Explained | CCI’s ₹1,300 crore fine on Google and how it will change Android smartphones

The story so far: India’s Competition Commission (ICC) has imposed a provisional fine of ₹1,337.76 crore on Alphabet-owned Google for “abusing its dominant position” in markets related to the mobile device ecosystem Android.

How did Google break competition law in India?

The CCI, the country’s competition watchdog, is empowered under the Competition Act 2002 to check whether companies, especially big tech companies, are not eliminating healthy competition in the market and do not create a monopoly.

India’s current ICC case identified almost identical abuse of the Android ecosystem by Google as the European Union’s competition watchdog did in 2018. The fine of more than 4 billion of dollars imposed on Google by the EU regulator was upheld by the European Court this year with most of the anticompetitive practices identified by the investigation.

CCI’s current case against Google began in 2019 and since then the regulator has reviewed various practices of the tech giant with respect to various relevant markets.

The first concerns the Android operating system (OS). Smartphones need an operating system to run apps and programs and one of the most important operating systems 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 operating system. Google operates and manages the Android operating system and licenses other proprietary Google applications such as Chrome and Play Store through it. Original equipment manufacturers (OEMs) or smartphone companies like Samsung then use this operating system and, through it, Google’s apps on their mobile phones.

Now, while Android’s source code is freely available and covers basic smartphone functionality, it does not include Google’s proprietary apps. To access and use these applications in their mobile phones, manufacturers must enter into agreements with Google that govern their rights and obligations, such as the Mobile Application Distribution Agreement (MADA), Anti-Fragmentation Agreement ( AFA), etc. Android Compatibility Commitment Agreement (ACC), Revenue Share Agreement (RSA), etc.

The TCC found that, through these restrictions in the agreements, Google ensured that manufacturers who wanted to use Google’s proprietary apps had to use Google’s version of Android.

Second, Google is the dominant player in the app store market for Android OS worldwide (excluding China). According to the EU, the Google Play Store accounts for over 90% of apps downloaded to Android devices globally. The TCC found that due to the mandatory pre-installation of the Google suite (which includes Play Store), consumers did not have the option of uploading or downloading apps outside of the Play Store. Google argued in the TCC investigation, as it did identically in the EU investigation, that it faces competitive constraints from Apple in the app area. Store. Thus, the TCC considered whether the Apple App Store and the Google Play Store had substitutability between the two. He concluded that Apple’s App Store could not replace the Play Store because Apple as a company is primarily based on a vertically integrated smart device ecosystem that focuses on selling high-end smart devices. range. The TCC further noted that while there could be a degree of competition between the two mobile ecosystems, namely Android and Apple, this was also limited when deciding which device to buy.

Third, the company’s dominance in the general Internet search market and in the market for non-OS-specific browsers (i.e. engines like Chrome, Firefox, etc.). As of last year, Google held 92% of the global search engine market. Therefore, by entering into Revenue Sharing Agreements (RSAs) with mobile phone manufacturers, Google was able to “ensure exclusivity” of its search services to the “total exclusion of competitors”. The CCI said these agreements with equipment manufacturers ensure that Google has continued access to search queries from mobile users, helping not only to protect its advertising revenue, but also to reap network effects through “continuous service improvements”. , to the exclusion of competitors”. This has also been made worse by making Google the default search browser for Android smartphones.

Due to Google’s various deals with manufacturers, another of its revenue-generating apps, Youtube, the ICC said, has taken a significant edge over its competitors in the online video hosting platform market. The evocation of Google’s antitrust practices with regard to Youtube was the distinctive element between the CCI investigation and the European investigation of Google in 2018.

The TCC found that Google was in a dominant position in all the relevant markets mentioned above and, through its practices, had violated several paragraphs of Article 4 of the Competition Act. Regarding the multiple restrictive agreements that Google has entered into with Android smartphone makers, the Commission said: “With these agreements in place, competitors never had a chance to compete effectively with Google and ultimately account, these agreements have resulted in closing the market to them as well as eliminating choice for users”.

What did the CCI ask Google to change in the Android smartphone ecosystem?

In addition to the “cease and desist” order against Google for engaging in anti-competitive practices, the ICC directed it to take certain actions regarding the Android OS ecosystem. Some of the main directions include:

• Smartphone makers should be allowed to choose which proprietary Google apps they want to install and shouldn’t be forced to pre-install the whole package.

• The licensing of Play Store to manufacturers shall not be tied to the requirement to pre-install Google search services, Chrome browser, YouTube, Google Maps, Gmail or any other Google application.

• Google should allow users, during initial device setup, to choose their default search engine for all search entry points, etc.

• Google should not deny access to its Play Services APIs (which allow two programs to interact with each other) to the detriment of manufacturers, app developers, and existing or potential competitors. This, the Commission said, would ensure app interoperability between the Google Android operating system as well as alternative versions or forks of Android and, with this remedy, app developers could easily port their apps to Android forks.

• Google should not provide monetary/other incentives to OEMs such as provided in revenue sharing agreements to ensure exclusivity of its search services.

• Google won’t impose anti-fragmentation obligations on OEMs, meaning manufacturers using an alternate version of Android should be able to access Google’s proprietary apps and vice versa.

• Google will not restrict the uninstallation of its pre-installed apps by users.

The TCC also noted that there were “glaring inconsistencies” in the revenue data presented by Google and gave it 30 days to provide the required financial details and supporting documentation. He also said the penalty of over ₹1,300 was provisional meaning it could increase.

What are the other antitrust cases against Google in India and internationally?

Google is already facing two other ICC antitrust investigations. In June 2021, the Commission ordered an investigation into allegations that Google abused its dominant position with Android in the Indian smart TV market. The TCC had said that on their face, certain agreements between Google and smart TV makers constituted an abuse of Google’s dominant position.

In November 2020, the ICC had launched an investigation to examine allegations that Google had abused its dominant position to push its payment system. CCI has launched the investigation regarding the mandatory use of Google’s billing system by app developers to charge their users for app purchases on the Play Store and/or for in-app purchases. The TCC concluded its hearing and reserved judgment in this year’s investigation. In what was seen as an attempt to soften the regulator’s blow, Google decided to introduce a third-party billing system option to its Play Store on a pilot basis. Google has faced three investigations in the United States and the European Union regarding its antitrust practices in search and search-related businesses, as well as in the advertising sales markets. The EU lawsuits imposed fines totaling approximately $8 billion on Google.