This article has been authored by Mehak Nayak & Moksh Roy, fourth-year law students at Symbiosis Law School, Noida.
With the recent slew of antitrust cases against Google, including the investigation into Google Pay ordered by the Competition Commission of India (‘CCI’) and the United States Department of Justice’s suit against Google, it becomes imperative to look into the different practices of the multinational because of which it is being proceeded against in various jurisdictions. This article aims to underscore the anticompetitive practices of Google and also concisely deliberates upon the existing proposals for regulation of digital markets.
Google’s Tryst with Antitrust Laws in the Past
In July 2018, the European Commission (‘EC’) had fined Google with €4.34 billion for breaching European Union (‘EU’) antitrust rules. The move came after Google came under the burner for requiring Android device manufacturers to cement Google Search app and Google Play Store in their operating system (‘OS’) via pre-installation, as well as to elude ‘android forks’, i.e. android devices that do not run Google’s apps by default. Google was directed to bring such anticompetitive conduct effectively to an end within 90 days or face penalty up to 5% of the average daily turnover of Google's parent company, Alphabet.
The EC had determined that pre-installation created a status quo bias. Users who found search apps pre-installed on their devices were likely to stick to these apps— ergo, such a practice reduced the motivation of manufacturers to pre-install competing apps, as well as the incentives of users to download such apps. This reduced the ability of rivals to compete effectively with Google. It had therefore been held in the decision that Google, which had a dominant position in the market vis-à-vis general internet search services, licensable smart OS (operating systems) and app store for the Android OS, used the market share to its advantage unjustly to create entry barriers, as well as cause irreparable loss of customer base to competing businesses.
This is just one of the many actions faced by Google in the recent past. In June 2017, the EC fined Google €2.42 billion for abusing its dominance as a search engine by giving prominent placement to Google’s own comparison shopping service, and demoting rival shopping services in its search results. Prior to that, in July 2016, the EC noted that Google had abused its dominant position in the online search advertising intermediation market by entering into agreements which allowed it to control how its competitor’s advertisements looked and where they were placed.
It is pertinent to note that Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the European Economic Area Agreement prohibit abuse of a dominant position. Both these provisions bear semblance to Section 4 of the Competition Act, 2002 (‘CA’) of India— which forbids businesses from exploiting their dominant position in the relevant market.
The Contemporary Wave of Anticompetitive Practices in India, from Google Pay to Google Play
On 9th November 2020, the CCI ordered an investigation into certain aspects of Google’s practices— exclusivity regarding mode of payments for app purchases, Google Play Store imposing Google’s payment platform on app purchases and charging a high commission for its usage, and Google forcing pre-installation of Google Pay, inter alia.
Google has encouraged manufacturers to pre-install Google Pay on Android devices, flouting the norms against anticompetitive vertical arrangements in Section 3(4) of the CA. If the aforementioned case against Google in EU is anything to go by, this conduct has pushed users to use Google Pay exclusively over other UPI (Unified Payments Interface) payment apps, for such preferential placement drives users to not look for alternatives due to a status quo bias and the same was also noted by the CCI in its order to investigate Google Pay.
Moreover, Google Pay is the only UPI based app allowed as a valid payment method, in addition to Google Play’s billing system, for the app developers as well as the customers, with regards to the purchase of apps as well as in-app purchases. This warrants a prejudiced and discriminatory denial of market access for competing apps of Google Pay, such as Paytm, PhonePe, PayZapp, etc. As a result, users have been inadvertently left without much choice and Google Pay now enjoys a dominant position in its relevant market. In November Google Pay led the UPI market with a 43.4% market share.
It is fair to infer that there has been a clear-cut manipulation of market power on Google’s part, which has employed every possible means to covertly force the usage of Google Pay on Android users in India.
Borrowing the precedent of Google’s EU Antitrust case of 2018, it appears that Google in India is also on the same path of abuse of dominance. Apart from the recent Google Pay case, Google has likewise been probed by the CCI in the past for abusing its dominance in the search market to give prominence to its Flights application. The CCI had also ordered an investigation into Google in 2019 on the ground that Google used its leading position in the licensable mobile OS market to influence manufacturers into pre-installing Google’s mobile applications suite on their devices, thus leveraging its dominance in one market to retain its dominance in another.
Taking a glance at the past-antitrust violations by Google, it becomes patent that sterner laws and guidelines need to be laid down in place for technology enabled markets. The Competition and Markets Authority (‘CMA’), which is the antitrust arm of the United Kingdom, recently conducted a study on digital platforms like Google and Facebook. In the study it highlighted the imperativeness of bringing into place regulations for digital markets, owing to the incumbency advantages possessed by the leaders in these markets. A similar stance was taken by the Congressional Committee in its report on competition in digital markets.
Proposed Regulatory Framework
The CMA recently proposed setting up a Digital Markets Unit (‘DMU’), which would specifically regulate big tech companies like Google. The CMA’s proposal involves designating digital firms having entrenched market power with a Strategic Market Status (‘SMS’). The CMA recommended that the DMU should be empowered to impose a code of conduct on SMS firms, to curb any anticompetitive behaviour arising out of their business practices, and that it should be empowered to make pro-competitive interventions, like mandating access to data or to essential facilities; stricter merger control regulations for SMS firms were also suggested. The EU has also introduced the Digital Markets Act in order to ensure fair competition in the digital markets and formulate special rules for firms designated as ‘Gatekeepers’.
In India, the Competition Law Review Committee (‘CLRC’) set up by the Ministry of Corporate Affairs, submitted its report in 2019, addressing the efficiency of current laws for regulation of digital markets at length. It opined that the provisions of the CA are wide enough to embrace and control digital markets. The CLRC, on the issue of terms like ‘access to data’ and ‘network effects’ being included in Section 19(4) of the CA, stated that Section 19(4) is inclusive in nature, and therefore such addition of the CA wasn’t required. The CLRC further recommended that thresholds beyond existing assets and turnover should be explored in the merger control regime. Subsequently, in the Competition (Amendment) Bill, 2020, a proviso was added after Section 5(c), authorizing the CCI and the Centre to notify new thresholds for merger notification. This change will allow for sector-specific merger control, which will further aid in a deeper and more targeted scrutiny of transactions entered into by big tech companies with smaller firms. This shall further put a stop on companies like Google from acquiring and killing off potential competitors at a nascent stage.
Further, the Personal Data Protection Bill, 2019 (‘PDPB’) brings unexpected recourse to the table— Section 19 therein confers the right of data portability on the data principal, i.e. the person whom the data relates to. This shall allow the data collected by big tech companies to be interoperable and be used by competitors offering similar services as well, in the event a user chooses to move away from a big tech company’s services to that of smaller competitor. This will result in small firms being on an equal footing with firms like Google, when providing similar data-intensive services.
As set out above, authorities in different jurisdictions are moving towards stringent regulation of tech giants with entrenched market power. Conversely, Indian authorities have made no indication of introducing policies specifically targeting corporations like these, like the CMA or the EU Authority. The additions to the merger control provisions of the CA will look into matters of ‘killer acquisitions’. Further, features like data portability and interoperability that will be brought in place by the enactment of the PDPB are bound to help in increasing effective competition, considering that access to data is deemed to be one of the barriers to digital markets, which was also pointed out by the CMA in its study. Certain studies, however, have raised questions on the positive effects of data portability on competition. It has been observed that data portability is not the end-all solution to restore and sustain competition in digital markets.
It is also noteworthy, that while other jurisdictions plan on imposing data-sharing and data portability obligations only on larger companies with entrenched market power, the PDBP confers them as a right on the people who use services which extract user data in any manner. This will raise compliance costs for small companies, while it would not be much of an issue for the larger ones. Balancing the privacy of the other users (like people in the contact list of the person using the service) from data portability requests raises another cause for concern. Section 41 of the PDPB also proposes setting up a regulatory body for governing matters related to data. Considering the regulatory tussles that the CCI has been in with other sectoral regulators in the past, it becomes difficult to imagine the CCI operating in tandem with this new regulator in order to properly govern digital markets.
In the authors’ humble opinion, the current regulatory framework in India is sufficient to solve matters of anticompetitive practices in digital markets by an ex-post analysis; however, not a lot of steps have been taken to tackle the problem of deep-rooted dominance in these markets. Specific guidelines for firms which are dominant in digital markets shall allow for targeted, ex-ante regulation, which is the need of the hour.
Hopefully, the requisite steps for proper regulation will be taken by the CCI after it has completed its study on digital markets.