This article is written by Raslin Saluja, from KIIT School of Law, Bhubaneswar. The author attempts to summarize the order given by the Competition Commission of India (CCI) in the antitrust case filed against Google.
Table of Contents
Introduction
Alphabet Inc’s Google holds a dominant position in multiple markets. This has opened many doors and lines of attacks in the form of various lawsuits against the technology giant. Google has been facing antitrust challenges in the United States for protecting its dominant position in the market for internet search and search advertising. Currently, there are three lawsuits filed against Google search where the first one is by the US Justice Department and eleven Republican State attorneys, the second one comes from a coalition of 30 states led by attorney generals of Colorado and Nebraska and the third one by a smaller group of states led by Texas. It also has a potential challenge awaiting in China.
Even in India, in the last two years, it had its own antitrust probes with the regulator Competition Commission of India (CCI). CCI has raised issues in the past with Google’s commercial flight search option, its dominant position in the search marketplace in 2018, and abuse of dominant position in the Android phone by imposing unfair conditions on device manufacturers to prevent them from using other operating systems in 2019. Recently it was also accused of abusing its dominant position in the market by following an unfair mechanism for apps listed on the play store, unfairly promoting its mobile payment application (Google Pay).
This is its fourth major antitrust challenge in India where it is accused of abuse of its dominant position in the smart television market.
Background and facts
The present case was initiated with a complaint filed by two antitrust lawyers (informants) hailing from Delhi who provided the information to CCI back in 2020 under Section 19(1)(a) of the Competition Act, 2002. It was against Google LLC, Google India Private Limited (collectively referred to as Google), Xiaomi Technology India Pvt. Ltd [opposite party (O.P 3)] & TCL India Holdings Pvt. Ltd [opposite party (O.P 4)] for contravention of various provisions of Sections 3 and 4 of the Act. The informants had also requested CCI to include other Original Equipment Manufacturers (OEMs) as a party, during the course of the investigation, if required.
It is known that Google LLC is a multinational tech company with specialised internet-related services and products whose operating system is used by the majority of smart mobile and tablet manufacturers in India. Further, Google India Private Limited is an Indian subsidiary of Google LLC. O.P 3 & 4 are stated to be leaders in the manufacturing/selling/distributing market of smart TV devices in India.
The informants being users and consumers of android smartphones and smart television devices have alleged Google for creating barriers for firms which are wanting to use/ develop modified versions of Android for smart TVs like that of Amazon Fire TV’s operating system. They referred to Case No. 39 of 2018 vide order dated 16.04.2019 passed under Section 26(1) of the Act. In that case, CCI had opined that certain clauses of the agreement entered between Google and OEMs, i.e. Mobile Application Distribution Agreement (MADA) and Android Compatibility Commitments (ACC) amounted to an abuse of dominant position by Google in violation of various provisions of Section 4 of the Act. To that end, Google was held to be in contravention of Section 4 in regard to the market for licensable operating systems for smart mobile devices in India. Based upon this previous order and various media reports and other sources in the public domain, the informants accused Google of violating Section 4 read with Section 32 of the Act and for being into anti-competitive agreements with O.P 3 & 4 violating Section 3 read with Section 32 of the Act.
However, since Google had modified these agreements in concern based on rulings by the European Union in 2019, the informants suggested considering the relevant period for contravention as 2009-2018/19.
What is a smart TV?
The ecosystem of the smart TV is an upgraded version of conventional/traditional television devices with new features that allow the users to view photos, browse the internet, stream video content available over the internet, etc. This feature is enabled/facilitated in the smart TVs with the help of an operating system that provides a user interface for using the smart TV functions. This operating system is pre-installed in the smart TV device and later cannot be changed by its users.
Among the other operating systems in the market, Android TV which is developed by Google especially for television devices is one of the most popular systems used by smart TV OEMs in India. To that end, it has been alleged that Google licenses the Android TV operating system to smart TV OEMs in a similar fashion as it licenses Android for smart mobile phones to smart mobile device OEMs.
Relevant markets in the present case
As per Section 19, for determining the relevant market, the Commission has to consider the relevant geographic as well as product market. In pursuant to that, the informants had submitted relevant market to include:
- The market for licensable smart mobile operating systems in India;
- The market for App Store in smart mobile devices in India; and
- The market for ‘licensable smart TV device operating systems’ and the market for ‘App Store for smart TV device operating systems’ in India.
Google licenses the Android TV operating system to smart TV OEMs in a similar fashion as it licenses Android for smart mobile phones to smart mobile device OEMs. Thus, the informants excluded certain operating systems which were not available in India’s geographic market and all the non-licensable operating systems tied up to brands like Tizen (Samsung), WebOS (LG), etc since OEMs can only access operating systems that are licensable by their developers.
Google’s dominant position in the market
They alleged that Google’s market share of different smart TV OEMs after due exclusion is 75 percent or more since six out of the top ten smart TV OEMs have signed up with Android TV, establishing its dominance in the licensable operating systems for smart televisions market. In addition to that, Google is also dominant in the market for app stores for smart TV device operating systems since all Android TVs come installed with Google’s proprietary app store i.e. Play Store. This version was supported by showcasing the economic power of Google, network effects, size, and importance of competitors, vertical integration of operating system and app stores, consumer dependence, entry barriers, etc.
Restrictions imposed by Google on smart TV and smart mobile device OEMs
By entering into the agreement, Google was alleged to have imposed the following restrictions which are anti-competitive and violative of Section 4 of the Act. These are:
- It has bundled its app store (Play Store) and operating system for television devices (Android TV) together which are two different products and come pre-installed with Google’s app store.
- The OEMs are bound by the Android Compatibility Commitments (ACC) formerly referred to as the Anti-fragmentation Agreements (AFA) which prevent them from manufacturing/ distributing/ selling any other smart television or mobile devices which operate on a competing forked Android operating system. This denies market access to developers of those forked Android operating systems, violating Section 4(2) of the Act,
- It also denies access to TVs operating on other licensable operating systems as Google’s Play Store is not available on them.
- It has created a barrier to entry by restraining the OEMs which have entered into ACC/AFAs from developing their own operating system based on forked android for televisions. Thereby limiting further research and scientific/technical developments in such forked Android-based operating systems.
- It has also led to supplementary obligations with no connection to licensing of the operating system or Google Mobile Service (GMS), which by virtue of the ACC, restrict freedom of action of OEMs with regard to the whole of their device portfolio (smart mobile devices, televisions, etc.) and not just the devices on which the Play Store or Android TV operating system is pre-installed.
Thus, these agreements entered into are in the nature of those as mentioned in Section 3(4) and are causing an appreciable adverse effect on competition in contravention to Section 3(1) of the Act. These agreements between the operating systems have also refrained the smart TV OEMs from selling TVs with competing forked Android-based operating systems, thereby not allowing its competitors to enter into the market for licensable operating systems for TVs.
Google’s response
The submissions made by Google stated as follows:
- It makes Android Open Source Project (AOSP) and does not deny a license to any third party under an open-source license. It is available for all and does not oblige (or entitle) licensees to preinstall any proprietary Google apps, app store, or services. This open-source project has furthered the development of other Android forks including FireOS by Amazon.
- That the third party holds the power to modify, study, and distribute the Android source for anyone for free of the operating system on the basis of AOSP license. The OEMs and the operating systems are free to modify AOSP and introduce their own Android TV platforms and devices. Whereas, Android TV is Google’s variant of Android for smart television devices and is licensed as an Android TV launcher under the Television App Distribution Agreement (TADA), as well as the license of Google’s other proprietary apps.
- It denied the dominance of Android TV and Play Store and stated that TADA is a separate and optional agreement on a device-by-device basis which provides the users with a set of pre-installed Google apps. OEMs can choose whether they want to install it on their devices.
- OEM partners observe a minimum level of baseline compatibility for smart TV devices that run on Android TV in their ACC which facilitates competition between Android TV and other established players in the sector.
- It denied the market share to be 75 percent and stated the allegations made are unsupported by evidence, incorrect factually, and based on legal misconceptions. That it is not dominant, anti-competitive, and does not require exclusivity from OEM partners or illegally tie Play Store with Android or deny access to play on other applications. There are various options and consumers are free to choose.
Commission’s prima facie observation and findings
In regard to the relevant market consideration, the Commission observed that an app store is the only place for the users to download apps. Though there are various apps that cater to the needs of the users, due to the pre-installment of major apps and limited real estate available in the disk space on smart TV hardware, the OEMs cannot pre-install all of them. Thus it is found that Google’s play store is rather a must-have app for OEMs to offer and therefore is of important consideration for users/OEMs.
The Commission then referred to the market share data of smart TV OEMs from Statista and among others found that the market share of the Android TV operating system is almost 90 percent, along with AndroidTV being used in seven (earlier six as per informants) out of top ten smart TV OEMs. This along with the network effects are sufficient parameters to assess and indicate the extent of market power that is enjoyed by Google, which thereby establishes its dominance in the market. Though it has been contested that the app store is not dominant, in the smart TV ecosystem, it makes it compulsory for the OEMs to have a Play store.
Findings on alleged abusive conduct
It was observed that though AOSP is available to any third party, it does not grant OEMs the right to distribute Google’s proprietary apps. In order to obtain access to other rights, it makes the OEMs sign an optional, non-exclusive agreement (TADA) which requires OEMs to comply with ACC, thereby imposing restrictions on OEMs. The OEMs have to preinstall the entire suite of Google apps if they want to pre-install any of Google’s proprietary apps and the device manufacturers have to commit to comply with the ACC for all devices based on Android manufactured/distributed/sold by them. In addition to that, there are more obligations that are imposed by the ACC on the OEMs restricting them from dealing with the Android Forks.
There are other commercial distribution features and permission that TADA imposes on OEMs which conclusively indicate that the license to pre-install Play Store is extensively dependent on the execution of TADA AND ACC (though optional as per Google) makes them de facto compulsory in whose absence the marketability of Android devices may get restricted. In turn, Google has indirectly reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android. Besides these obligations which restrict the freedom of hardware manufacturers are similar to contract conclusions based on acceptance of the parties. The Commission thus stated that this conduct results in contravention of Section 4(2) (a)(i), (b), (c) ,(d) & (e) of the Act.
Under Section 3(4) of the Act, the agreements entered into by Google and the operating systems include clauses of “refusal to deal” and “exclusive dealing”. These agreements have the potential to cause an appreciable adverse effect on competition since they create a wall for the developers to create a better forked android operating system that competes with the existing one, thereby contravening Section 3(1) of the Act.
Keeping in view these findings, the Commission directed the Director General (DG) to cause an investigation under Section 26(1) of the Act and submit its report within 60 days from the receipt of the order. To that Google requested for an oral hearing by way of a video conference to which the Commission granted them the liberty to make a further submission during the investigation. The Commission relied on the Supreme Court’s judgment in Competition Commission of India v. Steel Authority of India Ltd (2010) to go ahead with its decision in the prima facie case.
Google thus filed its confidential and non-confidential submissions dated 27.10.2020, 10.02.2021, and 14.04.2021, while the DG continued with the conduct of investigation as per the order given on 22-06-2021.
Conclusion
Google has been facing criticism from the public and small local start-ups for enforcement of policies and company charges which prevent their expansion and growth in the market. The present case seems like an extension of the other pending investigations going on against Google. Since in the absence of market share data, the CCI rather referred to using the market share of the Android TV operating system as a proxy, it will be interesting to see the results of this novel approach.
References
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