2023 (4) TMI 173 - AT - Companies Law

Abuse of dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(b)(ii), Section 4(2)(c), Section 4(2)(d) and Section 4(2)(e) of the Competition Act, 2002 - pre-installation of entire GMS suite under MADA - amounts to imposition of unfair condition on the device manufacturers and thereby infract provisions of Section 4(2)(a)(i) and Section 4(2)(d) of the Act or not - Revenue Share Agreement (RSA) - Doctrine of proportionality. Whether for proving abuse of dominant position under Section 4 of the Competition Act, 2002 any effect analysis of anti-competitive conduct is required to be done? And if yes; what is the test to be employed? - HELD THAT - For proving abuse of dominance under Section 4, effect analysis is required to be done and the test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not. Whether the order of the Commission can be said to be replete with confirmation bias? - HELD THAT - The Commission proceeded to consider the materials on the record and submissions of the parties with respect to each of the market and recorded findings and conclusions after considering the evidence on record. Hence, we are unable to accept the submission of the learned Senior Counsel for the Appellant that the order of the Commission is replete with confirmation bias. Whether pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellant resulting in breach of Section 4(2)(a)(i) and 4(2)(d)? - Whether the Commission, while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d), has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT - Pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellants resulting in breach of Section 4(2)(a)(i) and 4(2)(d) - The Commission while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d) has considered the evidence on record and has returned finding that the conduct of the Appellant harms the competition. Whether the Appellants by making pre-installation of GMS Suite conditioned upon signing of AFA/ACC for all Android Device Manufacturers (OEMs) has reduced the ability and incentive of the OEMs to develop and sell devices operating on alternative versions of Android i.e., Android Fork and thereby limited technical and scientific development which is breach of the provisions of Section 4(2)(b)(ii) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(b)(ii) has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT - The Appellant by making pre-installation of GMS suite conditional to signing of AFA/ACC for all Android devices manufacturers, has reduced the ability and incentive of devices manufacturers to develop and sell self-device operating or alternative version of Android and Android Forks and thereby limited technical and scientific development, which is breach of provisions of Section 4(2)(b)(ii) of the Act - The Commission while returning its finding has considered the evidence on record in respect of Section 4(2)(b)(ii) and has also returned finding on anti-competitive conduct of the Appellant. Whether Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference of above has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - Whether Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference to tying of Google Chrome with Play Store has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - Whether Appellant has abused its dominant position by tying up of YouTube App with Play Store and hereby violated provisions of Section 4(2)(e) of the Act? - Whether the Commission while returning its finding on breach of Section 4(2)(e) in reference to tying of YouTube with Play Store has not considered the evidence on record and has not returned any finding regarding the Appellants conduct being anti-competitive? - HELD THAT - Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive - Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive - Appellant has abused its dominant position by tying up of YouTube App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive. Whether the investigation conducted by the Director General was in violation of Principles of Natural Justice? - Whether the investigation conducted by the Director General is vitiated due to DG framing leading questions to elicit information? - HELD THAT - Investigation conducted by the Director General did not violate the principle of natural justice - Investigation conducted by the Director General cannot be said to be vitiated due to the Director General framing leading questions to elicit information. Whether order of Commission is vitiated since the Commission did not have any Judicial Member? - HELD THAT - The impugned order by the Commission is not vitiated on the ground that the Commission did not consist of a Judicial Member. Whether the order passed by the Commission in exercise of its power under Section 27(a) is beyond the findings recorded by the Commission and is not in accordance with law? - HELD THAT - There is no dispute that preinstalled Apps can be disabled by the users in no time. The OEMs are also not obliged to install all 11 suite of Apps of Google, thus the OEMs are free to not preinstall any of the Apps. All the Apps, which are preinstalled can be disabled as per the users choice, disabling all the Apps by user serve the purpose of disappearing the Apps from the screen and not performing any functions. The Apps can be enabled, if user so decides. Uninstallation will preclude option of the user to disable and enable the particular App as per its choice - direction in paragraph 617.7 is uncalled for and deserve to be set aside. Whether the penalty imposed on the Appellants by the Commission in exercise of its power under Section 27(b) was not based on relevant turnover of the Appellants, disproportionate and excessive? - HELD THAT - Google has not provided the financial information as sought by the CCI vide its order dated 6.10.2021, and reiterated in its later order dated 17.10.2021. The inadequacy of the data supplied by Google has been mentioned in detail in paragraphs 630, 631, 632, 633 and 634, whereafter the CCI points out to significant inconsistencies and wide disclaimers in presentation of the requisite data by Google. In such a situation, CCI has carried out the best estimation on the basis of a financial statements and information submitted by Google - in a conservation approach, the CCI has taken the lower of these two figures as turnover for the FY 2020-221 and imposed a penalty @ 10% of its average of relevant turnover for the last three FYs 2018-19, 2019-20 and 2020-2021. We uphold the amount of penalty imposed by CCI on Google. Regarding the issue of imposition of provisional penalty consider the argument of the Learned Senior Counsel of the Appellant that there is no provision in the Competition Act for imposing a provisional penalty, with the possibility of revising it on receipt of further information data. We are of the view that the section 27(b) of the Competition Act, 2002 provides for imposition of penalty, which shall not be more than 10% of the average turnover for the last three preceding years upon enterprises, which are parties to such agreements or abuse. Once the CCI has derived the best estimate of the relevant turnover for the last three preceding financial years, and imposed a penalty of 10% of the average of such turnover, we are of the opinion that further revision of this penalty on the basis of financial information or data that may come to light in future will not be in keeping with law. Appeal is thus disposed off in following manner (i) The impugned order of the Commission dated 20th October, 2022 is upheld, except as indicated at direction (ii) below; (ii) Direction issued in paragraphs 617.3, 617.9, 617.10 and 617.7 are set aside. Rest of the directions under paragraph 617 and fine imposed by paragraph 639 are upheld. (iii) The Appellant is allowed to deposit the amount of penalty (after adjusting the 10% amount of penalty as deposited under order dated 04.01.2023) within a period of 30 days from today. (iv) The Appellant is allowed 30 days time to implement the measures as directed in paragraph 617 (to the extent upheld by this order).

Summary

Issues Involved:

1. Whether for proving abuse of dominant position under Section 4 of the Competition Act, 2002 any 'effect analysis' of anti-competitive conduct is required to be done? And if yes; what is the test to be employed?
2. Whether the order of the Commission can be said to be replete with confirmation bias?
3. Whether pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellant resulting in breach of Section 4(2)(a)(i) and 4(2)(d)?
4. Whether the Appellants by making pre-installation of GMS Suite conditioned upon signing of AFA/ACC for all Android Device Manufacturers (OEMs) has reduced the ability and incentive of the OEMs to develop and sell devices operating on alternative versions of Android i.e., Android Fork and thereby limited technical and scientific development which is breach of the provisions of Section 4(2)(b)(ii) of the Act?
5. Whether the Appellant has perpetuated its dominant position in the Online Search Market resulting in denial of market access for competing Search Apps in breach of Section 4(2)(c) of the Act?
6. Whether Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act?
7. Whether Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act?
8. Whether Appellant has abused its dominant position by tying up of YouTube App with Play Store and hereby violated provisions of Section 4(2)(e) of the Act?
9. Whether the investigation conducted by the Director General was in violation of Principles of Natural Justice?
10. Whether the investigation conducted by the Director General is vitiated due to DG framing leading questions to elicit information?
11. Whether order of Commission is vitiated since the Commission did not have any Judicial Member?
12. Whether the order passed by the Commission in exercise of its power under Section 27(a) is beyond the findings recorded by the Commission and is not in accordance with law?
13. Whether the penalty imposed on the Appellants by the Commission in exercise of its power under Section 27(b) was not based on relevant turnover of the Appellants, disproportionate and excessive?
14. Relief if any to which the Appellants are entitled?

Summary:

Issue No.1:
For proving abuse of dominance under Section 4, effect analysis is required to be done and the test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not.

Issue No. 2:
The Commission proceeded to consider the materials on the record and submissions of the parties with respect to each of the market and recorded findings and conclusions after considering the evidence on record. Hence, the order of the Commission is not replete with confirmation bias.

Issue No.3 and 3a:
(i) Pre-installation of entire GMS Suite amounts to imposing of unfair condition on OEMs which is an abuse of dominant position by the Appellants resulting in breach of Section 4(2)(a)(i) and 4(2)(d).
(ii) The Commission while returning its finding on breach of Section 4(2)(a)(i) and 4(2)(d) has considered the evidence on record and has returned finding that the conduct of the Appellant harms the competition.

Issue No.4 and 4a:
(i) The Appellant by making pre-installation of GMS suite conditional to signing of AFA/ACC for all Android devices manufacturers, has reduced the ability and incentive of devices manufacturers to develop and sell self-device operating or alternative version of Android and Android Forks and thereby limited technical and scientific development, which is breach of provisions of Section 4(2)(b)(ii) of the Act.
(ii) The Commission while returning its finding has considered the evidence on record in respect of Section 4(2)(b)(ii) and has also returned finding on anti-competitive conduct of the Appellant.

Issue No.5 and 5a:
(i) The Appellant has perpetuated its dominant position in the Online Search Market resulting in denial of market access for competing Search Apps in breach of Section 4(2)(c) of the Act.
(ii) The Commission while returning its finding on breach of Section 4(2)(c) has considered the evidence on record and has also recorded finding regarding Appellant's conduct being anti-competitive.

Issue Nos. 6, 6a, 7, 7a, 8 and 8a:
(i) Issue No.6 and 6a: Appellant has leveraged its dominant position in Play Store to protect its dominant position in Online General Search in breach of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive.
(ii) Issue No.7 and 7a: Appellant has abused its dominant position by tying up of Google Chrome App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive.
(iii) Issue No.8 and 8a: Appellant has abused its dominant position by tying up of YouTube App with Play Store and thereby violated provisions of Section 4(2)(e) of the Act. Commission while returning its finding on breach of Section 4(2)(e) in reference of above has considered the evidence on record and has also returned finding regarding the Appellants conduct being anti-competitive.

Issue No.9 and 10:
(i) Issue No.9: Investigation conducted by the Director General did not violate the principle of natural justice.
(ii) Issue No.10: Investigation conducted by the Director General cannot be said to be vitiated due to the Director General framing leading questions to elicit information.

Issue No. 11:
The impugned order by the Commission is not vitiated on the ground that the Commission did not consist of a Judicial Member.

Issue No. 12:
In view of the foregoing discussions, we direct for deletion of directions at paragraph 617.3, 617.9, 617.10 and 617.7 while upholding other directions in paragraph 617.

Issue No. 13:
While calculating the "relevant turnover"�, the CCI has correctly considered the sum total of revenue of various segments/heads in India arising out of the entire business of Google India's operations of Android OS based mobiles. Further, the penalty imposed is final and would not be subject to any revision upon Google furnishing any further financial details and supporting documents, as sought by CCI vide its order dated 19.9.2022.

Issue No. 14:
In view of the foregoing discussion, the impugned order of the Commission is upheld except the four directions issued in paragraph 617.3, 617.9, 617.10 and 617.7. The Appellant are thus not entitled for any other relief except for setting aside the above four directions.