India: Google's Failure To Show Cause To CCI Costs Rs. 10 Million

  • CCI holds that Google USA and Google India failed to cooperate with Director General in relation to investigations. Adverse inference drawn against Google USA and Google India due to their failure to submit information despite sufficient time.
  • Fine of Rs. 10 Million imposed on Google USA and Google India due to non-compliance with directions of Director General.
  • Competition Commission however does not set out principles for imposition of fine.

Background

On March 26, 2014 the Competition Commission of India ("CCI/Commission") passed an order imposing a fine of Rs. 10 Million on Google USA and Google India ("Google") as they had failed to cooperate with the Director General ("DG") in relation to an investigation ("CCI Order").1 The DG was acting pursuant to information filed by Consim Info Private Limited and Consumer Unity & Trust Society ("Informants").

The imposition of penalty arose in the context of collateral proceedings initiated by the DG since Google, allegedly, was not cooperating with the DG. On an examination of the various notices sent by the DG, the replies sent by Google, the information supplied and the conduct of Google, CCI held that Google failed to show cause as to why penalty ought not to be imposed on them.

The present ruling is only confined to imposition of penalty due to a party's failure to comply with directions of the DG under Section 43 of the Competition Act, 2002 ("Competition Act"). Google will have to comply with the directions of the DG and submit the relevant information. After completion of investigation, CCI will examine whether there is a violation of Section 3 and Section 4 of the Competition Act.

Facts

Informants filed cases alleging that Google enjoyed a dominant position and was conducting its business in a manner that was discriminatory, by manipulating algorithms and was causing harm to advertisers and indirectly consumers. It was further alleged that by using a number of vertical services such as Youtube, Google News, Google Maps etc., it mixed many vertical results into generic search results. Informants contended manipulation in search results and that there was also denial of access and creation of entry barriers for competing search engines etc. CCI concluded that prima facie Google's had abused its dominant position and that a case had been made within the meaning of Section 26 (1) of the Competition Act. Consequently, DG was directed to carry out investigation in respect of Case No. 7 of 2012 and Case No. 30 of 2012.2

Show Cause Notice

During investigations DG sought information through several notices in respect of which DG contended that Google did not comply.3 Due to Google's failure to comply with the notices, DG reported the matter to CCI. It is important to note that CCI has taken a serious note of the conduct of Google and observed that Google showed an attitude of 'either withholding the information' or 'furnishing only a part of the information sought'. On account of this, CCI inferred that there was a 'wilful disregard' on the part of Google to comply with the information requests of DG. CCI issued a show cause notice to Google as to why measures under Section 43 of the Competition Act should not be taken against Google ("Show Cause Notice"). Section 43 of the Competition Act provides that if a person to whom directions have been issued, either by CCI or the DG, fails to comply with such directions, CCI may impose a fine of up to Rs. 1 Lakh per day of continuing non-compliance subject to a maximum of Rs. 10 Million.

Contentions in the Section 43 Proceeding

The issue before CCI was confined solely to Google's compliance with the Show Cause Notice and not the substantive issues in the cases filed. In its defence, Google contended that Google there wasn't unreasonable delay on its part. Google sought to substantiate its bona fides by demonstrating that it had in fact cooperated with the DG. On the substantial queries raised by the DG, Google contended that the queries raised by DG were quite complex, broadly-worded, reaching into several commercial aspects/transactions and hence these required time to obtain information. Google contended that in neither case, a timeline of alleged violations was indicated and consequently, Google was required to obtain information for an undefined period. Google further contended that the investigation was open-ended and that the investigation expanded over time and covered every facet of Google's business. With passage of time, information requests became more frequent and with shorter response times and all of this made the process of collecting information and presenting the same before the DG in a user-friendly manner challenging.

Google provided a timeline setting out the sequence of events to demonstrate that it had been cooperating with DG. While some delay was acknowledged, it was contended that this was unintentional and only for the purpose of ensuring that complete information was submitted. Google also sought to allay CCI's apprehensions that it was withholding any information at all and in fact was taking all measures possible to furnish information and cooperate with DG.

Google also addressed CCI on issues of law and submitted that for the purpose of exercising jurisdiction under Section 43 of the Competition Act, there should have been non-compliance and not belated disclosure, relying on Kingfisher Airlines Limited v. Competition Commission of India & Ors.4 Google also contended that the Supreme Court had recognized the principle that penalty was to be imposed only in cases of deliberate non-compliance. Factually, Google sought to corroborate its contentions with the various submissions and information provided by Google. Google also placed reliance on Section 43 of the Competition Act and contended that the provision itself contemplated 'reasonable cause' and hence CCI ought to determine with the delay in submission by Google was with cause or without cause.

CCI Order

CCI identified following broad topics on which DG had requested information:

  • Information related to algorithmic changes – CCI concluded that as on 15.01.2014, Google had not yet supplied information relating to algorithmic changes;
  • Non-submission of agreements – CCI concluded that in spite of extensions, Google did not supply the requisite information;
  • Non-submission of documents relating to Octathorpe and Adsense Account – CCI concluded that Google had not submitted complete documents relating to the query raised by DG;
  • Non-submission of documents relating to termination/suspension of tech-support Adword accounts – CCI concluded that Google did not submit complete documents, although some documents were indeed filed;
  • Non-furnishing of information pursuant to depositions – CCI concluded that Google failed to produce documents after making oral depositions . CCI noted that Google neither s ought additional time nor made any communication.

In view of the above, CCI concluded that Google failed to comply with directions of DG and that Google had in fact engaged in dilatory tactics to procrastinate the investigation. CCI rejected Google's contentions that the queries were too broad, covered wide-range of subjects and drew an adverse inference against Google merely because Google conceded that there was delay. Ironically, even though Google in a show of bona fides acknowledged delay, albeit with cause, Google's acknowledgement of delay has been held against it. CCI concluded that Google had given 'frivolous' and 'vexatious' pleas in an attempt to stall investigation and Google sought to avoid compliance. CCI concluded that Google had failed to demonstrate 'reasonable cause' as per Section 43 of the Competition Act.

However, in view of the submissions already made by Google, CCI imposed a fine of Rs. 10 Million, to be deposited within 60 days from receipt of the CCI Order. CCI further notes that in the event that Google failed to comply with future directions from either the DG or CCI, additional fine would be imposed – CCI held that each and every act of non-compliance of Google would give the DG fresh cause of action against Google.

Analysis

Response to show cause notices requires extreme care. It is imperative for companies to ensure satisfactory compliance while responding to show cause notices (See Nishith Desai Associate's article on responding to show cause notices)5 in form and substance. Although from Google's contentions it would seem that Google did all that it could reasonably be expected to, it would seem that CCI has unfairly drawn an adverse inference against the belated submission / non-submission. The rejection of Google's argument that a distinction should be made between wilful default and belated submissions would seem harsh. CCI has also not provided any rationale on the basis of which the maximum amount of Rs. 10 Million has been imposed, particularly, when CCI notes that Google's submission of some information was in fact a mitigating circumstance.

CCI has shown willingness to exercise all powers that it may have to ensure objectives of CCI are fulfilled. Consequently, companies should take notices from CCI (and for that matter, any sectoral regulator) extremely seriously as the consequences of non-compliance can be quite drastic.

Google has the right to appeal under Section 53B of the Competition Act. Given the adverse inferences drawn, Google may be tempted to challenge the CCI Order. For its part, we can expect CCI to get stricter with other companies and not hesitate to impose fine under the Competition Act. Imposition of fines and drawing adverse inferences are harsh measures and it would be reasonable to expect that CCI comes out with guidelines on imposing fines.

Footnotes

1 Case No. 7 of 2012, In Re: Consim Info Private Limited v. Google Inc., USA and Google India Private Limited and Case No. 30 of 2012, Consumer Unity & Trust Society (CUTS) v. Google Inc., USA and Google India Private Limited.

2 CCI Order dated June 20, 2012.

3 Show Cause Notice references letters dated 12.02.2013, 26.09.2013, 11.10.2013, 13.11.2013, 27.11.2013, 03.12.2013 and 21.12.2013.

4 Order of COMPAT in Appeal NO. 15 of 2012, dated 29.08.2012.

5 Show Cause for Litigation, Vivek Kathpalia and M.S. Ananth, Nishith Desai Associates, Hindu Business Line, available at http://www.thehindubusinessline.com/opinion/show-cause-for-litigation/article4891879.ece.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Pratibha Jain
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions