CCI imposes ₹1,337 crore penalty on Google for anti-competitive practices in Android mobile devices market

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The Competition Commission of India (CCI/Commission) on Thursday imposed a penalty of ₹1337.76 crore on Google for abusing its dominant position in multiple markets in the Android mobile device ecosystem.

In addition to the penalty, the CCI also directed Google to cease and desist from participating in anti-competitive practices and directed it to modify its conduct within a defined timeline.

“The Commission has imposed monetary penalty as well as issued cease and desist order against Google from indulging in anti-competitive practices that have been found to be in contravention of the provisions of Section 4 of the Act,” a press release issued by the CCI read.

Summary of findings

Mandatory pre-installation of the entire Google Mobile Suite with no option to un-install the same amounts to imposition of unfair condition on the device manufacturers;

Google used its dominant position in the online search market resulting in denial of market access for competing search apps;

Google leveraged its dominant position in the app store market for Android OS to protect its position in online general search;

Google leveraged its dominant position in the app store market for Android OS to enter as well as protect its position in online video hosting platform (OVHP) market through YouTube;

Google, by making pre-installation of Google’s proprietary apps (particularly Google Play Store) reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android.

The Commission examined various practices of Google in relation to licensing of the Android mobile operating system and several of its mobile applications such as the Play Store, Google Search, Google Chrome, YouTube etc.

During the course of the inquiry, Google also argued about the competitive constraints being faced from Apple.

To examine the extent of competition between Google’s Android and Apple’s iOS ecosystem, the Commission examined the differences in the two business models which affect the underlying incentives of business decisions.

“Apple’s business is primarily based on a vertically integrated smart device ecosystem which focuses on sale of high-end smart devices with state of the art software components. Whereas Google’s business was found to be driven by the ultimate intent of increasing users on its platforms so that they interact with its revenue earning service i.e., online search which directly affects sale of online advertising services by Google,” the CCI press release explained.

Based on its assessment, the Commission found Google to be dominant in all the relevant markets.

The CCI went on to explain how multiple agreements governing the rights and obligations of smart device OEMs result in a significant competitive edge to Google.

For instance, the Anti-fragmentation Agreement (AFA) and the Android Compatibility Commitment Agreement (ACC) guarantees that distribution channels for competing search services is altogether eliminated by prohibiting original equipment manufacturers (OEMs) from offering devices based on Android forks, which are outside the control of Google. Further, revenue sharing agreements (RSAs) helped Google to secure exclusivity for its search services to the total exclusion of competitors, the CCI found.

The Commission found that the underlying objective of Google in imposing various restrictions the agreements was to protect and strengthen its dominant position in general search services, and thus, its revenues via search advertisements.

It was opined that markets should be allowed to compete on merits and the onus was on the dominant players to show that its conduct does not impinge this competition on merits.

“By virtue of the agreements discussed above, Google ensured that users continue to use its search services on mobile devices which facilitated un-interrupted growth of advertisement revenue for Google.”

Therefore, it was concluded that Google’s actions amounted to abuse of its dominant position and were in contravention of Section 4 of the Competition Act.

The Commission also indicated certain measures to Google which could aid in modifying its conduct. These include:

OEMs should not be forced to pre-install a bouquet of applications, and and shall not be restrained from deciding the placement of pre-installed apps, on their smart devices;

Licensing of Play Store to OEMs shall not be linked with the requirement of pre-installing Google search services, Chrome, YouTube, Google Maps, Gmail or any other app;

Google shall not offer any monetary or other incentives to OEMs for ensuring exclusivity for its search services;

Google shall not incentivise or obligate OEMs for not selling smart devices based on Android forks.

Google shall not restrict uninstalling of its pre-installed apps by the users;

Google shall allow 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;

Google shall allow developers of app stores to distribute their app stores through Play Store.

In the interest of justice and with an intent of ensuring necessary market correction at the earliest, the Commission imposed a provisional penalty of ₹1337.76 crore on the basis of the revenue data presented by Google and gave it thirty days to provide requisite financial details and supporting documents.

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