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Competition regulator’s findings not applicable to Indian market, Google to NCLAT

Certain findings of the Competition Commission of India are not applicable to the Indian market, Google told the National Company Law Appellate Tribunal on Tuesday.

After the Supreme Court had denied the tech major any relief against the competition regulator’s directions, Google LLC is defending its business practices in India’s Android market before the NCLAT.

Google had been found guilty by the CCI for abusing its market dominance in the Android mobile device ecosystem and the online search market. The regulator fined the global tech giant Rs 1,377 crore and directed it to cease and desist from indulging in anti-competitive behaviour.

The company’s counsel Arun Kathpalia argued that the findings of the DG, CCI’s investigative arm, with respect to revenue share agreement (‘RSA’) are not applicable to India since they have been taken up from the European Commission’s (‘EC’) findings which pertained to portfolio-based RSA’s.

The competition regulator, in its order, had found that Google was sharing a significant quantum of money with original equipment manufacturers (‘OEMs’) under the RSAs. As per CCI’s findings, Google shared search advertising revenues with manufacturers, provided that they did not pre-install any competing general search service on any device within an agreed portfolio.

The order said that this not only indicates the inadequate bargaining power of OEMs vis-à-vis Google, but the quantum of payments made under RSAs by Google to the OEMs also operate as an entry barrier for the competing search engines.

Making a distinction between portfolio-based RSA’s and device-based RSA’s, Kathpalia said that in the former, if a rival competing search app is installed even on one device, the manufacturer would lose the revenue across the board on all devices. “You could not have a competing search app on an Android device under this arrangement”.

Whereas in device-based RSAs, this agreement was with respect to a specific device. In this scenario, the revenue will not be lost with respect to other devices of the manufacturer.

Post 2014, Google had made a complete shift from portfolio-based RSAs to device-based RSAs, Kathpalia informed the court.

He contended that there is complete freedom for the OEMs to choose whether to have an RSA with Google or Bing; or to have an RSA with Google for certain devices and with Bing for the other devices. There is no restriction, he said.

Neither the CCI nor the DG, he added, has done an analysis of the device-based RSAs. “The DG has verbatim reproduced the EC’s findings”.

As his second argument on Tuesday, Kathpalia said that regulator has failed to distinguish between the mobile application distribution agreement (MADA) and RSA in its findings.

“If there is a problem with RSA, you look at RSA. You cannot read RSA into MADA and say that MADA is bad”.

He highlighted that there is no obligation to have an RSA if you have MADA and that MADA is severable from RSA.

The argument was in the context of CCI’s conclusion that read together, RSA and MADA have several exclusionary effects.

Besides arguing that its RSA’s are not anti-competitive and shouldn’t be read with MADA, Google’s has so far submitted that –

  • Consumers used Google’s search engine not because it was pre-installed, but because it delivered better results.
  • CCI has made allegations without adequate inquiry and analysis and are therefore arbitrary. No inquiry was done with the end users. Statements given by the manufacturers were ignored as well
  • MADA is a non-exclusive agreement. Pre-installation of apps under MADA does not stop the pre-installation of other apps on the device. Android OEMs routinely pre-install non-Google apps.

Kathpalia would continue arguing for Google on Wednesday, post which the CCI will begin defending its October 2022 order. Bloomberg

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