The Competition Commission of India (“CCI”) vide its order dated June 22, 2021 directed the Director General to cause an investigation against Google for alleged anti-competitive conduct in the smart TV market. The said order was passed on an information filed under Section 19(1)(a) of the Competition Act, 2002 (“Act”).

Brief Facts:

Information under Section 19(1)(a) of the Act was filed by two individuals, Mr. Kshitiz Arya and Mr. Purushottam Anand (collectively referred to as, the “Informants”) against against Google LLC, Google India Private Limited, Xiaomi Technology India Private Limited and TCL India Holdings Private Limited alleging contravention of various provisions of Sections 3 (anti-competitive agreements) and 4 (abuse of dominant position) of the Act.

The Informants alleged that Google has imposed several restrictions upon smart TV and smart mobile device OEMs by virtue of the agreements entered into with them which tantamount to abuse of its dominant position by Google, in terms of various provisions of Section 4 of the Act:

1. Bundling its two different products, i.e. its app store (Play Store) to the operating system developed by it for television devices, i.e. android TV. All android TV based smart TV devices are alleged to come pre-installed with Google’s app store, i.e. Play Store for smart TVs.
2. Android Compatibility Commitments (“ACC”) formerly referred to as the Anti-fragmentation Agreements (“AFA”) stipulate and prevent Original Equipment Manufacturers (“OEMs”) from manufacturing/ distributing/ selling any other smart television or mobile devices which operate on a competing forked Android operating system. Thus, the developers of such forked android operating system are denied market access resulting in violation of Section 4(2)(c) of the Act.
3. Google’s Play Store is not available on other licensable operating system as Google does not make available its app store to any TV operating on a forked android operating system to prevent competition in these distinct relevant markets. This in turn also results in denial of market access which is alleged to be another violation of Section 4(2)(c) of the Act.
4. OEMs which have entered into the ACC/ AFAs with Google, are restrained from developing their own operating system based on ‘forked android’ for televisions. This has been stated to have not only created a barrier to entry into the market but actively resulted in limiting further research and scientific/ technical development of forked android based operating systems. Further, as per the Informants, such restriction on the OEMs tantamount to imposition of supplementary obligations and have no connection or nexus with the licensing of operating system or Google Mobile Services (“GMS”) for smart device.
5. The obligations, by virtue of the ACC/ AFA, restrict freedom of action of OEMs with regard to the whole of their device portfolio (smart mobile devices, televisions, etc.), and not just the devices on which the Play Store or Android TV OS is pre-installed.
6. In addition to the above, the Informants alleged that the agreements fall within the purview of Section 3(4) of the Act and are causing/ have caused appreciable adverse effect on competition.

Analysis of the Commission:

1. The CCI, for the purpose of investigation delineated the primary relevant market as “Market for licensable smart TV device operating systems in India”. The CCI also delineated an associated relevant market for app store for Android smart TV operating systems in India.
2. The CCI noted that Google enters into two agreements with android TV licensees i.e. Television App Distribution Agreement (“TADA”) and ACC. Google makes Android Open Source Project (“AOSP”) available to any third parties under an open-source license, however, the AOSP license does not grant OEMs, the right to distribute Google's proprietary apps such as Play Store, YouTube, etc. referred to as Google Applications in TADA. The AOSP license further does not grant OEMs, the right to use the android logo and other android related trademarks. In order to obtain those rights, Google requires OEMs to sign an optional, non-exclusive agreement, i.e. TADA. Further, TADA requires the OEMs to be in compliance with a valid and effective ACC. Thus, the two agreements that Google offers to the smart TV OEMs in India i.e. ACC and TADA, in conjunction essentially entail the following restrictions:

a) In order to be able to preinstall Google’s proprietary apps, device manufacturers have to commit to and comply with the ACC for all devices based on android manufactured/ distributed/ sold by them; and

b) In order to be able to preinstall any proprietary app of Google, e.g. Play Store, device manufacturers will have to preinstall the entire suite of Google apps.

c) The CCI was of the prima facie opinion that by making pre-installation of Google’s proprietary apps (particularly Play Store) conditional upon signing of ACC for all android devices manufactured/distributed/marketed by device manufacturers, Google 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 relating to goods or services to the prejudice of consumers in contravention of Section 4(2)(b) of the Act. Further, ACC prevents OEMs from manufacturing/ distributing/ selling any other device which operate on a competing forked Android operating system. Therefore, given the dominance of Google in the relevant markets and pronounced network effects, by virtue of this restriction, developers of such forked Android operating system are denied market access resulting in violation of Section 4(2)(c) of the Act.

3. The CCI was of the prima facie view that obligations imposed by ACC are akin to making conclusion of contracts subject to acceptance by other parties of supplementary obligations which by their nature or according to usage, have no connection with the subject of such contracts and thus, violative of provisions of Section 4(2)(d) of the Act.
4. In relation to the mandatory preinstallation of all the Google applications under TADA, the CCI observed that the device manufacturers who sign this agreement cannot pick and choose from amongst the google applications for preinstallation. In essence, this entails compulsory tying of ‘must have’ google apps (such as Play Store), which the device manufacturers would like to have on their devices, with other apps where other credible alternatives may be available. The CCI was of the prima facie opinion that mandatory preinstallation of all the Google applications under TADA amounts to imposition of unfair condition on the smart TV device manufacturers and thereby in contravention of Section 4(2)(a)(i) of the Act. It also amounts to prima facie leveraging of Google’s dominance in Play Store to protect the relevant markets such as online video hosting services offered by YouTube, etc. in contravention of Section 4(2)(e) of the Act.
5. Pursuant to the above observations, the CCI directed an investigation under provisions of Section 26(1) of the Act.

Please find a copy of the order here.

This update has been contributed by R. Sudhinder (Senior Partner) and Prerana Amitabh (Counsel).

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