like Chrome, Firefox, etc.).
    • As of 2021, Google has a 92% share in the global search engine market. Therefore, by having Revenue Sharing Agreements (RSAs) with mobile manufacturers, Google was able to “secure exclusivity” for its search services to the “total exclusion of competitors”.
    • The CCI said that these agreements with OEMs guaranteed Google continuous access to search queries of mobile users, helping not only in protecting its advertisement revenue but also helped in continuous improvement of services, to the exclusion of competitors.
    • This was also compounded by making Google the default search browser in Android smartphones.
    • Due to Google’s various agreements with manufacturers, another one of its revenue-earning apps —Youtube, gained a significant edge over competitors in the online video hosting platforms market.
What has been the Google’s response?
  • Google has stated that “The CCI’s decision is a major setback for Indian consumers and businesses, opening serious security risks for Indians who trust Android’s security features, and raising the cost of mobile devices for Indians”.
  • Google argued that it was not the dominant player in the market since consumers had a choice between its Android devices and Apple’s iOS operating system.
  • However, the CCI distinguished between the closed-source, non-licensable iOS and open-source, Android which can be licensed.
What has the CCI told Google to change in the Android smartphones ecosystem?

Apart from the “cease and desist” order against Google for indulging in anti-competitive practices, the CCI has directed it to take certain measures with regard to the Android OS ecosystem. Some of the major directions include:

  • Smartphone makers should be allowed to choose which of Google’s proprietary apps they want to install and should not be forced to pre-install the whole boquet.
  • The licensing of Play Store to manufacturers should not be linked with requirements to pre-install Google search services, Chrome browser, YouTube, Google Maps, Gmail or any other Google apps
  • Google should allow users, during the initial device setup, to choose their default search engine for all search entry points etc.
  • Google shall not deny access to its Play Services APIs (which allows two programs to interact with each other) to disadvantage manufacturers, app developers and its existing or potential competitors.
    • This, the Commission said, would ensure interoperability of apps between Google Android OS as well as alternate versions of Android and by virtue of this remedy, the app developers would be able to port their apps easily onto Android alternatives.
  • Google should not offer any monetary/ other incentives to OEMs such as those given in revenue-sharing agreements for ensuring exclusivity for its search services.
  • Google shall not impose anti-fragmentation obligations on OEMs, which means those manufacturers using an alternate Android version should be able to get access to Google’s proprietary apps and vice versa.
  • Google shall not restrict un-installing of its pre-installed apps by the users.

The CCI also noted that there were “glaring inconsistencies” in the revenue data presented by Google and gave it 30 days to provide the requisite financial details and supporting documents. It also said that the over ₹1,300 penalty was provisional, meaning it could increase.

What are the other antitrust cases against Google in India and internationally?

Google is already facing two other antitrust probes by the CCI.

  • In June 2021, the Commission ordered a probe into allegations that Google had abused its dominant position with Android in India’s smart television market. The CCI had said it prima facie opined that certain agreements between Google and smart TV manufacturers amounted to abuse of the dominant position by Google.
  • In November 2020, the CCI initiated a probe to look into allegations that Google abused its dominant position to push its payment system.
    • CCI started the probe in relation to the mandatory use of the Google billing system by app developers for charging their users for purchases of apps on the Play Store
    • In what was seen as a move to soften the blow from the regulator, Google decided to introduce an option of a third-party billing system on its play store on a pilot basis.
  • Did you know that Google faced three probes each in the U.S. and the European Union regarding its antitrust practices in search and search-related activities as well as advertising sales markets. The EU suits have altogether imposed fines totalling around $8 billion on Google.

Main Practice Question: How is Competition Commission of India ensuring that the digital market remains free and fair? Explain in the context of the fine imposed by CCI on Google.

Note: Write answer his question in the comment section.


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