Protecting competition

The Competition Commission of India's action will open up the Android space

The imposition of two fines within seven days on Google by the Competition Commission of India (CCI) indicates that the regulator is coming to grips with the nuances of monopolistic behaviour in the digital space. The first penalty, of Rs 1,338 crore, was for “abusing its dominant position in multiple categories related to the Android ecosystem”. The second penalty, for Rs 936 crore, was imposed for “abusing its dominant market position with respect to its Play Store policies”. Both orders are provisional. The fines are equivalent to proverbial slaps on the wrist, given its 2021 global revenue of $257 billion and profit of $76 billion. But they come with stringent conditions and timelines for compliance. The penalties can be increased if the digital giant fails to comply with the orders. Both of them are similar in delineation of anti-competitive practices to those imposed by the European Union’s (EU’s) Competition Commission, though the EU imposed far larger penalties of over ^7 billion. Penalties are calculated on the basis of revenue percentage within a jurisdiction. Google has 30 days to resubmit accounts and allow for re-calculating India revenues.

The first order says Google abused the dominance of the Android operating system, the dominance of Play Store for Android apps, the monopoly market share in search, the dominant position of the Chrome browser across multiple operating systems, and the domination of YouTube in online video hosting. The second order focused on the mandatory usage of the Google Play Billing System (GPBS) for paid apps and in-app purchases, which the CCI terms unfair conditions for developers. If app developers did not comply with using GPBS, they would not be permitted to list on Play Store and lose out on access. In addition, the CCI says Google discriminates in favour of YouTube by not requiring GPBS for it and it has a preferential method of integrating Google’s own UPI app, Google Pay, with Play Store, giving an unfair advantage to GPay. Google enters Mobile Application Distribution Agreements (MADA) with equipment manufacturers to ensure Google’s apps are pre-installed. MADA can involve revenue-sharing. The pre-installed search app, widget, Chrome browser and YouTube (a revenue-earning app) give it a big competitive edge. The CCI held that revenue-sharing agreements helped Google secure exclusivity for search.

The CCI has barred Google from forcing manufacturers to pre-install its applications. It specified that for pre-installation manufacturers must be allowed to choose from outside Google’s proprietary applications suites. Google is also prohibited from offering monetary or other incentives or entering into any arrangement for search exclusivity. Google shall also allow app developers to use third-party billing/payment processing services. It will allow side-loading of apps from outside Play Store. This would reduce the income from app installs since Google charges 15-30 per cent revenue shares on apps installed via Play Store/GPBS.
 

The company is also to set out clear, transparent policy on the data collected, use of data and also potential and actual sharing of data with other entities, including related entities. Any transaction data or consumer data generated through GPBS shall not be leveraged to yield competitive advantage. Google is also instructed to not discriminate against apps facilitating payment through UPI apps other than GPay. Taken together, these orders would open up the Android space. They would reduce costs for users and create competition across apps. Google has the option to appeal the orders and the counter-arguments it may present would help to further fine-tune regulating the smartphone ecosystem.