Google ruling to have direct impact on Make in India, says the Additional Solicitor General N Venkataraman

Additional Solicitor General N Venkatraman

The National Company Law Tribunal’s verdict upholding the Competition Commission of India’s Rs. 1,338 crore penalty against tech giant Google will enable more innovation by Indian start-ups and app developers, Additional Solicitor General N Venkatraman, who argued the case for the fair trade watchdog, said in an exclusive interview with Moneycontrol.

Ans: NCLAT’s ruling against Google is a landmark judgment on abuse of dominance.  The tribunal has rendered decisions on abuse of dominance on earlier occasions, but this is a well-fought case by both sides, with a lot of data on how one can show abuse of dominance.

The Competition Act in India is a new law even though it came into existence in 2009. Progressive decisions are being made only in the recent past. CCI is a forum which both investigates and adjudicates on allegations of violations of the Competition Act, 2002. Anti-competitive practices, which are what this law deals with, has three facets: abuse of dominance, abuse through combinations and the appreciable adverse effect on competition. These ingredients get crystallized and go through the scrutiny and filter of the tribunals and the courts.

Google had three types of agreements, the Anti-Fragmentation Agreement (AFA), the Mobile Application Distribution Agreement (MADA) and the Revenue Sharing Agreement (RSA). These agreements put a lot of restrictions on Original Equipment Manufacturers (OEMs), and app developers. They could extract these out of OEMs and app developers because of their dominance. For example, if you want to sign the MADA, you should first assign the AFA which makes an OEM commit that they will not develop an Android Fork (an operating system that is a modified, competing version of the Android OS based on the Android source code). Similarly, if they sign MADA, OEMs have to agree for default placement of Google’s apps; this is linked with RSA, which gives revenue share for doing this. All these put together was found to be abuse of dominance and anti-competitive. It is a major victory when the tribunal says that the entire domain of abuse of dominance by Google, as found by the CCI, is held to be correct.

If you see what has happened, the whole business structure was such that you have an operating system and an app. So, both put together generate data and traffic from the consumer. They all get finally funneled and they exit to the world of use through Google search. So you may have any browser, eventually everything is finally connected to Google search. The company used Google search as a monetising point since it ultimately gathered data and received traffic. Google Search occupies over 98 percent of the whole market, YouTube occupies 99.9 percent of the streaming space. So monetization became very easy for them. The tribunal very interestingly found that there were no new entrants in the market, and on the contrary, they noted that existing, even branded players (were) exiting the market, thus proving abuse of dominance.

I have said this earlier, and I repeat, the NCLAT has upheld 98 percent of CCI’s order. Google has been given very, very marginal reliefs. For example, NCLAT has found that Google need not provide for uninstallation of its apps. However, the tribunal has held that pre-installation of Google apps is an anti-competitive practice. How does it matter for uninstallation? It is of no consequence. Similarly, tribunal has said Google need not share its Application Programming Interface (API) for free since it their IP (Intellectual Property), they can monetize it. So Google is now compelled to enter into a fair and reasonable contract with companies who want to use their API. On the direction that Google need not permit third-party app stores through Play Store, the tribunal found that there is no specific finding of being anti-competitive and therefore, they are not confirming this direction. For sideloading, we ourselves said reasonable warning is enough.

Today, after NCLAT’s order, the gates are open for innovation, first of all, and you can enter the market on a free and reasonable basis. The complete eclipse formed by Google over all the OEMs and app developers goes; they are now free to do whatever they want to do. All this will re-energize the whole market, in terms of production of phones, in terms of prioritizing the apps, in terms of development of apps. It will have a direct impact on the Make in India and start-up growth vision of policy makers of the government.

This could not have been done by a single person, it was a complete team effort. The CCI worked with us so well as a single team. I should be very thankful to my briefing counsel, both Mr. Samar Bansal and Manu Chaturvedi. We worked for 25 days, three hours a day, every evening from 7:30 to 10:30 pm. So, the success should be shared equally by all the team members. It was therefore a very, very interesting experience. Even on Google’s side, the lawyers were kind enough to acknowledge before the tribunal that they had a huge bandwidth supporting them from India and possibly outside of India also (we do not know).  The battle was well fought till the last, both the sides were trying to fight out a good case. So therefore, intellectually and as a lawyer, it was a very stimulating and inspiring experience. What is so stunning is the judges heard it so patiently, day after day, gathered and assimilated all these inputs. In just a week, they could write a very detailed judgment, which will have an impact on the global competition law. For any lawyer who are participated in this matter, this will be one of the few cherished moments in their professional life.

Two very important and key amendments have been brought in. The first one is settlement, it was brought in with the clear objective that market course correction should happen as rapidly as possible. This amendment also gives option to the violators of the Competition Act to immediately fall in line and regulate themselves, so that endless litigation is avoided.

Two, we have now decided to impose penalties on the global turnover for companies who still want to fight the litigation and do not succeed.  See, this Google experience was not a very happy one when it came to imposing penalty because they never cooperated. So we will now follow the practice of certain international jurisdictions that the penalty for committing acts in violation of Competition Act shall now be calculated on the global turnover of the enterprise.  These critical amendments will solve problems. The amendment is clear, either you resolve it through settlement, if you fight it out and lose the litigation, be ready to cough up the penalty on your global turnover -- that's the message.

Digital competition law is in the making, it will be a supportive supplementary law to the Competition Act. Digital laws across the globe are now becoming a very nuanced area, so digital competition law has to be very focused. So something is in the making in this in this direction. We hope that it will emerge and supplement the existing competition law in a very dynamic manner.

It's a privileged opportunity, I should say. We consider India Bharat Mata, she is divine to us, and therefore, serving her is not a privilege everybody gets. So, whoever get this privilege should discharge it with a lot of responsibility, there's a huge responsibility attached to it. This journey has been extremely fulfilling, serving your mother gives you a lot of happiness. There is so much to do, there are so many opportunities and this government has been extremely supportive. They have given us a lot of independence; they trust our abilities. So I should be very, very thankful to the government also, for giving me this opportunity.