Daybreak - The antitrust case that forced Google to approach India’s top court

Episode Date: January 11, 2023

Last year, the CCI found Google guilty in two of the four antitrust cases against the tech giant. In one of the cases that involves Google's dominance in the Android OS market, the CCI has asked it to pay a fine of $161 million dollars.Google approached the NCLAT contesting CCI's order, asking the tribunal to squash it but NCLAT declined. Now, Google has moved the country's top court.What is the Android OS case all about?Tune in to find out.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Very soon, you might be able to uninstall Google's pre-installed apps from your Android phone, from YouTube, Google Maps and Gmail. You know the ones that you cannot remove even if you want to. What's been a standard for all Android phone users until now has come under the scanner of India's competition watchdog, the Competition Commission of India or the CCI. Last year, the CCI found

Google guilty in two antitrust cases. The tech behemith now stands to pay close to $300 million in fines. Out of this, $161 million is for exploiting its dominant position. in the market for Android's, which actually powers 95% of smartphones in India and is a key growth region for the US giant. And another $115 million is for some of its play store policies. Just think about it. For most of us, Google literally means searching for something on the internet. It has become a world. So it comes as no surprise why big tech companies around the world, including Google, have been facing billions of dollars in fines for abusing their dominance in the market. And that is why it was not like Google was caught off guard when it faced antitrust investigations

in India. Google was prepared for it. So in the case related to its alleged dominance in the Android market, Google decided to approach the national company law appellate tribunal, which is also known as Enclat. It asked for interesting. relief from the CCI's order, saying that the CCI investigators had copied parts of the European Commission's landmark 2018 ruling against it, which was in a similar antitrust matter. But the Enclat refused. And last week, news broke out that Google has legally challenged the CCI's order in the Supreme Court of India. Today, I will tell you all about this antitrust case that has forced Google to approach India's highest court.

Welcome to Daybreak, a brand new podcast from the Ken. I'm your host, Nick Das Sharma, and in each episode, I will tell your business story that is significant, interesting and most importantly worth understanding. Today is Wednesday, the 11th of January. To begin with, let us understand how India is following a global precedent when it comes to antitrust cases. against Big Tech.

In October last year, sources had told Reuters that Google was quite worried about the Indian antitrust decisions. And that is because, according to the tech giant, the remedies ordered by the CCI in India were even more extensive than the European Commission's landmark 2018 ruling. And the European ruling was also related to Google abusing its market dominance in the Android operating system. For a while though, tech giants mostly had it easy in India, except for a few hiccups here and there. But from here on, it might not be all smooth sailing.

The competition law challenges that Google is facing in India are a part of a global problem for the tech giant. Apart from the existing antitrust cases, it is also under scrutiny for its practices in the digital advertising market in both the United States and the tech giant. European Union. So going by how Asia-Pacific, Europe and the US are shining the spotlight on big tech, India might follow suit. In fact, it is following suit. In India, the CCI has a total of four cases against Google. Out of them, CCI has found Google guilty in two. Apart from these, Google has also been prescribed behavioral remedies and these may actually fundamentally change. the way Android and the Play Store operates. But what exactly is this particular case

that has forced Google to approach the country's top core? It's got to do with Google abusing its dominance in the mobile operating systems market. Android, the most common operating system in smartphones, was acquired by Google way back in 2005. In India, 97% of the smartphone that are used are powered by Google's Android OS. It is a big market for the tech giant.

So to understand why the CCI thinks that Google is adopting anti-competitive practices in this case, we have to understand how Android works. Android is an open source operating system. That basically means that developers can modify it and build on it, since it is a publicly accessible platform. Now, here's the thing. Most smartphone and tablet manufacturers in India use the Android operating system. With it, they combine a bunch of Google's proprietary applications and services,

which are also known as Google Mobile Services or GMS. This includes running apps such as Gmail, Google Maps, YouTube and the rest. So smartphone or tablet manufacturers like, say, Samsung, Xiaomi or Vivo, have two options. The first is they operate without the GMM. which means that their Android device will not include any apps such as Google Maps, Gmail or YouTube. And the other option is that they use the GMS. But for this, they have to enter into two additional agreements with Google. The mobile distribution agreement, also known as MADA,

and the anti-fragmentation agreement, AFA. According to Google, the reason for this is that since it is providing its operating platform free of cost, smartphone or tablet manufacturers will have to agree to certain conditions if they also want to use the GMS. And what are these conditions? That smartphone makers have to carry Google's search widget, the Chrome browser and an entire suite of applications. And here is the catch. They have to do it without offering users the ability to uninstall them. The CCI in its investigation found these conditions unlawful.

Plus, the CCI also said that because of the compulsory pre-instillation of the Google suite, which includes the Play Store, consumers did not have the option of downloading apps outside the Play Store. So the CCI found Google guilty of anti-competitive practices and fined it for nearly $162 million in this case. In its ruling, the CCI said that Google's licensing of its Play Store shall not be linked with the requirement of pre-installing Google's search services, the Chrome browser, YouTube or any other Google applications. But Google is not going down without putting up a fight. How has it responded to the CCS orders?

Google says that the implementation of the CCI's directives will hurt its long-standing business model and consumer interests. And that is because beyond the actual cost of the fine that has been imposed, the CCI is also asking Google to make some pretty significant changes at a business model level. When the CCI made its order public, Google released a statement saying that Indian developers have benefited from the technology, security, consumer protection, and unrivaled choice and flexibility that Android and Google Play have provided. And by keeping costs low, Google said that its model has powered India's digital transformation

and expanded access for hundreds of millions of Indians. But the CCI had a deadline for implementing its ruling. January 19, 2023. So the only natural course of action left for the tech giant was to legally challenge the order. First, it approached the Nclat asking for the CCI's order to be squashed. It told the tribunal that the country's antitrust investigators had copied parts of a European ruling against it. Even there, Google has challenged the record $4.3 billion fine that was imposed on it by the European Commission. But earlier this month, Enclad refused to grant interim relief to Google.

And instead, it directed the company to deposit 10% of the penalty. This is why Google was left with no option but to go to the topmost court of India. While we do not know how this will shape up, there is one thing that we know for sure. There are two more CCI cases pending against Google. And this is just the beginning of what is going to. to be a long battle for the tech giant here in India. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.