[Nikhil is a student at Symbiosis Law School, Pune.]
In the recent sensational antitrust case of United States v. Google (Google Case), the search engine giant has suffered a heavy blow at the hands of the trending big-tech clampdown. The trial in the United States District Court for the District of Columbia (Court) presided over by Justice Mehta is a landmark case in the antitrust realm which can be compared to the likes of the infamous 1990s Microsoft antitrust trial. The trial is a result of the US Department of Justice (DOJ) alongside several states suing Google for using its dominant position in the market for paying billions of dollars annually to companies like Apple and Samsung to ensure that they provide Google’s search engine as default option on their smartphones and web browsers. This trend of big-tech crackdown has been catching on in India and the decision of the United States case is bound to cause ripples in the Indian competition market.
Issues and Decision: United States v. Google
At the tail end of the 2020 Trump administration, the DOJ sued Google as it claimed that Google has used its dominant position to unlawfully monopolize the ‘general search’ market. The US Sherman Anti-Trust Act 1890 (Sherman Anti-Trust Act) does not deem it unlawful to have a legally obtained monopoly, however, such monopoly is termed anti-competitive if it has been obtained by excluding competitors. The Google Case revolves around the exclusive dealing agreement that Google has entered into with smartphone and browser manufacturers such as Apple and Samsung to allegedly ensure its monopoly. Such agreements, for example with Apple for USD 20 billion to maintain its status as the default search engine on Apple’s Safari web browser which is the preloaded browser of Apple, ensure that Google remains the default search engine of Apple users. Similar to the Competition Act 2002 (as amended), an exclusive agreement violates the Sherman Anti-Trust Act only when it has an appreciable adverse effect on competition or has a probable effect which would lead to foreclosure of competition leading to a substantial share of commerce being affected. Accordingly, the question before the Court was whether such exclusivity agreements entered into by Google have made it virtually impossible for its general search engine competitors to gain a toehold in the market. That said, Google’s defence throughout the trial has been two-fold: the exclusivity agreement is not anti-competitive, and it enjoys monopoly due to the superiority of its search engine over that of its competitors.
The Court, relying on expert testimonies (including that of Microsoft CEO Satya Nadella), coupled with the parties’ submissions, concluded that Google possesses a monopoly in the relevant market of ‘general search’ and has indeed violated Section 2 of the Sherman Anti-Trust Act by entering into exclusive dealing agreements with Apple, Samsung and others. The Court highlighted that Google had paid nearly USD 26.3 billion in 2021 to ensure that its search engine remains the default in smartphones and browsers. Justice Mehta noted that being the default search engine is an extremely valuable real estate for Google. Resultantly, through its efforts to maintain its status quo as a default search engine (through agreements), Google had foreclosed a substantial share of market and therefore deprived competitors the chance to compete.
Impact on Indian Competition Landscape
This judgment has had a considerable impact on the global antitrust landscape, and its implications have reached the Indian market as well. Coincidentally, on the same day as this landmark ruling, the Alliance of Digital India Foundation lodged a complaint with the Competition Commission of India (CCI), accusing Google of anti-competitive practices in the online advertisement market. While the two events are not directly linked, they reflect a domino effect, with growing global scrutiny of Google’s market behaviour influencing antitrust actions across different jurisdictions. Previously, CCI has penalized Google numerous times for engaging in anti-competitive conduct, for instance in the case of Matrimony.Com Limited v. Google LLC and Others (Google Search Bias Case) and Mr Umar Javeed and Others v. Google LLC and Another (Google Android Eco-System Case). This history of regulatory scrutiny and penalties by the CCI towards Google suggests that the CCI is well-acquainted with addressing anti-competitive conduct by Google in the area of Play Store billing and Google Mobile Services. In addition to these issues, the CCI has also examined the impact of exclusive agreements related to Google's general search engine. For instance, in October 2022, the CCI imposed a fine of INR 1,337.76 crore on Google for abusing its dominant position within the Android eco-system. The investigation focused on how Google's practice of pre-installing apps, including its search engine, on Android devices restricted competition and limited consumer choice.
In light of this, a question arises as to whether the CCI might take a more focused approach, akin to the DOJ’s case, targeting Google’s dominance in the general search engine market specifically. The Competition (Amendment) Act 2023 restricts an exclusive dealing agreement such as the one Google has entered into with Apple and Samsung, among others if it has an appreciable adverse effect on competition. The INR 1337.76 crore penalty imposed by the CCI on Google in 2022, was the result of an investigation into Google’s Android eco-system specifically focusing on how Google uses its dominance to stifle competition. The scrutiny revealed that Google’s policy of mandating pre-installation of applications including its general search engine restricted competition in the market. The CCI’s assessment of Google’s search services focused on the broader context of Android eco-system and the Indian geographical market while the Court’s approach under the Sherman Anti-Trust Act centered on Google’s default search engine agreements with major smartphone manufacturers such as Samsung and Apple in the US market. Despite the differences, if the CCI wishes to scrutinize Google’s exclusive dealing agreement with Samsung and Apple, it must pay heed to the market conditions of the product market i.e., ‘general search engine’ and identify a specific geographical market for the product.
The rationale by the Court behind holding Google liable for violation of Sherman Anti-Trust Act was the tacit action undertaken by Google (through the agreements) to maintain its position as the ‘default search engine’. Justice Mehta ruled against Google, on the basis that majority of the smartphone users in the United States access the internet through Samsung or Apple devices, both of which feature their independent browsers. Google’s exclusive agreements with these companies ensured its dominance as the default search engine on these devices, thereby hindering competition. The Court found that these agreements are anti-competitive and represent Google’s unlawful attempt to maintain its monopoly in the general search engine market. In contrast, while the CCI has previously scrutinized Google's anti-competitive practices across various product markets, a focused scrutiny of the general search engine market in context of the Google’s agreements with Samsung and Apple would require a careful perusal of the smartphone industry. The ruling by Justice Mehta is based on the rationale that Safari (a search engine and browser offered by Apple) and Samsung Internet (a search engine and browser offered by Samsung) have a significant share in the smartphone industry; however, the Indian smartphone market is far more fragmented. Brands such as Xiaomi and Vivo, which use different search engines and browsers as defaults and have not formed an exclusive dealing agreement with Google for its ‘general search engine’, hold significant market shares in India. This makes the direct application of the U.S. rationale less straightforward, though it still provides valuable insights into how Google’s strategies might be evaluated in different market conditions.
A recent report showcases that Xiaomi holds the largest market share (18%) in the smartphone market closely followed by Vivo (17.6%) and Samsung (16%). This differential dynamic of the market structure in India possesses a crucial question as to the lawfulness of the Google exclusive agreement; as Xiaomi, the market leader provides a default Mi Browser which has a Bing.com search engine. The second leading enterprise Vivo provides its customers with a default Vivo browser which uses Solr, an open-source search platform from Apache.
A Way Forward
The search engine antitrust ruling in the United States. has caused tremors across competition regulators, and as a result, Google is likely to face significant challenges in the Indian jurisdiction. Though Google's exclusive agreement may appear less concerning due to the presence of competitors in the Indian general search market, the mere existence of these competitors does not necessarily mean that competition is thriving. It must be pointed out that though competitors exist in the market, according to a report by Statista Google holds a clear monopoly on the mobile search engine market with a share of over 99% as of the February of 2024. Historically, the CCI in the Google Android Eco-system and Google Search Bias case has demonstrated that a dominant market share alone, even with the presence of competitors, does not preclude the possibility of finding dominance and abuse.
The Indian market’s diversity, with competitors like Bing and Solr providing alternative search options, does not automatically negate the potential for anti-competitive behaviour. The CCI’s previous rulings illustrate that dominance can be scrutinized regardless of competitor presence, and practices that undermine competition or consumer choice can still warrant regulatory action. Consequently, while the diverse market in India might influence the specifics of any regulatory proceedings, the fundamental principles of dominance and competitive conduct remain central to the CCI's assessment. Furthermore, any exclusive dealing agreements between Google and manufacturers like Samsung, while not leading to the outright exclusion of competitors, could still be examined for their impact on competition and market entry.
While Google might currently appear insulated from regulatory action specifically targeting its search engine, the landscape for big-tech companies could shift significantly with the introduction of the recent proposed Digital Competition Bill. The bill takes inspiration from the highly opposed European Union’s Digital Market Act and proposes ex-ante regulation which has sparked criticisms. The implementation of the bill will place Google in challenging water for CCI intervention and this heightened regulatory environment means that Google and its other big-tech peers will need to navigate their market activities with heightened attention to competition compliance.
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