Competition Commission of India’s penalty on Google India

January 15, 2023
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In this edition we would briefly discuss the widely reported news of Competition Commission of India (CCI) imposing penalties on alleged anti-competitive practices of Google India.
 
CCI was established after the enactment of Competition Act, 2002 which mandates CCI to promote and sustain an enabling competition culture through engagement and enforcement that would inspire businesses to be fair, competitive and innovative; enhance consumer welfare; and support economic growth.
 
In Oct 2022, on an appeal filed by three advocates in 2018 against Google India, CCI had passed two orders imposing penalties on Google. First order of Oct 20, with a fine of ~1337 Cr, relates to the anti-competitive practices with respect to Android (mobile operating system). Second order dated 25 Oct, with a fine of 937 Cr, alleges Google abusing its dominant position by way of its Play Store policies and asked Google to cease its “abusive” practices.
 
Google’s Android is the dominant operating system for smartphones in India with over 95% market share. As per the complaint to CCI, smartphone manufacturers (OEMs) have no choice but to agree to Google Mobile services (GMS) through which proprietary applications & services such as Google search, Google Chrome & Youtube come pre-installed on the device which cannot be removed. Such conduct was claimed to have hindered the development and market access of rival mobile applications or services.
 
In the second case, Google, through its control over the Play Store, is favouring Google Pay over other competing apps, to the disadvantage of other UPI apps and end users. In simple terms, apps have to necessarily enable their in-app purchases through Google Pay services only. This amounts to abuse of its dominant position by Google.
 
Google challenged both of these CCI orders in the appellate authority – The National Company Law Appellate Tribunal (NCLAT). NCLAT declined to provide interim relief to Google, following which Google has approached the Supreme Court which would listen to its plea on Monday 16 Jan 22.
 
Meanwhile through a comprehensive blog post, Google initiated its public communication exercise where it emphasised on the significant role Google and its products have played in ushering digital transformation in India.
 
“Over the last 15 years, through Android’s free open source software and suite of high quality apps, Google has helped device manufacturers make smartphones more affordable by a vast margin. Today, any user can get their hands on a fully functional smartphone at less than Rs. 6000 from numerous brands.”
 
Secondly, on impact of the CCI orders, Google has argued – “As we look beyond the estimated 700 million users who are already online, safety, affordability and expanded use cases for the next wave of users will be the pillars that will determine digital adoption. Unfortunately, the ordered remedies on Android strike blows to these very areas’’.
 
In other words, Google is making an argument against the CCI orders on increased security risks due to multiple unique android versions (called forks), lesser smartphone affordability due to increased software development costs, and higher user exclusion due to higher cost for app developers.
 
It is worth noting that, as brought about in this insightful piece, mobile broadband users through smartphones in India have plateaued. After a burst of rapid growth in the earlier half of last decade, it has become stagnant.
 
This leads to expanding the existing monetisation opportunities from the crowded top of the bracket 10 Mn indian internet users. E.g. in yet another news from last month, Google is set to launch Youtube Courses, a structured learning experience on Youtube, in direct competition to ed-tech apps. Thus, if Google apps are pre-bundled and configured in the device, it creates an unfair advantage for market access for others.
 
It would be interesting to see how the Supreme Court leans on this issue which would have bearing on the startup ecosystem.
Ecosystem Ventures This Week
Key Highlights – Events
We are happy to share that Mr. Abhishek Sanghvi, Mr. Abhijeet Bhandari (Partners, Ecosystem Ventures) and Mr. Shailesh Jain (VP, Ecosystem Ventures)  participated in the 17th Pravasi Bharatiya Sammelan and Global investor meet 2023, held in Indore.


Startup Funding Summary

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M&A Snippets

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