Android ruling: It’s battleground ‘effects test’ as Google knocks Supreme Court doors on NCLAT’s order

Application of the ‘Effects test’ is a big bone of contention between Big Tech and the country’s competition authorities, with Google now moving the Supreme Court against NCLAT’s March 29 order in the Android ruling on this controversial principle. 

The tech giant’s principal ground of appeal is that the NCLAT failed to “properly apply” the effects test to the CCI order in the matter.

Had NCLAT applied the effects test properly, it would have found that Google’s agreements were incapable of causing any anti-competitive effects, the tech giant submitted in its appeal filed with the Supreme Court recently.

Google has submitted to the apex court that NCLAT correctly held that an effects analysis is required to establish a contravention of Section 4 (abuse of dominance) of the Competition Act, but did not properly apply this test to the Commission’s Order. 

NCLAT had on March 29 substantially upheld the CCI’s Android order of October 20 last year, even while granting relief to the tech giant on four of the 10 non-monetary directions issued by the competition watchdog.

Also read: Google appeals to Supreme Court over NCLAT decision on Android case

CCI TOO HAS APPEALED 

On its part, the Competition Commission of India (CCI) — aggrieved by the same NCLAT order of March 29 — recently filed an appeal before Supreme Court, contending that effects analysis is not required to be undertaken under the law. In fact, CCI’s appeal precedes that of Google’s appeal on the NCLAT order.

Indian competition law does not require the competition watchdog to establish ‘actual effects’ of the anti-competitive conduct of dominant undertakings. 

Even the Competition(Amendment) Bill 2023, which was earlier this year passed by both Houses of Parliament, did not include or stipulate “effects analysis” for proving abuse of dominance, despite the Parliamentary Standing Committee batting for it.

In its appeal, the CCI has also contested the  four remedies set aside by NCLAT, besides maintaining “provisional penalty” of ₹1,337 crore could not be confirmed as “final penalty” as Google did not give true financials.

Put simply, effects-based tests are done to see if a particular business practice of a dominant enterprise has had a harmful effect on competition or not. 

Also read: Big Tech investigation. Competition law: NCLAT ruling on effects analysis leaves CCI in a fix

CCI has so far not adopted “effects doctrine” in adjudication of competition cases.  

CCI has taken the stance that when it comes to abuse of dominance, there is no question of proving effects since the ability to cause adverse effects is in-built once an entity is found to be dominant.

CCI has been going by the “likely effect” and not the actual effect of a business practice. It has been resisting demonstration of actual effects of the anti-competitive conduct, but went about adjudication on the basis of intent behind the actions or behaviour.

WHAT GOOGLE SAYS

In its appeal before the apex court, Google has submitted that NCLAT had erred in assessment of effects in the following respects: (i) NCLAT had ignored the reams of data and evidence submitted by Google that its agreements were incapable of foreclosing rivals. it was contended that the Tribunal erred by upholding the Commission’s findings, while ignoring this evidence. (ii) Tribunal erroneously relied on Google’s alleged market power to suggest that high market shares themselves demonstrate effects. 

Noting that dominance is distinct from effects, Google has contended that NCLAT by equating alleged evidence of dominance (i.e., high market share) under Section 19(4) of the Competition Act with evidence of anti-competitive effects, takes a circular approach. 

For a violation of Section 4 of the Competition Act, it must be demonstrated that: (i) a firm is dominant; (ii) it has engaged in certain conduct as set out under Section 4(2); and (iii) such conduct has caused harm to competition. The Tribunal has conflated the first factor with the third one. 

“The Impugned judgment ought to have demonstrated harm to competition resulting from the alleged conduct at issue. This is a fundamental error and the Impugned Judgment must be set aside on this ground alone,” Google has submitted.

WHAT IS EFFECTS DOCTRINE ?

The “effect doctrine” is a principle in competition law that focuses on the effects of a particular business practice or behaviour, rather than the intent behind it. It is used to determine whether a company has engaged in anti-competitive conduct that harms competition in the marketplace. 

Under the effect doctrine, a company’s actions may be deemed anti-competitive if they have the effect of significantly reducing competition, even if the company did not intend to harm competition. For example, if a company with a dominant market share engages in predatory pricing, it may be found to be in violation of competition law under the effects doctrine, even if it did not intend to harm its competitors.

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