Google vs CCI : Supreme Court Agrees To Hear Google's Plea Against NCLAT Order To Deposit 10% Penalty On Jan 16

The Supreme Court has listed on January 16 tech-giant Google's plea challenging the order of National Company Law Appellate Tribunal(NCLAT) which declined to stay the Competition Commission of India’s (CCI) decision to impose Rs 1,338 crore penalty on it for unfair and anti-competitive practices in relation to Android phones.

On January 6, the NCLAT refused to stay the CCI's order and directed Google to deposit 10% of the penalty amount within a period of three weeks.

The matter was mentioned by Senior Advocate AM Singhvi before a bench comprising Chief Justice DY Chandrachud and Justice PS Narasimha. Sr Adv AM Singhvi, while urging for an early listing submitted that extraordinary directions had been passed by the CCI. He said–

"Compliance date is January 19. Please list early otherwise the matter will be infructuous."

CJI DY Chandrachud stated that the matter will be listed on Monday. 

Background

Google LLC (formerly Google Inc.) is a Delaware limited liability company and wholly owned subsidiary of Alphabet Inc. Google provides a variety of information technology related services and an internet search service. Google’s core business activities are Chrome, Gmail, Google Drive, Google Maps, Android, Google Play, Search, and YouTube. Google India Private Limited (“Google India”) is an indirect subsidiary of Google LLC. Smart phones require an operating system to run the applications and programs. Android being one such mobile operating systems, was acquired by Google in 2005. The consumers of Android based smart phones filed a complaint against Google LLC and Google India under Section 19(1)(a) of the Competition Act, 2002, alleging abuse of dominant position by Google in the mobile Operating System markets.

The Competition Commission of India (“CCI”) Bench comprising of Mr. Ashok Kumar Gupta (Chairperson), Ms. Sangeeta Verma (Member) and Mr. Bhagwant Singh Bishnoi (Member), while adjudicating the complaint in Mr. Umar Javeed & Ors. v Google LLC & Anr., Case No. 39 of 2018, examined Google’s Android mobile operating system and proprietary mobile applications such as Play Store, Google Search, Google Chrome, YouTube, etc.

Google submitted that it was facing competitive constraints from Apple. The CCI Bench noted the differences in the business model of Google’s Android and Apple’s iOS ecosystem. While Apple’s business focuses on sale of high-end smart devices with state of the art software components, Google’s business focuses on increasing users on its platforms so that they interact with its revenue earning service. The Bench opined that there is no substitutability between Google’s Play Store and Apple’s App Store.

It was observed that Google manages the Android OS and licences its other proprietary applications. The Original Equipment Manufacturers (“OEMs”) use this OS & Google’s apps in their smart mobile devices. Google enters into multiple agreements to govern their rights and obligations viz. Mobile Application Distribution Agreement (MADA), Anti-fragmentation Agreement (AFA), Android Compatibility Commitment Agreement (ACC), Revenue Sharing Agreement (RSA), etc.

“MADA assured that the most prominent search entry points i.e., search app, widget and chrome browser are pre-installed on Android devices, which accorded significant competitive edge to Google’s search services over its competitors. Further, Google also secured significant competitive edge over its competitors, in relation to its another revenue earning app i.e. YouTube in the Android devices. The competitors of these services could never avail the same level of market access which Google secured and embedded for itself through MADA. Network effects, coupled with status quo bias, create significant entry barriers for competitors of Google to enter or operate in the concerned markets.”

The Bench held that mandatory pre-installation of entire Google Mobile Suite (GMS) under MADA, with no option to un-install the same, and their prominent placement amounts to imposition of unfair condition on the device manufacturers. Thus Google violated Section 4(2)(a)(i) of the Competition Act.

The CCI Bench concluded that Google perpetuated its dominant position in the online search market, resulting in denial of market access for competing search apps. Further, Google abused its dominant position in the Android OS app store market, to protect its position in online general search.

The CCI Bench by invoking its powers under Section 27 of the Competition Act, had imposed monetary penalty of Rs. 1337.76 Crore on Google for abusing its dominant position in multiple markets. The Bench further issued a cease and desist order against Google from indulging in anti-competitive practices that have been found to be in contravention of Section 4 of the Competition Act. Google was also directed to modify its conduct within a defined timeline.