THE CCI’S ₹1,300 CRORE FINE ON GOOGLE

  • The CCI, the country’s competition watchdog is empowered under the Competition Act, 2002, to check whether companies especially large tech companies are not eliminating healthy competition in the market and creating a monopoly.
  • The CCI said that due to Google’s various agreements with manufacturers, one of its major revenue-earning apps, Youtube, gained a significant edge over competitors in the online video hosting platforms market.
  • The mention of Google’s antitrust practices with regard to Youtube was the distinguishing factor between the CCI probe and the EU probe of Google in 2018.
  • Google is already facing two other antitrust probes by the CCI. In June 2021, the Commission ordered a probe into allegations that Google had abused its dominant position with Android in India’s smart television market and in November 2020, the CCI had initiated a probe to look into allegations that Google abused its dominant position to push its payments system.

Background:

  • The Competition Commission of India (CCI) has imposed a provisional fine of ₹1,337.76 crore on Alphabet-owned Google for “abusing its dominant position” in markets related to the Android mobile device ecosystem.
  • The CCI, the country’s competition watchdog is empowered under the Competition Act, 2002, to check whether companies especially large tech companies are not eliminating healthy competition in the market and creating a monopoly.
  • The current case by CCI against Google started in 2019 and since then the regulator has examined various practices of the tech giant with respect to relevant markets.
  • The first is regarding the Android operating system (OS). All smartphones need an OS to run applications and programs and one of the most prominent OS is Android which was acquired by Google in 2005.
  • According to Counterpoint research, 97% of India’s 600 million smartphones are powered by Google’s Android OS.
  • Google operates and manages the Android OS and licenses other Google proprietary applications such as Chrome and Play Store through it. Original Equipment Manufacturers (OEMs) or smartphone companies then use this OS and Google apps on their mobile phones. While the Android source code is openly accessible and covers the basic features of a smartphone, it does not include Google’s proprietary applications.
  • To use these applications, manufacturers have to enter into agreements with Google that govern their rights and obligations such as the Mobile Application Distribution Agreement (MADA), the Anti-fragmentation Agreement (AFA) etc.
  • The CCI held that through these restrictions in agreements, Google makes sure that the manufacturers who wished to use Google apps had to use Google’s version of Android.
  • Secondly, Google is the dominant player in the app store market for Android OS worldwide (except China).
  • According to the EU, the Google Play Store accounts for more than 90% of apps downloaded on Android devices globally.
  • The CCI held that through the mandatory pre-installation of the Google Suite (which includes Play Store), consumers did not have the option of side-loading or downloading apps outside of the play store.
  • Third is the company’s dominance in the general internet search market and the non-OS specific browser market (meaning engines like Chrome, Firefox, etc.).
  • As of last year, Google has a 92% share in the global search engine market. Therefore, by having Revenue Sharing Agreements with mobile manufacturers for its services, Google was able to “secure exclusivity” for its search services to the “total exclusion of competitors”.
  • The CCI said that these agreements with OEMs guaranteed Google continuous access to search queries of mobile users, helping not only in protecting its advertisement revenue but also in reaping the network effects through “continuous improvement of services, to the exclusion of competitors”.
  • This was also compounded by making Google the default search browser in Android smartphones. Finally, due to Google’s agreements with manufacturers, another of its revenue-earning apps — Youtube, the CCI said, gained a significant edge over competitors in the online video hosting platforms market.
  • The mention of Google’s antitrust practices with regard to Youtube was the distinguishing factor between the CCI probe and the EU probe of Google in 2018.

What has CCI told Google to change ?

  • Apart from the “cease and desist” order against Google for indulging in anti-competitive practices, the CCI has directed it to take certain measures with regard to the Android OS ecosystem.
  • Some of the major directions include — that smartphone makers should be allowed to choose which of Google’s proprietary apps they want to install, that the licensing of Play Store to manufacturers should not be linked with requirements to pre-install Google search services or any other Google apps, that Google should allow users to choose their default search engine for all search entry points etc.
  • The CCI also noted that there were “glaring inconsistencies” in the revenue data presented by Google and gave it 30 days to provide the requisite financial details and supporting documents.

What are the other antitrust suits?

Google is already facing two other antitrust probes by the CCI. In June 2021, the Commission ordered a probe into allegations that Google had abused its dominant position with Android in India’s smart television market and in November 2020, the CCI had initiated a probe to look into allegations that Google abused its dominant position to push its payments system. Google also faces three probes each in the U.S. and the EU. The EU suits have altogether imposed fines totalling around $8 billion on Google.

SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB

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