CCI imposes Rs1,338 crore penalty on Google

In a rather surprising move, the Competition Commission of India (CCI) imposed a steep penalty of Rs1338 crore on Google. Now, Google hardly needs any introduction. It has for long the rune the world’s largest and most powerful search engine. Google also runs the extremely powerful Google Maps, which shows you the path from anywhere to anywhere in the world. But above all, it is the most popular and powerful operating system for mobile phones and smart phones which is called the Android operating system (OS). The latest penalty imposition is pertaining to the misuse of its monopoly power in Android.

Now, leveraging powerful positions is nothing new. Microsoft has long been known to leverage its dominant position in PC operating system to push its products like the Explorer browser or the Microsoft Office product. For long Microsoft has also tried to use its dominance and influence to make consumers pay for its other products too. Google is no different and has been trying similar strategies across thee world. In fact, even in Europe, Google faces billions of dollars in fines for misusing its monopoly position. It is in this context and background that this latest penalty imposition must be seen.

The accusation is that Google forced the original equipment manufacturers (OEMs) who are the hardware suppliers to pre-install the Google apps. This is an easy way of pushing their products and in most cases, they become the default choice. The CCI (Competition Commission of India) order has asked Google to desist from forcing the OEMs of smart devices to pre-install its own apps. The Google order is quite explicit that the company cannot restrict users from un-installing such apps. Further, the order also states that Google is precluded from offering incentives to OEMs ensure the exclusivity of its search services.

In other words, Google has been directed to allow the users, during the initial device setup phase, to choose their default search engine for all search entry points. Google cannot force them to only use the Google search engine but they should be allowed to use the Yahoo search engine or the Bing engine, depending on their choice. Such users must also be permitted to change the default settings in their devices in a simple and user friendly manner. One area of contention has been monopolising the Play Store. Google has been asked to allow developers of other apps to distribute their apps through the Play Store.

One of the major allegations against Google was that it had substantially leveraged and even misused its dominant position in the app store market for Android OS with a view to protect its position in online general search. In addition, Google had also used its virtual dominance in the app store market for Android OS to position its products in the non-OS specific web browser market. The existing reach of Google in the search engine, maps and in the Android operating system gives it some huge disadvantages. However, competition laws prohibit any company from utilizing such advantages to kill competition. That is what this order is about.

The CCI has taken a comprehensive view of the matter. It examined the different practices adopted by Google with respect to licensing of its Android mobile operating system and various proprietary mobile applications of Google (e.g. Play Store, Google Search, Google Chrome, etc). Google has said that these are normal business practices to take on the might of Apple in the market and carve a niche for themselves. The experience with such competition suits, as we have seen in the past is that while the allegations are easy to level, the actual job of proving the misuse of dominance is very complicated in courts.

CCI also had problems with the business model adopted by Google. According to the CCI, Google had adopted an aggressive model of selling to an increasing number of users on its platforms so that they get an opportunity and reason to interact with its revenue generating engines at different points. Google makes billions of dollars on online search and focused and targeted advertising. It is a model that is extremely inter-related and eventually they have to end up leveraging one strength to push products at another end. Google has held the view that the customer is a franchise that was ultimately created by Google.

The Google Android subtle domination is targeted at 3 kinds of customers. Firstly, there are the smart device OEMs which install app stores to make their hardware commercially marketable. Secondly, app developers offer their services to end users. Finally, there are end users who directly consumer such apps. Google has used these tactics to target all these clients. As per the order, apart from paying Rs1,338 crore; Google must also desist from targeting any of these groups using its existing strategy.