Apr 28, 2023

NCLAT Upholds CCI’s Order Imposing INR 1,337 Crore Penalty on Google for Abuse of Dominance, While Upholding Only Six Out of 10 Directions Issued to Google

Google’s Conduct

Google’s conduct/practices which attracted scrutiny by CCI were as follows:

i.     Mandating pre-installation of Google Mobile Services (‘GMS’) suite through mobile application distribution agreement (‘MADA’) – amounts to an imposition of unfair condition on original equipment manufacturers (‘OEMs’) in alleged contravention of Sections 4(2)(a)(i) and 4(2)(d) of the Act;

ii.    Making OEMs exclusively offer Google’s search services e., Google Search by making the same a requirement under revenue sharing agreements (‘RSAs’), which offers substantial revenues to OEMs;

iii.   Conditioning pre-installation of GMS suite on entering anti-fragmentation agreement (‘AFA’) that restricts ability and incentive of OEMs to develop and sell devices operating on alternate versions of Android, e., Android Forks – amounting to limiting technical and scientific development in alleged contravention of Section 4(2)(b)(ii) of the Act;

iv.   Perpetuating its dominant position in ‘Online Search Market’ to deny market access to competing search apps, in alleged contravention of Section 4(2)(c) of the Act;

v.     Leveraging its dominant position in Google Play Store to protect its dominant position in Online General Search, in alleged contravention of Section 4(2)(e) of the Act; and

vi.    Tying of Google Chrome, YouTube, Search with Google Play Store, in alleged contravention of Section 4(2)(e) of the Act.

CCI’s Order

The CCI held that Google’s aforementioned conduct contravened Section 4 of the Act and imposed a ‘provisional’ penalty of INR 1,337 Cr. (subject to additional financial documents / information being submitted by Google) for abusing its dominance (‘CCI Order’). The CCI by way of this Order also imposed 10 remedial directions on Google.

Developments Post CCI Order

Google appealed against the CCI Order, under Section 53(B) of the Act before the NCLAT, while also praying for interim stay on the CCI Order. The NCLAT however refused to grant interim relief to Google. Thereafter, Google approached the SC for the same. The SC heard Google and CCI and declined to grant interim relief as well. Further, the SC directed the NCLAT to hear the appeal on merits and pass its final Order by March 31, 2023.

NCLAT’s Order

On March 29, 2023, the NCLAT passed its final order[1] (‘NCLAT Final Order’) upholding the CCI’s Order, while making the following significant findings:

i.     Google contravened Section 4 of the Act, for the conduct mentioned above;

ii.    The CCI is required to undertake an ‘effects analysis’ before finding abuse of dominance by an entity. Further, the test to be employed while conducting an ‘effects’ analysis is whether the abusive conduct in question is anti-competitive;

iii.   The CCI Order cannot be set aside on the ground of absence of a judicial member during oral arguments advanced by Google at the CCI stage;

iv.    The CCI Order does not suffer from a ‘confirmation bias’ (on account of a similar decision against Google, of the EC; and

v.     Penalty imposed by CCI is final and is not subject to any revisions upon Google furnishing further financial details.

Significantly, the NCLAT set aside the four following directions imposed by CCI:

i.     Requiring Google to Distribute Third-party App Stores Through Google Play Store: The NCLAT found that the same was without a finding of infringement / abuse. Further, Google does not prohibit distribution of apps developed by any app store; and in any case, Google has the right to impose its terms and conditions for distribution of apps through the Google Play Store. Additionally, the NCLAT noted that the CCI itself has found that Google has not abused its dominant position in the Google Play Store Market by imposing unfair and discriminatory conditions on app developers. Therefore, there was no occasion to direct Google to distribute the app stores of third-party app developers

ii.    Requiring Google to Allow Unrestricted Side-loading: The NCLAT held that Google’s warnings with respect to side-loaded apps are in line with the statutory mandate of the Information Technology Rules. Moreover, the Digital Markets Act in the European Union also permits warnings qua side-loading.

iii.   Requiring Google to Provide App Developers Access to its Proprietary Google Play Store APIs: The NCLAT set aside the same on the ground that proprietary software developed by Google should fetch value to Google. App developers cannot be given unhindered access to such software and there should remain an incentive for a tech company to further carry out such development and monetise it through commercial use.

iv.    Requiring Google to Provide an Option to Uninstall Google’s Proprietary Apps: The NCLAT set aside the same on the ground that CCI has already directed Google to not mandate pre-installation of GMS suite apps, and further that users can disable the same. Additionally, the CCI also noted that all the 11 apps in the GMS suite are not required to be preinstalled by OEMs.

Accordingly, the NCLAT directed Google to deposit the penalty of INR 1,337 crore and implement the remaining six directions, within 30 days from the date of the NCLAT Final Order.

[1] Competition Appeal (AT) No. 1 of 2023.




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