Provisional penalty. Did Google fudge financial data before CCI?

The Competition Commission of India’s latest move imposing a whopping penalty of ₹1,338 crore on internet giant Google for abusing its dominant position in multiple markets in the Android mobile device ecosystem has raised concerns about the correctness of the financial data presented by it. 

The doubts about the correctness of the financial data — which is key for computation of penalty — had prompted the competition watchdog, for the first time ever in an anti-trust order, impose a “provisional penalty”, sources close to the development said. 

The CCI has required Google to provide within 30 days supporting documents to back the financial information provided to the regulator.

Click here to read the CCI order

‘Glaring inconsistencies’

In fact, CCI has noted that there were “glaring inconsistencies” and “wide disclaimers” in presenting revenue data points by Google, they added. However, in the interest of justice and with an intent of ensuring necessary market correction at the earliest, the CCI “quantified the provisional monetary penalties on the basis of data presented by Google”, keeping the scope for revision of penalties open, sources said.

The order of CCI records that “From the perusal of the submissions by Google, the Commission notes that Google has made significant upward revisions in the financial data presented vide its submission dated 11.10.2022 vis-à-vis that of 17.12.2021. However, this data is still subject to multiple caveats, disclaimers, assumptions, exclusions, etc. Google while presenting the instant data has again qualified the same with various caveats...” 

Again, at another place, the order records that “Even the data in respect of revenue generated or arising/ accruing from their entire business operations in India, has been caveated with the following….” 

The order further goes on to note that “…the sum total of revenue of various segments/ heads in India as given by Google for the FY 2020-21 is xxx (data redacted) whereas, its total revenue from entire business from India operations for FY 2020-21 is ₹Xxx (data redacted) approx. i.e., the sum total of various heads is more than the total revenue for FY 2020-21. 

This clearly shows that data has not been presented by Google in a reliable manner, sources said. In this regard, it is observed that the Commission has given an unambiguous direction to Google that the data should be supported by certificates of Chartered Accountants.

However, Google has not provided the same and rather has provided certificates of its own officers, they added.

CCI took serious note of such “glaring inconsistencies” and “wide disclaimers” in presenting various data points by Google, which were also not supported by affidavits of external auditors, and was constrained to observe that despite commanding enormous resources, Google has failed to provide the data in the manner sought by CCI despite grant of sufficient time, as sought by it. 

Experts point out that such wilful default by Google may render it liable to be proceeded for non-compliance under the Competition Act which provides that if any person fails to comply, without reasonable cause, with a direction given by CCI, such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of ₹1 crore, as may be determined by CCI. 

Besides, the law provides for the prosecution of defaulters by punishing such conduct with imprisonment for a term which may extend to three years, or with a fine which may extend to ₹25 crore or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit.

Major setback, says Google

Meanwhile, reacting to the CCI order, a Google spokesperson said that the CCI decision and imposition of penalty is a major setback for Indian consumers and businesses. 

“Android has created more choice for everyone, and supports thousands of successful businesses in India and around the world. 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. We will review the decision to evaluate next steps”, the spokesperson said.

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