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CCI orders investigation into Google over Android TV licensing deals

The Competition Commission of India (CCI) has ordered an investigation into Google over its Android TV operating system (OS) used in smart TVs. The competition watchdog is specifically looking into Google’s licensing deals with smart TV manufacturers.

“The emerging smart TV sector in India is thriving, due in part to Google’s free licensing model and Android TV competes with numerous well-established TV OSs such as FireOS, Tizen, and WebOS. We are confident that our smart TV licensing practices are in compliance with all applicable competition laws,” a Google spokesperson told MediaNama.

CCI has asked the Director-General to carry out the investigation and submit the report within a period of 60 days from the date of receipt of this order (June 22, 2021).

CCI is studying two main markets for this investigation:

  1. the market for licensable smart TV operating systems in India
  2. the market for app stores for smart TV operating systems in India

Why was this investigation ordered?

The investigation is a result of a case filed by antitrust lawyers Kshitiz Arya and Purushottam Anand last May. The two lawyers alleged that Google is guilty of anti-competitive practices under Section 3 and Section 4 of the Competition Act, 2002 because it is abusing its dominant position and entering into anti-competitive agreements with smart TV manufacturers like Xiaomi and TCL, who are named as opposite parties in the case along with Google.

Google’s dominant position in the smart TV OS market

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  • More than 75% market share: Google’s Android TV has a market share of 75% or more, and 6 out of the top 10 smart TV OEMs have signed up with Android TV, the lawyers claimed. CCI’s own estimation stands much higher at 90% market share.
  • Play Store preinstalled: Google’s dominance is further strengthened by the fact that all the devices that run Android TV come with Play Store preinstalled.
  • Other factors in play: Network effects, the economic power of Google, size and importance of competitors, vertical integration of operating system and app stores, consumer dependence, entry barriers, etc, are other reasons Google has a dominant position in this market, the complainants claimed.

How is Google abusing its dominant position? 

Google enters into two agreements with Android TV licensees: Television App Distribution Agreement (TADA) and Android Compatibility Commitment (ACC). The complainants and the CCI both concur that these agreements entail the following:

  • Bundles OS and apps: Google’s agreements bundle the Android TV operating system with the Play Store, allowing it to preinstall its proprietary app store.
  • Denies market access to forked Android operating systems: The ACC agreement stipulates and prevents OEMs from making and selling smart TVs which operate on a competing forked Android operating system. Thus, denying market access to Google’s competitors such as Amazon, which makes a forked Android operating system called FireOS.
  • Play Store not available to forked Androids: Google does not make available its Play Store to TVs operating on a forked Android operating system. Thus, to install Play Store, smart TV manufacturers have to sign the ACC and TADA agreements. Furthermore, these agreements require manufacturers to install the entire suite of Google apps even if they only wish to install a particular app like Play Store. CCI argues that this not only amounts to the imposition of an unfair condition on the smart TV manufacturers but also results in Google leveraging its dominance in Play Store to protect its other services such as YouTube.
  • Manufacturers cannot develop forked Android versions: The ACC agreement disallows smart TV manufacturers from developing their own forked Android operating systems, which “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,” the order stated.
  • Obligations extend to other devices made by the manufacturers: TV manufacturers who sign the ACC agreement are obligated to not just adhere to it for the devices on which the Play Store or Android TV OS is pre-installed but to the whole of their device portfolio including smartphones and smart home devices. CCI noted that, by making these supplementary obligations that have no connection with the subject of the primary contract, Google is violating the Competition Act.

Google’s response and CCI’s counterarguments

CCI sought responses from Google regarding the complaints made against it and received two submissions. The tech giant stated that the allegations against it are “unsupported by evidence, factually incorrect, and based on material legal misconceptions,” and that “Google does not require exclusivity from OEM partners; Google does not illegally tie Play with Android, and Google does not illegally deny access to Play on other apps.”

Open source Android license available to anyone: Google pointed out that it makes the Android Open Source Project (AOSP) license available to any third-party developer and does not obligate these developers to install any proprietary Google apps, app store, or services. It further claimed that AOSP has resulted in the development of successful Android forks, including FireOS by Amazon.

  • CCI’s response: CCI argued that although Google makes AOSP available to anyone, the license does not grant developers the right to distribute Google’s proprietary apps such as Play Store, YouTube, etc. The AOSP license further does not grant manufacturers the right to use the Android logo and other Android-related trademarks. In order to obtain these rights, Google requires manufacturers to sign the TADA agreement. TADA, in turn, requires manufacturers to be in compliance with the ACC agreement.

Manufacturers allowed to use AOSP: Google said that TV manufacturers can use and modify AOSP to make their own versions of Android. It further states that only those using the official Android TV made by Google will have to sign the TADA agreement.

  • CCI’s response: CCI argues that Google’s Play Store is “prima facie noted as a ‘must have’ app,” and to install this app manufacturers must sign TADA and ACC, making these agreements “de facto compulsory.”

App stores are less important for TV users: Google argued that app stores like Play Store are less important for smart TV users compared to users of smartphones or tablets and that they should not be equated to each other.

  • CCI’s response: CCI argued that the app store appears to be the only place available to the user to download apps, and the demand, as well as supply of these apps, is dynamic and not static as new apps are routinely launched by developers. Therefore, the app store is critical and must-have and not unimportant as Google claims.

ACC makes the market more competitive: Google claims that the ACC agreement requires TV partners to observe a minimum level of compatibility for smart TV devices that run on Android TV and this facilitates competition between Android TV and longer-established players benefitting Indian consumers.

  • CCI’s response: CCI stated that this aspect will be appropriately examined during the investigative stage.

Market share overstated: Google claimed that the 75% market share figure is “based on several flawed assumptions, which conveniently overstate Google’s competitive position.”

  • CCI’s response: CCI argued that based on preliminary estimation it found that Android TV in fact has a 90% market share. It arrived at this figure by studying the market share of smart TV manufacturers that are Android TV licensees and found the following statistics: Xiaomi – 37%, Sony – 7%, TCL – 11%, and Others – 35%. CCI also noted that Android TV is now used by 7 out of the top 10 smart TV manufacturers. Based on these parameters, CCI stated that Google is dominant in the relevant market for licensable smart TV device operating systems in India.

Consumers have many options: Google said that there is “vigorous competition” at the consumer level because consumers have many options when streaming internet content such as smart TV, streaming stick, set-top box, or laptop.

  • CCI’s response: CCI notes that Google’s arguments are misplaced because the current allegations pertain to commercial transactions between Google as a licensor of Android TV/app store and Smart TV manufacturers as a licensee. Therefore, the market for devices used for streaming content is not relevant to this matter.

Update (24 June, 9:00 am) – Added comments received from Google Spokesperson

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