CCI introduces Leniency “Plus” regime in India- Will it suffice?
Google’s agreements with Original Equipment Manufacturers (OEMs) of smart TV/mobile manufacturers have invited yet another Antitrust investigation by the Indian Fair Market watchdog, the Competition Commission of India (CCI).
The CCI vide its order dated 22 June 2021, has directed an investigation upon finding a prima facie case of abuse of dominance against Google for allegedly compulsory tying of its ‘must have’ app , the licensable Android Mobile OS and Google Play Store with Android TV Operating System (Licensable OS developed by Google), Fire TV (Licensable ‘forked android’ OS developed by Amazon), etc. in the market for licensable Android smart TV operating systems in India, and the market for app stores for android mobile operating systems as well as in the associated relevant market for app store for Android smart TV operating systems in India after finding that Google is dominant in the said markets .
The information was filed by two Delhi based individuals based on the earlier order of CCI dated 16 April 2019 directing investigation in the licensable Google Android OS case and the second order dated 09 November 2020 directing investigation against Google for leveraging its dominance in the market for licensable Mobile Operating System (OS) for Smartphone and the market for App Stores for Android OS to protect its position in market for its online payment App, the Google Pay case. Investigations are already going on against Google in both these cases.
The Informant has alleged violations under section 3(4) and section 4 of the Competition Act, 2002 (the Act) based on Google’s conduct of imposing several restrictions, upon smart TV and smart mobile device Original Equipment Manufacturers (“OEMs”) by virtue of its agreements entered into with them. However, since after the rulings by European Union in 2018-19, Google had modified its agreements with the OEMs, therefore, the informant suggested that the relevant period for contravention may be confined from 2009-2018/19. It was alleged that on account of the restrictions imposed by Google in these agreements entered with the OEMs and considering the extremely high market shares enjoyed by Google in the relevant market(s) in India, smart TV OEMs, such as Xiaomi Technology India Pvt. Ltd and TCL India holding Pvt Ltd., have decided to refrain from selling TVs with competing forked android based operating systems, such as by Amazon. As a result, Google’s competitors in this industry such as Amazon, have not been able to enter the market for licensable operating systems for TVs. Further, due to the restrictions imposed on smart TV OEMs, they cannot have the option to pre install entertainment apps other than the major entertainment apps like Netflix, Amazon Prime and YouTube due to limited real estate availability in terms of disk space on smart TV hardware.
The present investigation ordered is the THIRD Antitrust investigation against Google related directly to its Android OS for Smart mobile phones and Its Play Store since 2018, when CCI first imposed a penalty of Rs. 136 Crores against Google for abuse of dominant position in the market of “online general web search and web search advertising services” in India.
However, it is not as if every such allegation against Google of leveraging of its dominance has been successful. For instance, CCI, dismissed allegation of leveraging of dominance for Google Meet application, vide its order dated 29 January 2021. The present investigation is, therefore, a sequel to the two pending investigations as aforesaid.
Relevant Markets suggested and specific allegations
The Informants have submitted that the following relevant markets should be considered:
- Market for licensable smart mobile operating systems in India;
- Market for App Store in smart mobile devices in India; and
- Market for ‘licensable smart TV device operating systems and the market for ‘App store for smart TV device operating systems’ in India.
As Google licenses the Android TV operating system to smart TV OEMs in similar fashion as it licenses Android for smart mobile phones to smart mobile device OEMs.
It was alleged that Google has a market share of 75% as per the market share of different smart TV OEMs after excluding OEMs using non-licensable smart TV OSs i.e., LG (WebOS) & Samsung (Tizen) since currently, 6 out of the top 10 smart TV OEMs have signed up with Android TV and thereby, Google has effectively established its dominance in the market for licensable operating systems for smart televisions according to informants.
The informants alleged that the following restrictions imposed by Google vide its agreements upon smart TV and smart mobile device OEMs are anti-competitive:
- It has Bundled its two different products, i.e. its app store (Play Store) to the operating system developed by it for television devices. As all Android TV based smart TV devices are alleged to come pre-installed with Google’s app store, i.e. Play Store.
- Google is preventing OEMs from manufacturing/ distributing/ selling any other smart television or mobile devices which operate on a competing forked Android operating system through its Android Compatibility Commitments (ACC). Thereby denying market access to the developers of such forked Android operating system.
- Google also denies market access as its Play Store is not available on other licensable operating system as Google does not make available its app store to any TV operating on a forked Android operating system to prevent competition in these distinct relevant markets.
- Further, OEMs which have entered into the ACC with Google, are restrained from developing their own operating system based on ‘forke android’ for televisions. This is a barrier to entry into the market by actively limiting further research and scientific/ technical development of forked Android based Operating Systems.
- The obligations, 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 OS is pre-installed.
Google’s response-
In response to such allegations Google contended that:
- Google’s Android Open-Source Project (AOSP) license is available to any third parties under an open-source license, which does not oblige (or entitle) licensees to preinstall any proprietary Google apps, app store, or services.
- Google licenses Android TV ‘launcher’ (i.e., Android TV’s user interface, which allows users to navigate channels, apps, and content) under an agreement namely, Television App Distribution Agreement (TADA), as well as license of Google’s other proprietary apps. TADA is a separate and optional agreement that enables OEMs, on a device-by-device basis, to provide users with a set of preinstalled Google apps.
- Neither Android TV nor Play is dominant in any market, and there can be no status quo bias in favour of Play or other Google apps as OEMs can decide whether to install Android TV and the accompanying Google apps (including Play) on some, all, or none of their devices.
- ACC facilitates competition between Android TV and longer established players in the connected TV sector to the benefit of Indian consumers.
Google refutes the conditions imposed buy it as anti-competitive. It believed because of the vigorous competitions smart TV OS developers compete for pre-installation on smart TVs and smart TV device. As consumers have many options when choosing how to watch TV content streamed over the internet.
Commission’s prima facie view
The Commission based the primary relevant market for this assessment as “Market for licensable smart TV device operating systems in India”. Further, commission observed that users of smart TV with android OS can only download other apps through Play store provided by Google which makes its pre-installation by OEM compulsory. Therefore, in smart TV ecosystem, the Commission delineated an associated relevant market for “app store for Android smart TV operating systems in India” to assess the impugned conduct.
Commission relied on the market share analysis given by the Informants for prima facie evaluation backed up by the current share of various smart TV OEM. Hence, it held Google dominant in the relevant market for licensable smart TV device operating systems in India.
For the conduct of abuse the commission considered the two agreements entered by Google with Android TV licensees i.e., TADA and ACC. It noticed that these agreements are de facto compulsory as in order to be able to preinstall Google’s proprietary apps, device manufacturers have to commit to comply with the ACC for all devices based on Android manufactured/distributed/sold by them. Such a pre-installation condition is prima facie violative of section 4(2) (b). Additionally, ACC preventing OEM from manufacturing/ distributing/ selling any other device which operate on a competing forked Android operating system is in violation of Section 4 (2)(c) of the Act.
Further, mandatory preinstallation of all the Google Applications under TADA amounts to imposition of unfair condition on the smart TV device manufacturers and thereby in contravention of Section 4(2)(a)(i) of the Act. It also amounts to prima facie leveraging of Google’s dominance in Play Store to protect the relevant markets such as online video hosting services offered by YouTube, etc. in contravention of Section 4(2)(e) of the Act.
Thus, CCI directed the Director General (DG) to conduct a detailed investigation, not only on alleged contravention of Section 4 relating to abuse of dominant position but also those relating to “refusal to deal’ and ‘exclusive supply agreement’ in terms of the provisions contained in section 3(4) read with Section 3(1) of the Act as well.
Comment-
The present CCI order is the THIRD such order directing investigation against Google on various allegations relating to abuse of dominance and exclusivity concerns. This case is almost an extension of the Google’s pending cases in India and adds yet another dimension relating to smart TVs working on Android OS platform and its outcome is going to have serious repercussions on the future growth of competing smart TV operating systems like “Forke android” OS developed by Amazon, in India, which is one of the largest and fastest growing market for such Smart TVs in the World. I hope a detailed investigation would bring about a much-required clarity on Google’s Android OS licencing strategies, which may impact its conduct in rest of the World.
#Google #AndroidOS #CCI #Abuseofdominance
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