India: Between The Lines... February, 2018

Last Updated: 23 February 2018
Article by Vaish Associates Advocates


The Competition Commission of India ("CCI") in Limited and Another v. Google LLC and Others (decided on February 8, 2018) imposed a penalty of $21 million on Google, Inc., Google India Private Limited and Google Ireland Limited ("Google") for abusing its dominant position under the Competition Act, 2002 ("the Act").


An information was filed to CCI by Limited and Consumer Unity & Trust Society ("the Informants") under the Act alleging that Google was running its core business of search and advertising in an unfair and discriminatory manner, causing harm to the advertisers and the consumers. Google provides a large number of vertical search services, including video (YouTube), news (Google News), maps (Google Maps), etc. It was averred that Google started mixing many of its vertical results into its organic search results. It was further pointed out that Google's own sites would appear prominently on the search results page irrespective of whether they were the most popular or relevant to the search and it would not place results from any other vertical search sites as prominently in its list of results. It was also alleged that Google was imposing conditions unfair and discriminatory to its advertisers and entering into restrictive agreements. These activities resulted in Google abusing its dominant position in the relevant market in India contravening the provisions of Section 4 of the Act. CCI directed the Directorate General ("DG") to cause an investigation. Accordingly, investigation was conducted against Google and a report was filed before CCI. As a result of this, the issues that came before CCI for examination were:

Issue 1: What is the relevant market(s) in the present case?

Issue 2: Whether Google is dominant in the said relevant market(s)?

Issue 3: Whether Google has abused its dominant position under Section 4 of the Act?

Abuse of dominant position

'Dominant position' means a position of strength enjoyed by an enterprise in the relevant market in India which enables it to operate independently of competitive forces prevailing in the relevant market; or to affect its competitors or consumers or the relevant market in its favour. To analyse dominance, the factors are enumerated in Section 19(4) of the Act. Dominance per se does not constitute a legal wrong, however its abuse is prohibited under the Act. Abuse is stated to occur when an enterprise uses its dominant position in the relevant market in an exclusionary or/and exploitative manner. The Act gives an exhaustive list of practices that constitute abuse of dominant position and, therefore, are prohibited. Under Section 4 of the Act the following constitutes abuse of dominant position:

  1. Directly or indirectly imposing unfair or discriminatory conditions or price (including predatory price) in purchase or sale of goods or service.
  2. Limiting or restricting production of goods or provision of services or market.
  3. Limiting or restricting technical or scientific development relating to goods or services to the prejudice of consumers.
  4. Denying market access in any manner.
  5. Entering into contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts (Imposition of supplementary obligations).
  6. Using its dominant position in one relevant market to enter into, or protect, other relevant market.


DG at the conclusion of its investigation has identified two relevant markets as per Sections 2(r), 2(s)and 2(t) read with Sections19(6) and 19(7) of the Act: market for online general web search services in India and market for online search advertising services in India. Based on the market share of Google, DG found Google to be a dominant enterprise in both the relevant markets. Further, DG submitted that Google biases its search results, imposes unfair conditions on its advertisers and its distribution and intermediation agreements restrict competition. The Informants agreed with the DG report stating that Google's search results were not strictly determined by relevance, it misleads users into believing that its results are driven purely by quality considerations. Further, most vertical search services depend on Google for their survival and Google's search biases threatens their very survival. Therefore it harms competition, reduces innovation, and impedes choice. The Informants alleged that the Google is guilty of unfair discrimination between third party ads and house ads by not disclosing adequate information to third party advertisers. Further, it imposes unfair condition on the trademark owners (particularly those who have notified their trademarks to Google) by allowing their trademarks to be bid as keywords by third parties in online search advertising. It was also alleged that Google has two search distribution agreements with Apple (for its Safari browser) and Mozilla (for its Firefox browser) by which Google is set as the default option in case of web searches. This amounts to a denial of market access to competing search engines and therefore contravenes Section4(2)(c) of the Act. Google also offers online search and advertising services on other websites through intermediation agreements. There are clauses under these agreements that restrict the publishers from showing ads that are "same or substantially similar" to Google's on the same site. This amounts to imposition of unfair conditions by Google on the publishers and results in abuse of dominant position.

In response to these allegations Google argued that DG's market definition for search is flawed because there is no relevant market for general search. Further, Google denied its dominance in the relevant market and contended that it faces substantial competitive constraints in each query category. Google contended that its search results are relevant and according to its quality standards. These search results are neither biased nor do they mislead user or harm competition. Google's other competitors like Yahoo and Bing use similar technology for their search results. If Google ceased to use the technology it uses to develop the search results, it would be forced to retreat to pre-2000 levels of technology which would mean inferior services for Indian users compared to those offered in the rest of the world. In relation to unfair conditions being imposed on its advertisers, Google contended that it treats house ads like third-party ads and strictly prohibits operators of Google's house ads accounts from accessing data or information that is not publicly available to all other advertisers. Further, Google stated that permitting advertisers to bid on trademarked keywords increases competition as it enhances user choice and enables Indian websites to compete against the trademark owner without violating the trademark law. With respect to the distribution agreements that restrict competition, Google alleged that agreements by which the Google search engine appears as a default setting does not deny market access to competitors. Defaults simply provide a convenient way for users to access a preferred search service. Users can easily switch away from the default if they so choose to. Finally, with respect to the intermediation agreements, Google stated that these agreements do not create exclusivity nor do they harm competition. Further, Google does not claim that the non-confusion clause in fact amounts to exclusivity. Google contended that it has never actually interpreted it in this way or that any publisher has ever felt bound by exclusivity.

Observations of CCI

CCI agreed with the submission of DG and held that market for online general web search services in India and market for online search advertising services in India to be two distinct relevant markets. CCI held that the technologies used by Google to obtain search results leads to an unfair diversion of traffic in favor of commercial units (sponsored search results). It has also allocated disproportionate real estate to the commercial units resulting in either pushing down or pushing out of third party verticals who were trying to gain market access. Consequently, users may have been devoid of additional choices of results and therefore, such conduct amounted to an unfair imposition upon the users availing search services. CCI did not agree with DG and the Informant on the issue of unfair conditions on advertisers. CCI found that Google provides sufficient data to advertisers on the performance of their ads and does not discriminate in favor of house ads. It also opined that allowing trademarks to be bid as keywords is advantageous to competition as it is another way that competitors can target their ads to users who have mentioned a rival and is beneficial to consumers as it helps them in reviewing and locating a wide choice with respect to the products. Hence, Google was not found guilty of imposing unfair conditions on its advertisers.

In relation to Google's distribution agreements, CCI held that the findings of DG were based upon the supposition that through such agreements, Google has the "potential" to strengthen its market position to the exclusion of other search engines. However, these findings were unfounded and these agreements are neither exclusive nor had it been established that such arrangements denied market access to any of the competing search engines. Finally, with respect to the intermediation agreements, CCI held that by restricting publishers from partnering with competing search services, Google was denying its competitors access to the search business and further marginalizing competitors and endangering their viability while strengthening its own position. These restrictions amounted to a de-facto imposition of online search exclusivity which resulted in an abuse of its dominant position.


The CCI held that Google was guilty of abusing its dominant position in the market for online general web search and search advertising services in India by using its search designs to influence the search results in a discriminatory manner and entering into intermediation agreements that restrict competition. Google was also asked to cease activities that resulted in search biases, provide disclaimers in case of sponsored search results and not enforce the restrictive clauses in its intermediation agreements with its Indian partners.

VA View

This judgement by CCI, even though subject to appeal, has been welcomed by Indian vertical search engines as it shall be instrumental in creating a level playing field for the smaller competitors in the face of a tech giant stranglehold over local digital business. While the quantum of a $21 million fine imposed by CCI may be small for the global technology giant, the ruling has raised hopes for Indian digital startups that are feeling the heat from Google's dominance of online search.

This is the third international set-back for Google since 2017. In a similar case, the European Union's anti-trust regulators had fined Google to the tune of $2.7 billion in June 2017 for promoting its own products over others. Google had also, earlier in April 2017, settled an anti-trust matter in Russia out of court with a $7.5 million settlement amount. In the U.S. too, Google had narrowly escaped a lawsuit intended to be filed by the Federal Trade Commission in 2012 for unfair business practices by making a few changes to its policies. This competition law judgement sends an important message to the information technology oligarchs worldwide that India is likely to put up a worthy fight to safeguard the interests of its indigenous stakeholders.


The National Company Law Appellate Tribunal ("the NCLAT") in Wiki Kids Limited and Others v. Regional Director, South East Region and Others (decided on December 21, 2017) rejected the scheme of amalgamation of two companies while holding that interest of stakeholders is not being served as envisaged in the scheme.


Avantel Limited, a listed company held 99.9% (ninety nine point nine percent) of the paid up share capital of Wiki Kids Limited, an unlisted company (collectively "the Appellants"). Appellants proposed a scheme of amalgamation ("Scheme") for amalgamation of Wiki Kids Limited into Avantel Limited and moved the Andhra Pradesh High Court seeking directions with respect to the meetings of the shareholders and creditors. As per directions of the Andhra Pradesh High Court, the Appellants convened a meeting and the Scheme was approved by majority shareholders. During this time, a notification was issued by Ministry of Corporate Affairs and the case stood transferred to National Company Law Tribunal, Hyderabad ("the NCLT"). The Appellants filed the second motion petitions with the NCLT and also filed no objection from Bombay Stock Exchange Limited, Securities and Exchange Board of India ("SEBI"), Registrar of Companies, Regional Director and Official Liquidator (collectively "the Respondents"). The NCLT after seeking clarifications from the parties and after perusing the records, rejected the Scheme by concluding that Scheme in question is beneficial only for common promoters of both the companies and public interest was not being served. The Appellants filed an appeal in the NCLAT against the order of the NCLT and following issue was framed for determination:

Issue: Whether order of the NCLT rejecting Scheme is maintainable?


The Appellants argued that they complied with all the requirements/ directions pertaining to Scheme and there was no objection to the Scheme from any concerned authority or stake holders or general public at large. They submitted that the NCLT has completely overlooked the potential business model developed by Wiki Kids Limited, which is a transferee company in the instant case. The Appellants contended that the courts should not supplement its wisdom with the commercial wisdom of the stakeholders. The Registrar of Companies has not raised any objections to the Scheme as confirmed by the affidavit of Regional Director. Appellants relied on the judgment of Supreme Court in case of M/s Miheer H. Mafatlal v. Mafatlal Industries Limited (decided on September 11, 1996), which held that "The Court acts like an umpire in a game of cricket who has to see that both the teams play their according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire."

On behalf of the Respondents, Regional Director, South East Region while submitting that the share exchange ratio was arrived at on the basis of a valuation report issued by an expert and there was no cause for them to disbelieve the premises on which the share exchange ratio was arrived, prayed that the order passed by the NCLT be expunged. Further, SEBI submitted that it is not the authority as per law to do valuation and therefore, the observation made in the impugned order passed by the NCLT is unwarranted. It further stated that it has no means to give its observation on movement of market price of the scrip and since no grievance or objection has been raised, it has no objection to the proposed Scheme. The Official Liquidator also submitted its report with the opinion that the affairs of the Wiki Kids Limited appear to have not been conducted in a manner prejudicial to the interest of the members or to public.

Observations of the NCLAT

The NCLAT admitted the fact that compliance under the law has been done and no objection certificate from the relevant authorities have been obtained. However, after examining the entire Scheme, it concluded that, the Scheme had been designed just to give benefit to promoters of both the companies whereas for other shareholders benefit depends on the future performance. The NCLAT examined the cases referred by the Appellants and distinguished them with the facts of the present case. The NCLAT observed that the NCLT has enough expertise to look into the scheme of amalgamation and it can also see whether it is not just and fair to all shareholders. It has a duty to act in public interest. In matter of the company, what needs to be seen is that the scheme of amalgamation is not only beneficial to a one group, but is in the best interest and protection of all the stakeholders. While examining the scheme of amalgamation, it is desirable for the tribunals not to look into mathematical details but to look broadly at the scheme of amalgamation. The NCLAT concluded that the Scheme was beneficial to promoters only and therefore the NCLT was justified in exercising its discretion to reject the amalgamation.


The NCLAT held that there is no infirmity in impugned order of the NCLT and therefore dismissed the appeal.

VA View

The nuance of this judgement lies in the distinction between the 'public interest' and the 'interest of stakeholders'. The NCLAT made a deliberate attempt to disassociate with the term 'public interest' because it can be subject to wider interpretation and open a doorway to unnecessary objections to such scheme of amalgamation.

In the instant case, the NCLAT while holding that the NCLT has duty to act in public interest, clarified that the scheme of amalgamation should not only benefit the promoters, but serve the interest of all stakeholders. This judgment will serve as a precedent in laying down the principle that even though all the requirements or directions pertaining to a scheme of amalgamation including approval of the shareholders and creditors, are complied with and no objection has been obtained by the concerned regulatory authorities, it would not mean that such a scheme shall be considered to be in the interest of all stakeholders. The judgment also is a departure from the earlier judgments on the issue, wherein it was held that the court is not competent to question the decision of majority shareholders in approving the scheme, and therefore, expands the scope of judicial scrutiny.

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© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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