NCLAT agrees to hear Google plea challenging CCI's penalty order, refuses immediate stay

New Delhi [India], January 4 : The National Company Law Appellate Tribunal (NCLAT) on Wednesday agreed to hear Google's plea challenging the Competition Commission of India (CCI) order slapping of Rs 1337 crore penalty for alleged violations in the Android mobile device ecosystem.
The NCLAT on Wednesday issued notice to CCI and sought its response to Google's plea. NCLAT while admitting the plea asked Google to deposit 10 per cent of the penalty to show bonafide. Meanwhile, Tribunal refused to put an immediate stay on the CCI penalty order.
The next hearing on February 13 on the issue of staying the penalty and the main hearing on the plea will be on April 3, said the Tribunal.
On October 20, 2022, The Competition Commission of India (CCI) imposed a penalty of Rs 1,337.76 crore on tech giant Google for abusing its dominant position in multiple markets in the Android mobile device ecosystem, apart from issuing cease and desist orders.
The Commission also directed Google to modify its conduct within a defined timeline.
The Commission had examined various practices of Google in the matter of licensing of Android mobile operating system and various proprietary mobile applications of Google namely Play Store, Google Search, Google Chrome and YouTube.
During the course of the inquiry, Google argued about the competitive constraints being faced by Apple, CCI said in a statement.
In relation to understanding the extent of competition between Google's Android ecosystem and Apple's iOS ecosystem, the Commission said it noted the differences in the two business models which affect the underlying incentives of business decisions.
The Commission said that Apple's business was primarily based on a vertically integrated smart device ecosystem which focuses on the sale of high-end smart devices with state-of-the-art software components. Whereas Google's business was found to be driven by the ultimate intent of increasing users on its platforms so that they interact with its revenue-earning service, which means, an online search directly affects the sale of online advertising services by Google.
Further, in relation to app stores, the Commission said it noted that the demand for the same comes from three different sets of consumers with smart device original equipment manufacturers (OEMs) who wish to install an app store to make their smart devices commercially viable and marketable; app developers, who want to offer their services to the end-users; and end users to wish to access app stores to access content or avail other services.
The Commission said it had examined the substitutability between Google's Play Store for Android OS and Apple's App Store for iOS from the perspective of all three demand constituents and found that there is no substitutability between Google's Play Store and Apple's App Store.
The Commission further noted that there might be some degree of competition between the two mobile ecosystems -- Android and Apple, however, that too is also limited at the time of deciding as to which device to buy. Based on its assessment, the Commission found Google to be dominant in all the mentioned relevant markets.
The CCI concluded that mandatory pre-installation of the entire Google Mobile Suite (GMS) under MADA (with no option to un-install the same) and their prominent placement amounts to imposition of an unfair conditions on the device manufacturers and thereby in contravention of the provisions of Section 4(2)(a)(i) of the relevant Act. These obligations are also found to be in the nature of supplementary obligations imposed by Google on OEMs and thus, in contravention of Section 4(2)(d) of the Act.
It said Google has perpetuated its dominant position in the online search market resulting in the denial of market access for competing search apps in contravention of Section 4(2)(c) of the Act.
It also concluded that Google has leveraged its dominant position in the app store market for Android OS to protect its position in online general search in contravention of Section 4(2)(e) of the Act and that Google has leveraged its dominant position in the app store market for Android OS to enter as well as protect its position in non-OS specific web browser market through Google Chrome App.
It noted that Google has leveraged its dominant position in the app store market for Android OS to enter as well as protect its position in the OVHPs market through YouTube and thereby contravened provisions of Section 4(2)(e) of the Act.
The CCI also concluded that Google, by making pre-installation of Google's proprietary apps (particularly Google Play Store) conditional upon signing of AFA/ ACC for all android devices manufactured/ distributed/ marketed by device manufacturers, has reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android i.e., Android forks and thereby limited technical or scientific development to the prejudice of the consumers, in violation of the provisions of Section 4(2)(b)(ii) of the Act.
The CCI also indicated some measures including that Google shall not incentivise or otherwise obligate OEMs not to sell smart devices based on Android forks and shall not restrict uninstalling of its pre-installed apps by the users.
In relation to the computation of penalty, the CCI noted that there were glaring inconsistencies and wide disclaimers in presenting various revenue data points by Google.
"However, in the interest of justice and with an intent of ensuring necessary market correction at the earliest, the CCI quantified the provisional monetary penalties on the basis of the data presented by Google. Accordingly, the CCI imposed a penalty of Rs. 1,337.76 crores upon Google on a provisional basis, for violating Section 4 of the Act," a CCI release said. It said Google has been given a time of 30 days to provide the requisite financial details and supporting documents.