Authored by Zenia Cassinath (Principal Associate)
Competition Commission passes two orders against Google for abuse of dominance and imposes collective fine of INR 2,274 crore.
The Competition Commission of India (“CCI”) has, in a series of two orders dated 20th October 2022 and 25th October 2022, found Google to be in contravention of various provisions of the Competition Act, 2002 that relate to abuse of dominance and has (cumulatively) fined it INR 2,274.2 crore (~ USD 284.275 million) for abusing its dominance. The orders could likely have an impact on the manner in which other players in the industry also conduct their operations.
For manufacturers of smart devices (“OEMs”) to use the Android operating system managed by Google (“Android OS”) and its proprietary apps on their devices and as such gain access to certain ‘must have’ apps on their devices, the OEMs were inter alia:(i) obligated to pre-install a bundle of Google’s proprietary apps (otherwise known as Google Mobile Services “GMS”) and place them in a prominent position on the home screen of the device; (ii) restricted from dealing with any Android Forks (i.e. modified versions of the android open source operating system which does not meet the requirements of Google’s compatibility tests); and (iii) restricted from dealing with search services that competed with Google Search services.
CCI observed that: (A) the mandatory pre-installation and prominent placement of the GMS apps were unfair conditions; (B)Google was able to strengthen its dominant position in the online search market by the mandatory arrangement with OEMs; (C)by linking/tying services together Google has leveraged its dominant position in the Android OS app store market as well as its control over Android ecosystem, to use Android as a vehicle to protect its market position with respect to (i) general search services, (ii) non-operating system specific web browser market (the Google Chrome App) and (iii) online video hosting platforms (YouTube); and (D) technical and scientific development, innovation and R&D was adversely impacted.
CCI passed the order against Google LLC and its indirect subsidiary Google India Private Limited. In addition to the imposition of a penalty of INR 1,337.76 crore (~ USD 167.22 million), Google has been ordered to not indulge in anti-competitive practices and to modify its conduct. Some of the behavioural modifications ordered are set out below:
1. OEMs may choose specific Google’s proprietary apps to be pre-installed and should not be forced to pre-install a bundle of apps along with deciding the placement of the apps. The licensing of Play Store should not be linked with the requirement of pre-installing Google search services, Chrome browser, YouTube, or any other apps of Google.
2. Google should not offer any monetary/ other incentives to, or enter into any arrangement with, OEMs for ensuring exclusivity for its search services.
3. Google should not restrict the uninstalling of its pre-installed apps by the users and set up default search engine.
4. Developers of app stores should be permitted to distribute their app stores through Play Store.
5. Anti-competitive clauses of agreements entered into with OEMs in India should not be enforced by Google.
6. A period of three months has been provided to implement necessary changes in its practices and/or modify the relevant agreements and to submit a compliance report to the Commission in this regard.
Abuse of dominance in relation to Google Play’s Billing System
To distribute an app through the Google Play Store, app developers have to agree to the terms and conditions which also included Google Play’s Payments Policy. Consequently, the app developers were mandatorily and exclusively required to use Google Play’s Billing System (“GPBS”) for receiving payments for apps distributed through the Google Play Store and in-app purchases, failing which app developers were not permitted to list their apps on the Play Store. The app developers were also restricted from informing alternative modes of making purchases to their customers.
CCI observed that: (A) access to the Play Store is dependent on mandatory usage of GPBS for payments, which is an unfair condition on app developers and also discriminatory since the same condition is not applicable for its proprietary app such as, YouTube; (B) this would have negative impact on improvements and innovative solutions of third-party payment processors / aggregators and denies payment aggregators/ payment gateways access to the market; (C) by levying high fees on third-party apps and not charging the same to its own apps, Google was able to increase its competitor’s costs and Google’s access to the data generated by third-party apps, could disadvantage its competitors; and (D) Google had seamlessly integrated Google Pay with the Play Store whereas other UPI payment systems could only be used by adopting further processes by the customer, this could result in increased use of Google Pay due to this seamless technology and denial of market access to competitors.
CCI passed the order against Alphabet Inc, Google LLC, Google Ireland Limited, Google India Private Limited and Google India Digital Services Private Limited. In addition to imposition of penalty of INR 936.44 crore (~ USD 117.055 million). Google has been ordered to not indulge in anti-competitive practices and undertake inter alia the following behavioural modifications:
1. App developers should not be restricted from using any third-party billing / payment processing services, should not be discriminated, and no adverse measures should be imposed against apps using third-party billing/ payment processing services.
2. App developers should not be restricted from communicating with their users to promote their apps and offerings, in any manner.
3. Google should set out a transparent policy on data that is collected on its platform, use of such data, and the potential and actual sharing of such data with app developers or other entities. The competitively relevant transaction / consumer data of apps generated and acquired through GPBS, should not be leveraged by Google to further its competitive advantage. Google should also provide access to the app developer of the data that has been generated through the concerned app, subject to adequate safeguards.
4. Google should not impose any condition on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to the app developers. There should be transparency in communicating to app developers, services provided, and corresponding fees charged. The payment policy and criteria should be published.