Google LLC & Anr vs Competition Commission Of India & Ors

Citation: Competition Appeal (AT) No.01 of 2023

Court: National Company Law Tribunal

Bench: Ashok Bhushan

Parties involved:

Appellant- Google LLC and Google India Pvt Ltd

Respondents- Competition Commission of India, Mr Umar Javeed, Ms Sukarma Thapar and Mr. Aaqib Javeed

Facts of the case

Google LLC and Google India Private Limited challenged the order passed by the Competition Commission of India in the case of Mr. Umar Javed and others vs. Google LLC before the National Company Law Tribunal. The Competition Commission of India found Google guilty of engaging in anti-competitive practices in violation of Section 4 of the Competition Act, 2002. Remedies were granted in view of Section 27, imposing a penalty of Rs. 1337 crores on Google under Section 27(b) of the Act. Under Regulation 10 of the CCI Regulations, a preliminary conference was held, and orders were passed under Section 26(1) of the Competition Act, directing the Director General to investigate allegations of abusive and discriminatory conduct under Sections 3 and 4 of the Act.

The Commission, after hearing the matter and assessing the Director General’s report, concluded provisions of Section 4(2) of the Act by mandatory pre-installation of the entire GMS suite under the Mobile Application Distribution Agreement, dominant position in the online search market, leveraged position in the app store for Android OS, and limited technical or scientific development relating to goods and services violative of Section 4(2) (b) (ii).

To address these concerns, CCI granted remedies under Section 27, directing Google to a. Cease anti-competitive activities by not requiring Original Equipment Manufacturers (OEMs) to pre-install Google search services.

1. Cannot offer monetary incentives such as revenue-sharing agreements to gain exclusivity
2. Cannot impose Anti-Fragmentation agreements and Android compatibility commitments to limit innovation and reduce competition
3. Allow users to uninstall pre-installed apps on their devices and choose default search engines.

Google challenged the order in front of the NCLAT, but the order was upheld along with the penalty for violation of Sections 3 and 4, dismissing the plea filed by the appellants.

Issues Raised

1. Whether mandatory pre-installation of the entire G Suite under the MADA perpetuates anti-competitive practices violative of Section 4 (2) (a) (i) and Section 4 (2) (d)?
2. Whether the AFA and ACC agreements limited the ability of manufacturers to develop and sell alternative versions of Android, thereby reducing scientific and technical development under Section 4(2) (b) (ii)?
3. Whether Google restricted competition and deny market access to competing search apps by leveraging its position in the online search market?
4. Whether Google abused its position by tying up the Play Store with the YouTube app and the Google Chrome app to expand into another market?
5. Whether the order of the Competition Commission of India replete with confirmation bias?
6. Whether the order passed by the commission in exercise of its power under Section 27 follows the law?
7. Whether the penalty imposed on the Appellants by the commission based on its findings was disproportionate and excessive?

Arguments by both parties

Key contentions by the Appellant

The learned counsel for the appellant raised multiple submissions in support of the appeal. 1. The conclusion drawn by the commission that MADA is an unfair instrument is incorrect. It is a voluntary and per-device agreement between the OEM and Google with no terms imposed on the OEM. Once signed, the OEMs can decide whether to pre-install the apps. MADA does not curtail manufacturers from pre-installing alternative apps, and device manufacturers’ willingness to sign the MADA is explained by their desire to access Google’s proprietary Apps and services on their devices. None of the OEMs has submitted to the Director General that they do not want to enter into the MADA Agreement, or that there is any compulsion on them to enter into the MADA Agreement.

1. The suite of apps provides OEMs with high-quality and desirable apps for free with negligible storage, and they do not restrict non-Google apps from being pre-installed on OEM devices.
2. Various competing browsers are preinstalled in devices of different manufacturers. The users are free to disable a preinstalled App on their device. Inability to uninstall Apps does not constitute an unfair term on OEMs, nor does it impact competition.
3. According to the commission, ACC/AFA are valid documents, providing a minimum baseline requirement for manufacturers to follow. ACC/AFA are not anti-competitive since they do not restrict OEMs from innovating.
4. The revenue-sharing agreement and MADA are mutually exclusive agreements. It covers only specific devices and does not prohibit market access
5. Google Chrome, which is a search engine of Google, is not required to be made as default search under the MADA. The OEMs are entitled to preinstall as many search engines as they may desire, and ultimately, it is the user who can disable any preinstalled search engine and install any other search engine.
6. MADA does not restrict OEMs from pre-installing competing search engines on their devices. Google Search market share has been consistently high regardless of the device on which the search query is generated and irrespective of whether it has been preinstalled or set as default. The success of the search engine cannot be attributed to its preinstallation under the MADA.

Key contentions by respondents

1. The mandatory pre-installation/ bundling of 11 core applications and premium placement of the same is a clear violation of Section 4(2)(a)(i) and Section 4(2)(d) of the Act. Tying up the Play Store with Google Chrome and YouTube and reducing the incentive for OEMs to pre-install alternative Android forks are anti-competitive practices.
2. The CCI proved that MADA obligations are unfair and discriminatory. The MADA clauses make Google’s 11 bundled core Applications must-have Apps by every OEM using Google Android OS. Thus, it being a voluntary agreement doesn’t matter since these core applications are deemed necessary for the devices.
3. The argument that the MADA, AFA/ACC and RSA and different and exclusive documents is incorrect. Every OEM, which is an RSA signatory, is required to first sign MADA, but for an OEM to sign MADA, it must also sign the AFA/ACC. The above indicates interdependence and interconnection between all three Agreements. The AFA/ACC and MADA allow Google to take complete control of OEM devices
4. Clauses of MADA set out the obligation on OEMs that Google search is set as the default search engine for the remaining search access points available on Android devices. RSA further mandates that OEMs take steps to ensure that Google, once set as default on all search access points on a device, also endures as the exclusive search service on that device. The obligation imposed by Google on OEM through a combination of MADA and RSA converges to ensure that Google Search is both the default and exclusive search service on Android devices
5. The Anti-Fragmentation Agreement (AFA) and Android Compatibility Commitment (ACC) were framed as quality control, but in reality, they prevented OEMs from developing or using forked Android versions, harming innovation and technical progress (violating Section 4(2)(b)(ii)).
6. Google imposes excessive restrictions, which have severely impacted Google’s competitors, who side-load competitive Apps on the Android OS.
7. Google’s argument that users could uninstall its apps was inadequate — the CCI asserted that pre-installation gives Google a head start and artificially influences user behaviour.
8. The Commission’s decision to impose a penalty @ 10% of Google’s turnover is justified. The Commission proceeded with the best possible alternative to compute the amount of penalty after failure of Google to provide relevant data with the intent of ensuring necessary market correction at the earliest.

Final Decision

The National Law Company Tribunal upheld the order passed by the Competition Commission of India, setting aside a few directions and dismissing the appeal filed by Google LLC and Google India Private ltd.

The Tribunal upheld:

• The pre-installation of the entire GMS suite is an abuse of dominant position by the appellants in breach of Section 4(2)(a)(i) and 4(2)(d).
• Making pre-installation of the GMS suite conditional on signing the AFA/ACC for all Android manufacturers to develop alternative Android versions, limiting technical and scientific development, is a breach of Section 4 (2)(b)(ii).
• The Appellant perpetuated its dominant position in the online search market, resulting in the denial of market access for competing search apps in breach of Section 4(2)(c) of the Act.
• Google leveraged its position in the Play Store to protect its dominant position in online general search, thus perpetuating anti-competitive activities.
• The tying up of Google Chrome with the Play Store and YouTube App was an abuse of dominant position in one market to leverage its position in another dominant market.
• The investigation conducted by the Director General was within the regulations of the Competition Commission and did not violate principles of natural justice. ● The penalty of 1337 crores, imposed by the CCI on the appellant, was upheld.

Directions set aside

Directions issued in paragraphs 617.3, 617.9, 617.10 and 617.7 from the CCI’s order were set aside.

Paragraph 617.3: Google should not block access to its Play Services APIs in a way that harms phone manufacturers (OEMs), app developers, or rival companies. The tribunal found this direction excessive and not proportionate to the order passed.

Paragraph 617.7: Google shall not restrict the uninstallation of its pre-installed apps by users. Directions have already been issued to allow OEMs to choose from apps that should be preinstalled, and they are not obliged to preinstall the entire suite of apps. Thus, the direction was set aside as unnecessary.

Paragraph 617.9: Google shall allow the developers of app stores to distribute their app stores through the Play Store. Direction is unsustainable since the commission itself found that Google had not abused its dominant position in the Play Store.

Paragraph 617.10: Google shall not restrict the ability of app developers, in any manner, to distribute their apps through side-loading.

Direction is unnecessary since users are warned during the process of sideloading

Ratio Decideni and Discussion

Google leveraged its position as a dominant player in the operating system and search engine market to further cement its standing by anti-competitive and discriminatory practices. By imposing unfair conditions on OEMs through the mandatory pre-installation of apps, limiting the scientific and technical development of manufacturers, denying market access to competitors, imposing excessive conditions through arrangements such as AFA/ACC and RSA and exploiting its position in the Android OS market to dominate in other relevant sectors. To deliver its decision, the NCLAT relied upon findings of the Competition Commission of India, regulations under the Competition Act, 2002, along with certain judgments such as Excel Crop Care Ltd. vs. CCI, Uber (India) Systems Pvt. Ltd. vs. CCI and Saurabh Tripathi vs. CCI. Practices perpetuated by Google harmed competition and reduced consumer choice.

By upholding the order along with the penalty, the NCLAT emphasised the need to regulate large tech firms and ensure their compliance with the competition laws. The economic market must operate within a legal process, and the competition law must promote competitive growth for businesses to thrive and for consumers to receive maximum choices.

Reference(S):

Google LLC v Competition Commission of India [2023] NCLAT (Competition Appeal (AT) No. 01 of 2023)

The Competition Act 2002 (No. 12 of 2003)

Competition Commission of India (General) Regulations 2009