India: Competition Commission Of India And Google: Regulatory Overreach?

1. INTRODUCTION

The Competition Commission of India ("CCI") directed the Director General ("DG") to conduct an investigation¹ into the alleged anti-competitive conduct of Google in the market concerning smart television ("Smart TV") ("CCI Order"). The complaint was filed by two individuals ("Complainants"), who are consumers of Android-based smartphones and Smart TV devices.

The Complainants alleged that Google abused its dominance and imposed vertical restraints on Smart TV and smart mobile device original equipment manufacturers ("OEMs")² by way of television app distribution agreement ("TADA") and Android compatibility commitment ("ACC") which inter alia resulted in: (i) bundling of Google's play store ("Play Store") with the operating system ("OS") for television devices, i.e. Android TV; (ii) pre-installation of Play Store in Smart TV devices; (iii) restricting OEMs to deal with competing forked Android OS; (iv) non-availability of Play Store to other licensable OS, etc.

2. DELINEATION OF RELEVANT MARKET

Given that: (i) from the OEM's perspective, only those OS which are accessible to them through licensing should be considered for delineating the relevant market; and (ii) the CCI in its earlier order³ had differentiated between licensable and non-licensable OS, the CCI delineated the primary relevant market as "market for licensable smart TV device operating systems in India" ("Primary RM"). Further, as OEMs cannot pre-install entertainment apps⁴ and it is critical to offer an app store along with Smart TV for users, the CCI delineated the secondary relevant market as "market for app store for android smart TV operating systems in India" ("Secondary RM") (collectively referred to as "Relevant Markets").

3. FINDINGS ON DOMINANCE

As the market share data of licensable Smart TV OS suppliers (i.e., in the Primary RM) was not readily available, the CCI relied upon the market share of Smart TV OEMs and observed that the market share of Android TV OS appears to be approximately 90%⁵. Further, the CCI observed that the Relevant Markets exhibit strong network effects (attracting users, app developers, and OEMs) resulting in entry barriers for Google's competitors. Thus, the CCI found Google to be dominant in the Primary RM.

In relation to the Secondary RM, the CCI disagreed with Google's argument that the Complainants relied on false equivalences between smartphones and Smart TVs to assert that Play Store is a must-have app and observed that Play Store appears to be a 'must-have' app, and all Android TV-based Smart TVs have it pre-installed. Accordingly, Google was found to be dominant in the Secondary RM too.⁶

4. FINDINGS ON ABUSE OF DOMINANCE

The CCI observed that as Play Store is a 'must-have' app, in its absence, the marketability of Android devices may get restricted. Given that pre-installation of Play Store is conditional upon execution of the ACC for all Android devices, such conduct of Google reduces the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android – thereby, limiting technical or scientific development relating to goods or services to the prejudice of consumers. Additionally, the ACC prevents OEMs from dealing with any other device which operates on a competing forked Android OS, resulting in a denial of market access.

Further, the CCI prima facie observed that the mandatory pre-installation of all the Google applications⁷ under TADA amounts to: (i) imposing unfair conditions and supplementary obligations on the Smart TV device manufacturers⁸; and (ii) leveraging of Google's dominance in Play Store to protect the markets such as online video hosting services offered by YouTube. The CCI also directed the DG to investigate the allegation of imposition of vertical restraints (and any efficiencies claimed by Google) along with the above-mentioned aspects of abuse of dominance.

5. INDUSLAW VIEW

In India, the CCI, just like its counterparts in developed jurisdictions (such as, the USA, European Union ("EU"), Germany, etc.) has set its scanners on big-tech companies. The CCI is presently investigating Amazon, Flipkart, Facebook, and WhatsApp. With the current CCI Order, now there are 3 ongoing investigations against Google. Interestingly, neither the Federal Trade Commission in the USA nor the European Commission in the EU have initiated proceedings against Google in relation to agreements for licensing of Android TV/app store to Smart TV OEMs. The CCI Order reflects the aggressive approach of the CCI to shed its image as a young regulator.

In the absence of market share data in relation to licensable Smart TV OS suppliers for examining dominance of Google in the Primary RM, the CCI has applied a novel approach of using market share of Android TV OS as a proxy. Previously, in the case against WhatsApp, in the absence of concrete information on usage and users in the Indian context, the CCI used trends and results based on global usage and users of WhatsApp as proxy to examine market share/ strength of WhatsApp. However, the case against WhatsApp was dismissed as the abuse was not prima facie established. It will be interesting to see whether the DG, post a factual analysis and detailed investigation, also comes to the same conclusion regarding Google's dominance in the Primary RM, and that there was justifiable cause for putting Google through the rigors of an investigation based on such a novel approach of the CCI.

Footnotes

1. Kshitiz Arya and Anr. v. Google and Ors. (Case No. 19 of 2020) order dated 22 June 2021 under Section 26(1) of the Competition Act, 2002.

2. In addition to Google, the complaint was also filed against two of the leading Smart TV/mobile manufacturers i.e., Xiaomi Technology India Pvt. Ltd. and TCL India Holdings Pvt Ltd. with a request to add other OEMs as opposite party, during the investigation, if the CCI/ DG deemed fit.

3. Case No. 39 of 2018 (i.e., CCI Google Android Matter).

4. Such as Netflix, Amazon Prime, YouTube, etc. due to limited real estate availability in terms of disk space on smart TV hardware and the users need options to download the apps of their choice.

5. The CCI accessed the market share data of Smart TV OEMs from Statista.com and for its analysis excluded the data of non-licensable Smart TV OS. To compute the market share data, the CCI made crude apportionment of the market share assigned to the 'Others' category by Statista.com, between Android TV and other OSs, based on the number of OEMs using these OSs.

6. App stores in Smart TV ecosystems are an important consideration for both OEMs as well as users.

7. Such as Play Store, YouTube, etc.

8. In essence, it is compulsory tying of 'must have' Google apps (such as Play Store), which the device manufacturers would like to have on their devices, with other apps where credible alternatives may be available.

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