Over the last two weeks, the Competition Commission of India (CCI) has dealt Google two huge fines and, more importantly, prescribed behavioural remedies that change the fundamental way Android and Play Store work. Both CCI and Google have made interesting arguments during the course of the investigations, arguments that set precedents for future tech antitrust tech cases. We talked with lawyers and other experts to understand the nuances of both orders, the grounds Google might be able to challenge them on, and what it means for developers and consumers going forward.
Why is CCI not considering Apple iOS as part of the same relevant market as Google Android?
One of the main reasons that CCI has been able to establish dominance and subsequently the abuse of dominance is because it considers Android and iOS as two different relevant markets. Google had strongly objected to this and had repeatedly claimed that the iOS and the App Store are both strong competitors to Android and Play Store. However, experts MediaNama spoke to concurred with the CCI on this for the following reasons:
- Have to look at it from the perspective of manufacturers: “Based on the analysis of other regulators and based on my own analysis, I came to the decision that they are definitely different relevant markets. Why? Because the relevant market is decided from the context that is given. Here the context is from the standpoint of manufacturers. So, for example, if you are a manufacturer, licensable operating system is different from a vertically integrated one. So if you are Apple, you are not going to license iOS to anybody. However, if I am Android, I can license it to Xiaomi, I can license it to OnePlus, and ten other companies. So licensable and non-licensable they become automatically separate markets,” Vikas Kathuria, Affiliated Research Fellow at Max Planck Institute for Innovation and Competition, explained to MediaNama.
- Competition only exists at the time of buying: “The CCI found that competition, if any, could be said to exist only to the time of deciding which device one must buy, and not beyond,” Varma said. “Maybe a super high-end Samsung would be in the same relevant market as the Apple iPhone 13. But that was not the question here. We were looking at it from the standpoint of manufacturers of devices,” Kathuria added.
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How did CCI balance the security risks of side-loading and third-party payment systems with the competition concerns?
In the Android order, CCI has directed Google to:
- Allow listing of other app stores on the Play Store
- Not place any restrictions on side-loading, including showing warnings to users. Side-loading refers to downloading apps outside of app stores using the APK file.
- Not deny developers of Android forks access to Play Services APIs
In the Play Store order, CCI has directed Google to:
- Not restrict app developers from using any third-party billing either for in-app purchases or for purchasing apps.
In both these cases Google had argued that allowing the above will pose significant security risks to users. For example, Google cannot guarantee that an app that has been side-loaded is safe for a user or that a third-party app store has sufficient moderation processes in place like Play Store.
- Will negatively affect regular users: “I think there necessarily is a trade-off between interoperability, convenience, and security. You can’t have all three at the same time. And in this case, I’m not sure how that will be managed. For regular users who don’t run their own Android mod builds, and who depend on a company like Google for security, this may negatively affect them,” Prakash explained. “To give an example from another field, if you look at browsers and if you look at how Mozilla used to handle third-party apps or third-party add-ons versus how others did and why Mozilla changed, Mozilla used to put the burden of ensuring security on the users and on the add-on developers. That didn’t work because most users actually expected the browser itself to ensure security,” Pranesh Prakash, co-founder of the Centre for Internet and Society and Affiliated Fellow at the Information Society Project, Yale Law School, added.
- Google’s tight coupling forces security updates: “It’s not only for commercial reasons that Google actually tightened up the rules for phone manufacturers, and what they could and could not do with Android, because the closer coupling of Android with the Play Store actually has a security component as well. One of the benefits of that tighter coupling, which is harmful to third-party apps and for independent Android implementations, is actually security because it actually forces, through a different mechanism, security updates when the phone manufacturers and the OS providers actually aren’t providing the updates themselves,” Prakash remarked.
- Same concerns might not exist for third-party payment systems: While CCI’s direction may pose a concern when it comes to third-party apps and app stores, the same might be an issue with third-party payment systems “because third-party payment systems are a tightly regulated market in and of themselves. So, presumably, at least, the security aspects of those third-party payment systems would be up to speed. There are independent industry bodies that certify security in payment systems as well,” Prakash opined.
- CCI hasn’t properly dealt with the security element: Siding with Google, Gowree Gokhale, Partner at Nishith Desai Associates, commented: “CCI does not seem to have dealt with security element in relation to the anti-fragmentation issue. They seem to have just brushed it aside. The discussion is very sketchy on this point. Google says that it will license its GMS only to compatible versions of the OS. Basic compatibility has been prescribed by Google. One of the reasons for basic compatibility is security, which has not been discussed in this order at all. All of us are aware of the constant cyber security threats and the government is really working towards having a secure network, I don’t see that the order really deals with that issue.”
- Play Store does malware scanning for side-loaded apps as well: Countering the previous points, Kiran Jonnalagadda, Co-founder and CEO at Hasgeek, commented that “Play Store already does malware scanning for all apps. There’s nothing in its UI to indicate that it skips sideloaded apps.” “If by ‘security’ you mean whether an app is safe for the user, this has been solved elsewhere: SSL certs with ‘extended validation’ show the name of the business that owns the cert,” he added.
- Different parts of the process can and should be unbundled: “The platform service of listing apps can and should be disconnected from the bundled services: malware scanning, authenticity scanning, content ratings, and curation. Each of these can be independent businesses, the way it has long worked for the Windows app ecosystem from the 90s onwards,” Jonnalagadda opined.
- The current regulatory framework doesn’t allow CCI to properly balance the two: “In the limited facts of the case, the Commission can’t do much. And that’s why we have to talk about ex-ante regulation,” Kathuria said. “The European Commission engages with the stakeholders, including the delinquent firm and in that scenario, the firm can make a solid case that, look, this pre-installation is necessary for this purpose. There are security risks, there are other risks, et cetera. In India, engagement would be very limited. You have done something which is abusive. I just need to address it. I’m just looking at that particular abuse, but I’m not looking at the forward cases,” Kathuria explained.
Will fragmentation of Android harm developers?
While on the face of it, both the orders appear to favour developers in many ways, the provisions related to anti-fragmentation might do them more harm than good, experts pointed out. While fragmentation is not defined either in the order or by Google elsewhere, it refers to the emergence of multiple versions of Androids. To prevent this, Google signs agreements with manufacturers restricting them from developing Android forks. CCI, however, has ordered that Google cannot place any anti-fragmentation obligations on phone manufacturers, thus allowing them to freely develop their own versions of Android.
- Developers will have to make multiple versions of their apps: “You are not in a position to fully appreciate till you start actually seeing the effect. If the market develops in a way where you have a conflicting ecosystem with multiple OS on various devices where developers will have to constantly customize for each OS. And it doesn’t give them a very stable ecosystem to develop their apps. So maybe the developer cost goes up,” Gokhale pointed out. “Hypothetically (as CCI has done as well!), suppose there is a mobile device manufacturer who has only say 5% market share in India and developers feel that for this version of the OS, why should they invest? Isn’t that mobile company going to suffer? Because many people will no longer develop for their ecosystem. Today due to the compatibility mandate, there is a stable and consistent ecosystem,” she added
- Will be hard to switch between Android phones: “If things were to go CCI order way, it may create confusion for people if they completely unbundle everything and there is no compatibility. People will not know what will work on which device. Today users can switch from one mobile, because they know that everywhere the experience will remain the same. In fact, last evening I bought an Android phone of a different make than the existing one and within a few minutes I was set,” Gokhale remarked.
CCI has ordered that Google should not charge “disproportionate” fees: How will this be enforced and does CCI have the power to dictate pricing?
In the Play Store order, CCI ordered that Google should “not impose any condition (including price related condition) on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to the app developers.”
This is a broadly worded decision because we do not know what is considered disproportionate. Developers might argue that the commissions charged by Google are disproportionate while Google might claim (and has claimed) that it needs to charge this fee to run the Play Store and keep Android free for all.
- CCI is not a price regulator, this is merely a warning: “CCI is not a price regulator. It never said that it was a price regulator. No global regulators can dictate prices. CCI only says that the fees should be fair, reasonable and non-discriminatory. So it is a warning to Google that, if you charge 30%, perhaps it could be unfair and then we are there to look into it. So I think it’s a reminder. And every negotiation would happen in the shadow of the CCI’s direction to Google,” Kathuria opined.
- CCI hasn’t dictated pricing, only cease and desist against discriminatory practices: “CCI in its order has categorically studied the discriminatory pricing by Google whereas various app developers are forced to pay a service fee of 15-30% via using the mandatory Google Play Billing system whereas its own apps such as YouTube are given liberty to use third party billing system thereby creating a disproportionate pricing system for other app developers. The CCI has not dictated pricing but has asked Google to cease and desist from such discriminatory practices,” Utsav Trivedi, Partner at TAS Law, remarked.
What are some grounds that Google can challenge both these orders on?
Google has said that it is reviewing both the CCI decisions and evaluating the next steps. In all likelihood, Google will appeal the decisions given the drastic changes the company has been ordered to make and the hefty monetary penalties.
- Google can score victories on the security and Android forks front: “Where Google can score a victory would be on two accounts: Android forks and also the security risk. These two things will play out in a big manner because these are technical grounds. Providing access to everybody, maybe forks are not so good for innovation, because you need to consider cybersecurity, et cetera. Fragmentation perhaps is a big risk and if you look at the judgment, fragmentation hasn’t been dealt with in a solid fashion. There are many articles that have taken a contrarian stance. So these two things perhaps will feature strongly, but it would be an uphill task for generalist appellate body and courts,” Kathuria remarked.
- Users and start-up community were not consulted:“I think what stood out for me in this order is I couldn’t sort of get the feel that investigation has been sufficient and that it has been 360 degrees. So, for example, I don’t see a user survey being conducted. I understand that in the EU, when they talk about preinstallation bias, there was a survey conducted there. I think there is an assumption here in the Indian context,” Gokhale remarked. “And the second element I don’t see is the startup community, the developer community in India, which has flourished in the Android ecosystem. I’m talking about the developers who are coming up, what is their perspective, especially on the so-called fragmentation issue. I don’t see their perspective. And that’s why I say that the evidence doesn’t seem all 360 degrees for me. It appears as if a lot of it is conjecture rather than hard facts. There is an assumption of too many things. That’s what I feel when I’m reading this order,” Gokhale added.
- Kathuria, however, held a completely different view: “If you look at it, the Commission has extensively engaged with stakeholders, app developers, operating system developers, and businesses. All the stakeholders have deeply engaged with the Competition Commission of India. And that’s the beauty of this decision,” Kathuria remarked.
- Cannot just go off conclusions made abroad: “Sometimes we have the tendency to simply rely upon what has been found or concluded internationally on similar issues without realizing that India is a unique market. You need to examine facts separately in terms of evidence in India because the competition law needs to be applied to a given set of facts. And unless you examine the facts in India, you can’t just impose the overall thought process from outside the country,” Gokhale opined.
- Section 19 is not comprehensively applied: “The other thing I don’t find in this order is the application of Section 19 of the [Competition] Act, where you have to take into account multiple factors together while examining the effect under Section 4. That is not coming out very clearly,” Gokhale remarked.
- Doesn’t get into the history:“The other important thing I feel that is missed out in the order is a complete history of how things have developed. For example, why has Google achieved this position? How was Google able to overcome Yahoo, which may have been dominant? It has come up with innovation, the quality of the products, and otherwise, why have competitors failed, if at all? Is it only because of the assumed conditions that Google has put in or whether the competition was unable to come up with quality products in the last 5-6 years or didn’t persist enough in [the] Indian market?” Gokhale questioned.
- Pretty straightforward case: Despite the above pitfalls, Kathuria believes that the CCI has a strong argument. “So far as the theory of harm is concerned, I think it’s a pretty straight jacket. It has been tried and tested in other jurisdictions as well, self preference, tying, et cetera. If you’re talking about Google Android. And for Google Play, you will see that even though it has not been finally decided in the EU, this sort of abuse is already featured in the DMA. So in terms of substance, the appellate body won’t be able to do much because CCI knows its strengths. Even if you look at the courts, our judges are generalists, I think they would defer to the CCI,” Kathuria explained.
How are the CCI orders different from similar decisions dealt with globally?
- Recognition of the role YouTube has played: “The CCI crackdown on Google Android and Play Store is identical to that of those by the EU in 2018, which has hitherto imposed fines worth USD 8 billion overall on Google. The key exception in India’s case, however, has been the CCI’s recognition of the involvement of YouTube in anti-competitive practices. CCI has observed that by virtue of Google’s agreements with Original Equipment Manufacturers, YouTube has gained a significant edge over competitors in the online video sharing and hosting space,” Nikhil Varma, Managing Partner at Miglani Varma and Co, told MediaNama.
- CCI has preempted legal challenges prudently: “I would say that on substance, they’re not very different. As a competition regulator, we have limited tools and if you look at the structure of Indian competition law, it’s basically modelled on the EU law. And even if you look at the evolution of the competition law, they have sort of the same theories of harm. In this case, what the CCI has applied, it’s the same that the European Commission applied in the Google Android case. So structure wise it’s the same. But there is one thing that is very much noticeable. If you have seen the language, and if you have seen the span of the Google Android decision, it’s huge. And the CCI, very prudently, is referring to the Supreme Court cases. There are very few cases that went all the way to the Supreme Court, but the CCI knows that it has to make it watertight. Because Google has deep pockets, it will definitely appeal the decision. So I think CCI has preempted very well,” Kathuria opined.
- More comprehensive than other orders: “India’s order against Google Android and Play Store is more comprehensive as compared to similar orders dealt by global regulators. In India, the report found that there were no substitutes for the Android ecosystem, a defense that was used in other countries. […] For example, the distribution of alternative app stores through Google Play Store is a milestone judgment that will allow companies to compete and build better products customized for India. Moreover, now users can uninstall Google apps, which give similar apps a chance to compete with Google in a healthy environment,” Deshmukh commented.
What next?
- Can expect a similar outcome in the iOS investigation: “I would say that Apple is going to face a similar fate because in their own relevant market, iOS is also dominant and they are engaging in similar practices. So I think it’s telling for them that they would be facing the same fate as Google,” Kathuria remarked. “An activist CCI, as the one we witness today, must concern Apple and other major players indulging in allegedly anti-competitive practices. […] Like Google, Apple’s argument that it is an insignificant player in the Indian market also does not hold water, for the concern expressed by the CCI is with respect to anti-competitive practices against developers, and not end-users,” Varma added.
- We need to frame ex-ante regulations: “Another thing that perhaps you want to have a look at is that the Commission could act in this case because Google was a dominant player. However, in this market, the digital markets you are talking about, abuse can happen even below the dominant position. And that is the position of “gatekeeper” and that is why we need ex-ante regulations, something like the Digital Market Act. Imagine if we have something like DMA. CCI took two years to come up with this, we don’t have to and can’t wait for two years, because these markets are shifty, they would already tip in the favour of the delinquent dominant form by the time you make an intervention and all these behavioural remedies are proper lip service, you can’t do much about it,” Kathuria opined.
- What will commissions with third-party billing systems look like: “The question for payment integrators is how much percentage will you charge on alternative stores? Do any of the companies that cried wolf see a future business model (now that CCI has made its decision)? If so, please enlighten us. The idea of taking consumers outside a known ecosystem like the Play Store or App Store will become littered with security issues namely phishing. How do these payment companies plan to monetise this decision? As an observer, I am curious to know this,” Aditya Kshirsagar, independent tech evangelist, commented.
- Can expect more specialised app stores going forward: “There is a business opportunity for alternative app stores to become sustainable businesses. For a software entity, there is an opportunity in curating apps, content, and services with a specific interest. Imagine an alternative app store dedicated to fitness. Users get to interact with their preferred brands, developers, and peers. For developers it allows for a higher LTV (long-term value) through sustained engagement,” Kshirsagar said. “Moreover, with alternative app stores being available to download from Play Store, alternative app stores will be able to provide finer services to users with a customized and localized experience. The users will have a choice to use the most relevant app store that suits their needs,” Deshmukh added.
- Will alternative app stores be able to list Google apps: “Google apps should be given equal treatment as other apps and ideally should be allowed to be distributed through alternative app stores. It creates a level-playing field for all apps while giving users a choice. However, it also depends on Google and whether they wish to distribute their apps through alternative app stores,” Deshmukh said.
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Also Read
- What Changes India Wants Google To Make To Android
- India Orders Google Play Store To Allow Developers To Use Third Party Billing Systems, Not Impose Disproportionate Fees, And More
- Google Play To Allow Alternative Billing Systems In India: Here Are Some Unanswered Questions
- Competition Commission Orders Investigation In Google’s App Store And GPay
- Summary: CCI Orders Detailed Antitrust Investigation Into Apple Over App Store Practices
