CCI intervention to achieve a level playing field in the digital space!
The Competition Commission of India (“CCI”) by its Order dated February 8, 2018 (“Order”) held that Google enjoys dominant position in specified product market in India and has abused its dominant position in contravention of the provisions of the Competition Act, 2002 (“Act”).1 CCI imposed monetary penalty of USD 21 Million, applying the proportionality principle and calculating penalty based on the relevant turnover from the direct sales operations only in India.
This CCI ruling is a first of its kind in the Indian context in relation to the digital space. Interestingly, the decision is not a unanimous decision, but is 4:2. Even the majority view has not held against Google on all counts of allegations, but only three of them. Minority view has not concurred with the majority view on all the three counts.
CCI took note of adjudication by foreign regulators on similar issues, however, independently came to its conclusion based on the facts of the present case and based on the Indian law.
After carefully examining various allegations, the CCI ruled that Google enjoys dominant position in Online General Web Search and Web Search Advertising Services in India and has abused its dominant position by three specific actions.
One of the issues was in relation to display of “Universal Results”2 to certain fixed positions and not in order of relevance. This issue was already been remedied by Google post 2010. The dissenting view however held that since the issue was resolved, there was no need of any regulatory intervention.
The other two grounds were as follows:
In this update, we have examined the findings and view of the Director General after investigation, the informants’ arguments, Google’s argument and findings under both majority and minority view. However, please note that certain critical details pertaining to market share of Google for specific period in general online search as well as online advertising, traffic faced by Google’s search services, factual submissions by Microsoft in this regard as well as details on web search syndication agreements have been redacted for confidentiality purposes. The parties have submitted confidential and non-confidential version of their responses to the DG’s Investigation Report and prayer for confidentiality to be maintained for the next three years. CCI granted their confidentiality requests, therefore, it is difficult to do a comprehensive analysis of the order without the complete set of figures and statistics.
The Informants viz. Matrimony.com Limited and Consumer Unity and Trust Society alleged that Google runs its core business of search and advertising business in a discriminatory manner causing harm to advertisers and indirectly to consumers. The allegations raised in the present information (“Information”), may be outlined under the following two heads:
Google’s Search Engine Services
Google was alleged to promote its own vertical search services viz. YouTube (videos), Google News (news) and Google Maps (maps) and manipulating its search and quality score algorithm leading to only their own sites appearing prominently on the search results, irrespective of whether they were the most relevant and popular sites to the search. The Informants alleged that such acts lead to denial of access and refusal to license content to competing search engines and creation of entry barriers.
Google’s Advertising Services
Google’s dominant position in the search advertising market has allowed it to saddle advertising clients and consumers with unfair and discriminatory conditions.
Both Informants alleged that Google owing to its market share, size, resources and reputation enjoys a position of strength worldwide for online search and online search advertising affecting its competitors, consumers and market in its favour. Given that the allegations raised by both Informants were comparable, the CCI directed both information to be clubbed and investigated together by the DG. Three Google entities viz. Google Inc., Google India and Google Ireland were subject to investigation due to their role and operations in the Indian market. Upon receipt of the information, the CCI by its order dated April 3, 2012 directed investigation to be conducted. Interestingly, two versions of the Investigation Report were filed- confidential and non-confidential version.
Section 4 prohibits any enterprise from abusing its dominant position. The term ‘dominant position’ has been defined in the Act as ‘a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour’. The basic premise for determination of alleged abuse of dominance is establishing that one party is in a dominant position in the relevant market. The determination of relevant product3 and geographic market4 is the starting point of investigation under the Act.
The Act does not prohibit the mere possession of dominance that could have been achieved through superior economic performance, innovation or pure accident but only its abuse. The DG and CCI analyses factors under Section 19(4) of the Act5 to determine whether an enterprise is abusing its dominant position in the relevant market.
We have dealt with the findings of DG, contentions raised by both parties and the CCI’s analysis on all issues separately.
A. Relevant Market
Investigation by DG: The DG determined the relevant market6 based on analysis of characteristics, intended use and price of the products and services provided by Google. DG identified the relevant markets of “Online General Web Search Service in India” and “Online Search Advertising in India” for the geographic market of India (“Relevant Markets”):
DG further held that Online Search and Search Advertising are complementary but not part of the same relevant product market.
Contentions of Informant: The determination of the Relevant Markets by DG was supported by the Informants.
Google had contended that the Act requires existence of a trading relationship between a company and its customers as a pre-condition for defining relevant market and establishing domination. Since search is free, there exists no trading relationship with the users of its search services. In relation to this aspect, the Informant submitted that there is no requirement for monetary consideration for services anywhere under the Act and therefore users of search engine are providing data as well as “eyeballs” to search engine as consideration, thus constituting a trading relationship under the Act.
Contentions of Google: Google, at the outset found the determination of Relevant Markets to be flawed, and stated that:
B. Dominance of Google
Investigation by DG: The DG noted the dominant position in the Relevant Markets on the following grounds:
Contentions of Informants: The Informants agreed with the DG’s determination of Google’s dominance.
Contentions of Google:
CCI in the dissenting view also has agreed to the definition of “relevant market” and assessment of Google’s dominance.
C. Abuse of Dominant Position by Google
Based on detailed analysis and information provided, the DG concluded that Google has been abusing its dominant position in the Relevant Markets on three counts and on other counts, it was held not to be abusing its dominant position. We have dealt with each issue separately below.
1. Search Bias
Investigation by DG:
Contentions of Informants: The Informants submitted that Google’s Universal Results were being used as a tool to push down results of competing specialized search services through updates to its algorithm. Given that most vertical search services rely heavily on Google for their survival, Google’s search bias has threatened their survival. The Informants supported DG’s findings regarding lack of transparency in quality scores given to advertisers by Google. It noted that inadequate information being shared rendered the entire process opaque and susceptible to manipulation in violation of Section 4(2)(a)(i) of the Act.
Contentions of Google: Google argued that its specialized search designs are just like free search results but designed to make them more relevant and user friendly. The technology behind Universal Results was determined purely by relevance and appeared on the SERP only when compared with the generic blue link results. It stated that earlier (i.e. pre-2010) the fixed positions of Universal Results was due to lack technological know-how at the time to keep it free floating and the same has been rectified to address the concerns.
With respect to possible bias in OneBoxes, Google contended that OneBoxes provide factual responses for which there would be only one answer and hence, the question of relevance would not arise. The content providers did not pay Google and hence the question of favouring its partners could not have arisen.
In relation to the Commercial Units, Google argued that the same were a result of Google’s two-sided business model with free service to users and paid engagement with advertisers. It stated that DG’s finding that Google has harmed competition with its specialized result designs, was not supported by any data.
The CCI noted that until 2010, the display of universal results was limited to certain ‘fixed positions’ and were not displayed in accordance with their relevance. Such practices were unfair as it created misleading notion that such search results were in response to queries determined algorithmically based on relevance. CCI dismissed Google’s argument that it lacked the technology to do so at the time in the absence of evidence. Thus, on this point CCI held against Google.
Google had contended that limiting Universal Results to fixed positions demonstrated its exacting relevance standards. Google having admitted to shifting to universal results at any position on the SERP depending on same relevance screen applicable to other generic results, prior to the information being filed, there is no need for any regulatory intervention with the new regime addressing the concern. Therefore, Google cannot be held liable for imposition of unfair conditions with respect to its historic use of fixed positions for universal results on the SERP.
CCI dismissed the unsubstantiated finding of the DG that OneBoxes8 show biased data and held that mere possibility that it may not select the most relevant provider, is not a substitute for actual evidence of bias. It disagreed with the DG’s finding that Universal Results were more so biased as the ‘more results’ option would lead a user to Google’s search options and not any other vertical search service.
Commercial Units: Google Flights
Taking the example of Google Flights, the CCI observed that while the link to Google Flights is qualified by a ‘sponsored’ label, by integrating the said link prominently with the SERP, Google is able to drive traffic to its own pages and generate higher revenues through advertisements. The CCI held that a user’s clicking behavior is influenced by Google’s public claim or ranking results based on relevance and “Google’s dominant position in the General Web Search is being leveraged to provide gateway for users to find relevant travel verticals.”9 Google through its search design not only placed commercial units at a prominent position on SERP and allowed pushing down of vertical trying to gain market access. Accordingly, it found this conduct of Google to be anti-competitive as it imposed unfair/ discriminatory condition on purchase of services, in contravention of the Act.10
Flight units and the Google Flights Page offer tools for users to compare different offers from different airlines by various parameters including price, duration, schedule but do not offer possibility of booking directly. On the contrary, travel verticals like MakeMyTrip and Cleartrip not only provide search option but also allow for booking of flights. The provisions of the Act necessitate ex post determination of abuse by dominant enterprises with facts and evidence, and not merely relying on hypothetical frameworks built on perceived premises. In the absence of relevant data or analysis of user-click behaviour in India vis-à-vis the Commercial Units or actual traffic flow, diversion of traffic by Google to the extent that it prevents third party verticals to acquire sufficient volume of business, such claims are unsubstantiated. CCI in its concurring view held that investigation failed to reflect any evidence for a reasoned assessment of how “prominent” placement of flight units amounted to imposition of unfair conditions on users and liability cannot be affixed on unclear and ambiguous evidence.
2. Limited Disclosure of Information and unfair/discriminatory conditions imposed on Advertisers
Investigation by DG:
Contentions by Informants: The Informants agreed with DG’s finding and stressed on the lack of transparency associated with quality score and manual interventions by Google render the entire process opaque and prone to manipulation.
Contentions by Google: Google disagreed with the finding of the DG that it withholds performance data from the advertisers and stated that apart from the quality score, it provides advertisers with extensive data to manage their ad campaigns and provides relevant and useful information. It has argued that:
3. Unfair Conditions on Trademark Owners
Investigation by DG: The DG noted that:
Contentions of Informants: The Informants were largely in agreement with the findings of the DG and added that Google supported a bidding war between owners of trademarks and competitors who would try and outbid such owners for their keywords. It was only Google that profited from monetizing search results by facilitating trademark violations and Informants suffered significant loss due to its competitors being allowed to use its trademarks in their ad space.
Contentions by Google: Regarding the issue of trademarked keywords, Google contended that it does not restrict owners of trademark from bidding for the keywords and does not violate Indian trademark laws. Google had also argued that processing complaints in relation to ad texts violating trademark laws by using minor variations of Consim’s trademarks was not consistent with trademark law or Google’s Ad Text Policy. The Google’s Ad Text Policy specifically exempts from investigation ad text that uses the term descriptively in its ordinary meaning rather than in reference to trademarks. Consim’s competitor used “Bharat Matrimony” to describe its matrimony services in a descriptive manner and the Ad Text Policy did not address such issues.
CCI Analysis: The CCI held that:
4. Distribution Agreements
Investigation by DG: The DG found Google to be in contravention of Section 4(2)(c) of the Act11 for distribution agreements with Apple and Mozilla for setting Google as the default search engine. The DG observed that long term contractual arrangements such those executed with Apple and Mozilla, had the potential of strengthening Google’s market position in the Relevant Market by denying access to others.
Contentions of Informants: The Informants were in complete alignment with the DG on their findings on the anti-competitive nature of distribution agreements executed by Google.
Contentions of Google:
5. Unfair conditions in Syndication / Intermediation Agreements
Investigation by DG:
Contentions of Informants: The Informants agreed with the DG’s findings.
Appreciating Google as an essential trading partner for online advertisers, it observed that Google received the lion’s share of all advertising. However, the onerous and arbitrary conditions imposed on such advertisers by Google made it exponentially more expensive for any existing advertiser to shift a competitor.
Contentions of Google:
CCI Analysis: CCI while discussing allegations of Google hindering advertisers from transferring ad campaigns to other ad platforms (Terms and Conditions use of Google’s AdWords API) held that:
D. Penalty Order
Based on analysis of the above issues, CCI concluded that Google has abused its dominant position in the ranking of universal results prior to 2010, in prominent display and placement of commercial flight unit with link to Google’s specialized search options and in unfair conditions imposed under intermediation agreements. Accordingly, CCI has:
Accordingly, on the three counts of abuse of dominance recognized by the CCI, it imposed a penalty of USD 21 million on Google calculated at the rate of 5% of Google’s average total revenue generated from India operations from its different business segments for the financial years 2013, 2014 and 2015. It may also be significant to note that the penalty was imposed by CCI despite noting its objections to Google’s insufficient disclosure of its financials for its India operations. To determine the relevant turnover, CCI relied on the recent decision of the Supreme Court in Excel Crop Care Limited v. Competition Commission of India & Anr.12 based on only the ‘relevant turnover’, i.e. relating to the product in question in tune with the intent of the Act and legal principles.
The CCI in this decision has recognized the pace at which innovation, technology and big data is transforming the economic landscape globally and locally. Appreciating the crucial role that market drivers like Google play in driving India into the future, CCI has iterated that, “public intervention in such markets should be targeted and proportionate. Such a calibrated approach in technological markets ensures that intervention remains effective; it does not restrain innovation and helps the market to regulate itself.”
While CCI has held against Google on 3 counts, it is interesting that several other grounds were dismissed by CCI. The dissenting /minority view has analysed the facts of the 3 counts and in fact has held that no intervention is require on those three counts as well. Most competition law orders are very fact and evidence based. As rightly stated by the dissenting view that application of law is not amenable to hypothetical frameworks built on perceived premises. The regulatory interventions should be evidence based as opposed to perception based. If Google were to challenge this order, the question will be whether it challenges all the findings including definition of relevant market, finding that Google is dominant in those markets or only challenges the specific findings in relation to three counts. From long term perspective, Google may want to challenge all the findings, else they become precedent in so far as definition of market and finding of dominant position, unless of course the market dynamics change.
– Atikant Kaur, Payel Chatterjee, Pratibha Jain & Gowree Gokhale
You can direct your queries or comments to the authors
1 In Re: Matrimony.com Limited (“Matrimony.com”) and Google LLC & Ors. with In Re: Consumer Unity & Trust Society (“CUTS”) and together with Matrimony.com, the “Informants”) and Google LLC & Ors. (collectively referred to as, “Google”)
2 Universal Results – these are groups of results for a specific type of information, such as news, images, local businesses, etc. The results shown in Universal Result groups are stated to be free results.
3 The relevant product market is defined in as ‘a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use
4 The relevant geographic market is defined as ‘a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas
5 i. market share of the enterprise; ii. size and resources of the enterprise; iii. size and importance of the competitors; iv. economic power of the enterprise including commercial advantages over competitors; v. vertical integration of the enterprises or sale or service network of such enterprises; vi. dependence of consumers on the enterprise; vii. monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise; viii. entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers; ix. countervailing buying power; x. market structure and size of market; xi. social obligations and social costs; xii. relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition.
6 Figures of Google’s market share, financials and other sensitive information have been redacted from the text of the Order available in the public domain.
7 Google inserts certain specialized result designs in the SERP in the form of (i) Universal Results - groups of search results such as news, images or local businesses, (ii) OneBoxes – factual responses for searches on currency, weather, temperature, etc. and (iii) Commercial Units – result types set apart in ad space and distinguished with a “Sponsored” label.
8 OneBoxes provide factual answers to users’ queries. OneBoxes return direct answers to, for example, queries about mathematics, stock quotes, local time, currency conversion, and the weather.
9 Para 248, Page 94 of the Order
10 Section 4(2)(a)(i) of the Act
11 Section 4 (2) (c) Indulges in practice or practices resulting in denial of market access [in any manner]; or
12 Civil Appeal No. 2480 of 2014, decided on May 8, 2017