Why Competition Commission of India (CCI) has fined Google?

CCI has in October 2022 fined Google in two separate cases in a span of two weeks. While one related to its anti-competitive practices for its abusive conduct in Android mobile device ecosystem, the other related to its anti-competitive policies around Play Store, where it enjoys a dominant position.

In the Android case, CCI imposed a fine of ₹1,338 crore and in the Play Store case the penalty imposed stood at ₹936.44 crore.

In 2019, CCI had ordered a detailed probe following complaints by consumers of Android-based smartphones. The case on Google Play Store policies was initiated in 2020 based on an information provided by a party that sought anonymity.

What is Android?

Android is an open-source mobile Operating System (OS), which was acquired by Google in 2005. Smartphones need an OS to run applications and programs. Google’s Android is the dominant mobile OS, powering over 95 per cent of India’s smartphones.

Google operates and manages the Android OS and licenses other Google proprietary applications such as Chrome, Gmail, Maps, YouTube, Play Store, etc.

Original Equipment Manufacturers (OEMs) or smartphone manufacturers use Android and through it, Google’s apps on their mobile phones.

What were the restrictions Google placed upon OEMs while licensing Android OS?

Google licences Android as well as its various applications (Play Store, Search, YouTube, Maps, Gmail, etc.) to smartphone OEMs for pre-installation in mobile devices, through various agreements viz., MADA, AFA/ ACC and RSA.

What is Mobile Application Distribution Agreement (MADA)?

OEMs are required to pre-install the entire Google Mobile Suite (GMS) covering 11 applications of Google as a bundle, and place these apps on the home screen of the device.

GMS is a collection of Google applications and Application Programme Interface (APIs) that help support functionality across devices. GMS includes wide range of key Google apps such as Google Maps, Gmail, YouTube, etc.

What is Anti-fragmentation Agreement (AFA)/ Android Compatibility Commitment Agreement (ACC)?

The OEMs which have chosen to pre-install Google’s apps on their mobile devices are restricted from manufacturing and marketing not only smart mobile devices but also any smart device (viz. smart speakers, smart watches, smart TVs, smart navigation system, etc.), on alternative versions of Android.

What is Revenue Sharing Agreement (RSA)?

Google pays share from its advertisement revenue to OEMs in exchange for exclusive installation of its search services on their smart mobile devices.

What were the issues before CCI in the Android case?

The anti-competitive conduct of Google in abusing its dominant position in the market for licensable OS for smart mobile devices in India.

The combined results of the aforesaid agreements ensured that competitors of Google in search services market as well as mobile operating systems market could not find sufficient distribution channel to scale up their business. Accordingly, they were not able to compete with Google and Google acquired a virtual monopoly in these markets. It also resulted in eliminating choice for users. The ultimate aim of Google behind these practices was to protect its advertisement revenues, which is dependent on search services.

What are the key findings of CCI in the Android case?

Mandatory pre-installation of entire Google Mobile Suite (GMS) under MADA (with no option to un-install the same) and their prominent placement was found to be imposition of unfair condition on device manufacturers. CCI also found Google to be abusing its dominant position by making pre-installation of Google’s proprietary apps (particularly Google Play Store) conditional upon signing of AFA/ACC for all android devices manufactured/ distributed/marketed by device manufacturers. This was found by CCI to have reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android i.e., Android forks and thereby limited technical or scientific development to the prejudice of the consumers, in violation of the provisions of competition law.

What was the penalty imposed by CCI in Android case?

CCI imposed a penalty of ₹1,337 crore which was calculated @ 10 per cent of average revenue of Google from its business operations in India.

What corrective measures has CCI sought in the Android case?

OEMs shall not be restrained from (a) choosing from amongst Google’s proprietary applications to be pre-installed and should not be forced to pre-install a bouquet of applications, and (b) deciding the placement of pre-installed apps, on their smart devices.

Google shall not restrict un-installing of its pre-installed apps by the users.

Google shall allow the users, during the initial device setup, to choose their default search engine for all search entry points. Users should have the flexibility to easily set as well as easily change the default settings in their devices, in minimum steps possible.

What has been stand of Google on the charges that it abused its dominant position?

Android users have considerable freedom to customise their phones and to install apps that compete with Google’s besides the ability to quickly and easily move or disable preinstalled apps, including Google’s apps.

In relation to MADA restrictions, Google argued that pre-installation and placement requirements are promotional opportunities for Google for its revenue earning services. By virtue of MADA, Google was able to offer Android OS free to the OEMs.

In relation to AFA/ACC, Google pointed out that the fragmentation of the Android OS would make it difficult for the app developers to make their apps compatible with multiple versions of Android.

In relation to RSAs, Google contended that the payment to OEMs seeking exclusivity for search reduces the cost for OEMs and, therefore, the devices can be sold at more economical price.

What happens next in the Android and Play Store cases?

Google is likely to appeal both the orders of CCI before National Company Law Appellate Tribunal. Typically, the Tribunal stays penalty on deposit of 10% of the penalty amount. However, the other directions issued by CCI are not ordinarily stayed. If unsuccessful, Google can avail a further and final appeal before Supreme Court.

What happens if Google fails to comply with the two orders?

Google can be penalised by CCI for non-compliance and can impose further monetary penalties. Also, CCI can order prosecution of Google and its individuals who are in charge of, and responsible, for conduct of its business.

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