October 30, 2022

Competitive Commission of India fines Google

Bappa Sinha

THE Competition Commission of India (CCI) has recently fined Google in two separate rulings. In the first ruling, the CCI imposed a fine of Rs 1,337.76 crores on Google for "abusing its dominant position in multiple markets in the Android Mobile device ecosystem". In the second ruling, the CCI imposed a fine of Rs 936.44 crores on Google for "for abusing its dominant position with respect to its Play Store policies". In both cases, the CCI has issued a "cease and desist order" and asked Google to modify its conduct within a specified timeline. 

Let us look at these rulings in more detail to understand the orders and their implications.

In the first ruling, the CCI noted that Google, through its Android operating system (OS), had a monopoly in the smartphone operating system space, as it powers 97 per cent of the 600 million smartphones in India. The CCI ruling said that Google used its monopoly position in the Android OS to protect its leading positions and unfairly disadvantage competitors in a number of areas. This includes online search, web browsers and online video hosting platforms. Google forces smartphone manufacturers using Android OS to pre-install and prominently place its services and apps, including Google search, Google Chrome and the Youtube app. 

Why does this matter to the consumers, i.e., the users of smartphones? What it does, is use Google's monopoly over the Android OS to either keep out other competitors, for example, the search engine or online video platforms or extend Google's reach into other areas, such as online payments, for example, Google Pay. This, according to CCI, provided a significant competitive advantage to Google.

While Google has made a basic Android OS open source that can be downloaded and used by anybody, it licenses a whole bunch of other add-ons required by cellphone manufacturers. The Android OS license comes with the restrictions that Google search and browser Chrome must be pre-installed on a mobile phone or device using the Android OS. Google also prevents manufacturers from selling any device using an alternate version of Android – Android forks – not approved by Google on any of their devices!

This CCI ruling follows the precedent of similar rulings in other parts of the world, including the European Commission's ruling against Google. These bodies found that Google used its monopoly in Android OS and imposed unlawful restrictions on mobile phone manufacturers, consolidating its dominant position in the search market and other markets. The European Commission, though, had set a much bigger fine of $4.3 billion dollars on Google.

Google's main business is advertising, with more than 80 per cent of its revenues last year from advertising was more than $200 billion worldwide and about Rs 14,000 crore in India. This revenue, which makes Google the biggest recipient of advertising, is based on Google being able to effectively target relevant ads to the end users. This is why sellers have to spend on ads to be carried by Google platforms. We know about Google's ability to profile everyone who uses any Google app or platform – e.g., Gmail, Youtube and Google maps – and track the person 24x7 through such multiple platforms. The most pervasive of these platforms is our mobile phone, which tracks the person's every phone activity: clicks, photos, sound, video and location at all times during the day, even when the person is not actively using the phone or sleeping. The Android OS on the smartphone, along with a suite of very "helpful" Google apps such as the search widget, act in effect as pervasive spying tools which Google deploys to track every activity and profile every user. It is this very effective profiling platform which Google guards zealously abusing its monopoly position in this space.

Apart from the Android OS ruling, the CCI, in a second ruling, noted that Google abused its dominant position with regard to its Play Store payment policies. It ruled that Google unfairly restricted app developers to using Google Play's Billing System (GPBS) for receiving payments for apps and also for in-app purchases, i.e., purchases made while using any downloaded app. Google also restricted app developers on its Play Store from displaying links to a website providing an alternate payment method or language encouraging the user from purchasing outside the app. The CCI also directed Google not to use relevant transaction/consumer data collected through its GPBS payment system to further its competitive advantage over third-party app developers.

In both rulings, CCI has found that Google was using its monopoly position in the Android smartphone market to disadvantage third-party search, apps and payment services. These rulings are in line with the CCI's mandate of curbing anti-competitive or abuse of dominant position by monopolies to curb competition. It must be noted that the CCI, which replaced the Monopolies and Restrictive Trade Practices Commission (MRTPC) in 2009, has a much more limited mandate. While the MRTPC sought to restrict and dismantle monopolies, considering them bad for the economy and society per se, the CCI seeks to curtail only "anti-competitive" practices of monopolies. This is a part of the neoliberal reforms and confers freedom for business monopolies to operate freely as long as they don't engage in "anti-competitive" practices. 

The CCI rulings, while welcome, have only addressed Google's use of its monopoly position in the android OS space to discriminate against its competitors. In the US, there are multiple wide-ranging law suites pending against Google, which have been brought in by the US justice department and more than 40 states. Those law suites target the core of Google's monopoly over the search and online advertising market. Google, through its 2007 acquisition of DoubleClick, now its Adsense platform, controls the entire process – from targeting to the placement and delivery of ads to the end user. It effectively has a monopoly at both ends of the advertising market – controlling and shortchanging both the advertisers and the viewers/buyers – and choking off any competition to this absolute control of the entire advertising ecosystem.

Most of today's tech giants, such as Apple, Google, Amazon, Facebook and others, have secured monopoly positions in their respective market segments resulting in supernormal profits for them at the cost of great harm to industry and innovation and the broader economy and society. Governments all over the world have been late and wanting – too little, too late – in acting to curb these monopolies. These governments the world over must now act before these monopolies wreak further havoc on our societies.