A habitual offender?

Financial Express, November 24, 2022

By Pradeep S. Mehta & Sidharth Narayan

The penalties of Rs 1,337 crore, and Rs 936 crore (collectively $280 million), imposed on Google by the Competition Commission of India (CCI), are for the abuse of its dominance (AoD) with respect to Android mobile devices and Play Store policies, respectively. Google has been penalised on similar issues by other competition regulators across the world as well. Google’s competition woes in India started in 2018, when it was fined Rs 135 crore ($16 million) by the CCI on a complaint filed by Bharat Matrimony and CUTS regarding the imposition of unfair conditions in agreements with websites pertaining to general search and search advertisement services. A penalty of 5% was imposed, based on relevant turnover, after six years; this has been appealed.

Notably, Google was also sued by the US DoJ in 2020 over similar concerns. The European Commission (EC) also opened an investigation into Google’s ad tech policies last year after a penalty of $1.7 billion was imposed in 2018 concerning online advertising services and a penalty of $2.7 billion with respect to shopping comparison services in search results in 2017. The recent order by the CCI also pertained to unfair conditions in agreements, but with Original Equipment Manufacturers (OEMs). It mandated OEMs to pre-install Google apps and services—the Google Mobile Suite—on their devices and prohibited them from offering devices with competing Android forks. A penalty of 10% of relevant turnover was imposed after two years of case initiation. In 2021, 37 US state and district attorneys general sued Google for similar practices. In the same year, Korea’s Fair Trade Commission (FTC) imposed a penalty of $177 million on Google for similar conduct. These came after EC imposed a penalty of $5 billion in 2018 on similar grounds.

Another recent order by the CCI pertained to Google’s play store policies, wherein it was found to impose unfair conditions on app developers, requiring them to exclusively use Google Play’s Billing System not only for receiving payments for apps but also for in-app purchases. A penalty of 7% was imposed. There are ongoing investigations in Indonesia and the UK on similar issues. The CCI is also currently investigating Google’s AoD in news aggregation for imposing unfair conditions with respect to its advertising policies on news publishers, who have little bargaining power. The Australian Competition and Consumer Commission had dealt with a similar issue previously, while the French Competition Authority had imposed a penalty of $592 million. There are other issues as well that need to be investigated, such as those related to discriminatory email spam filters (Google was recently sued by the Republican National Committee in the US), misleading consumers on the collection and processing practices of their location data (penalties imposed in Australia and US), among others.

These reveal that while the CCI has been shortening the time for adjudicating AoD matters and competition authorities are enhancing the quantum of penalties imposed on it, Google is proving to be a habitual offender on these issues globally. Accordingly, the recent penalties imposed by the CCI should not be seen in isolation but viewed collectively. While such ex post penalties are large, these are not an adequate measure to stop Google from indulging in anti-competitive practices. The tech goliath perhaps considers such penalties as an operating expense and can provide for them through contingent liabilities, given its deep pockets.

Considering this, many countries have now started to formulate specific laws to ensure fair competition in digital markets. For instance, the US is considering the ‘Open App Markets Act’, which prohibits companies from mandating app developers to use an in-app payment system owned or controlled by the company as a condition of distribution or accessibility. Similarly, Australia passed the ‘News Media and Digital Platforms Mandatory Bargaining Code’, which helps news publishers to bargain individually or collectively with Google and other news aggregators. South Korea has also passed the ‘Telecommunications Business Act’ which seeks to ban app payment monopolies.

This is an opportune time for India to also explore formulating such laws given that India’s digital governance regime is going through an overhaul, with a new proposed telecom law, upcoming Digital India Act, and a data protection law, along with proposed amendments to the Competition Act. Notably, the CCI’s former chairman has voiced the need for ex ante measures to ensure fair competition in digital markets. Discussions on this are also happening at the OECD. Increasing cooperation amongst competition authorities globally would be useful. India may also borrow a leaf from EC’s ‘Guidelines on the method of setting fines’, which includes aspects of recidivism. It empowers the EC to increase the basic amount of the penalty by 100% in case a business repeats the same or a similar infringement for which it was held liable.

Exploring such laws and practices would help the Indian government achieve its vision and efforts towards an open, free and fair internet where consumers can exercise free choice, their expectations are not distorted by the abuse of market power, and there are no curbs on innovation or market entry.

The authors are with CUTS International

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