Introduction

By way of a December 8 2018 decision, the Competition Commission of India (CCI) imposed a penalty of approximately Rs1.4 billion (approximately $21 million) on Google for abusing its dominant position in the market for "online general web search and web search advertising services" in India. While the European Commission fined the online search giant $2.7 billion for a similar infraction, the CCI's fine of a mere Rs1.4 billion (5% of Google's turnover in India) has widely been seen as insignificant, and media reports have accused the CCI of having gone easy on the company, as the director general had recommended a host of violations against Google. Notably, two members of the CCI issued a dissenting order, finding that there was no evidence of abuse of dominance against Google.

Unlike the European Commission, the CCI has asked that Google include disclaimers, rather than insisting that Google remove its specialised search boxes. Meanwhile, the battle between 'matrimony.com' (the complainant) and Google (the respondent) is ongoing, with Google preparing its appeals against the verdict, which must be filed within 60 days before the National Company Appellate Tribunal.

The CCI found Google to have abused its dominant position only on the following counts:

  • Universal results – before 2010 Google unfairly ranked the universal results returned by general web searches in a pre-determined manner – rather than by relevance – in violation of Section 4(2)(a)(i) of the Competition Act.
  • Commercial flight unit – Google unfairly designed and displayed its commercial flight unit, including a link to Google's specialised search options and services, in order to deprive users of other flight options, in violation of Section 4(2)(a)(i) of the act.
  • Negotiated search intermediate agreements – Google imposed prohibitions on publishers under negotiated search intermediation agreements which restricted their choice and prevented them from using the search services provided by competing search engines, in violation of Sections 4(2)(a)(i), 4(2)(c) and 4(2)(e) of the act.

Facts

The investigation into Google's alleged abuse of its dominant position was initiated by the CCI following two complaints(1) filed by Consim Info Pvt Ltd (now 'matrimony.com') and the Consumer Unity and Trust Society (CUTS), respectively. Among other things, it was alleged that Google created an uneven playing field by unduly favouring its own services and, in doing so, leveraged its strong position in various online search markets to enter into and enhance its position in ancillary markets.

According to the informants, Google ran its core business of searching and advertising in a discriminatory manner. This practiced harmed not only advertisers, but also consumers using the search engine, as it created an uneven playing field by favouring Google's own services and partners. Google achieved this by manipulating its search results to advantage its vertical market partners. This not only caused direct harm to competitors in vertical markets, but also caused direct harm to other website owners, since their websites were lowered on general search results and thus received fewer clicks as a result of the lessened traffic. Further, consumers no longer received the most relevant results at the top of their general searches. Google allegedly mixed many of its vertical results from its vertical search services (eg, YouTube, Google News and Google Maps) into its organic search results.

On finding a prima facie case existed based on the allegations, the CCI directed the director general to investigate the matter under Section 26(1) of the act. After investigating the allegations, the director general recommended the following violations of Sections 4(2)(a)(i), 4(2)(b)(ii), 4(2)(c) and 4(2)(e) of the act:

  • Google was found to be indulging in search bias by integrating and blending its own specialised vertical search services, options and features (eg, YouTube, Google News and Google Maps) into its online general web search services in Google's universal search, OneBox and commercial units.
  • Google placed its own specialised search features in prominent positions on the search engine results page (SERP). As top results receive higher user attention, Google was steering users to its own products and services and producing biased results. In doing so, Google leveraged its dominance in general searches in order to protect its market position in vertical search services.
  • By way of the above unfair practices, Google also hampered the market, impeding innovation and thereby harming competition and consumers.
  • Google followed an opaque procedure by not disclosing the quality scores and information on bids received from various advertisers for a particular keyword in an auction (even on the historical basis), although the same was found to be technically feasible.
  • Google's policy regarding compensation was entirely discretionary and did not require that advertisers be compensated for losses that could be attributed to Google system errors.
  • Google was not required to pay monetary consideration for its house ads, which gave it a competitive edge. Google was aware of the quality scores that the system assigned to other websites and that its house ads were assigned higher quality scores than its competitors. This allowed Google to ensure that its house ads appeared as the top slots above third-party ads – in particular, its competitors – and destroyed the level playing field for third parties and its competitors.
  • Google's AdWords policy restricted the use of notified trademarks in competitors' ad text.
  • As the preferred syndicate service provider for publishers, Google used its dominant position in online general web searches and online search advertising services to impose restrictive conditions under its AdSense programme. Before 2010 Google did not disclose AdSense revenue to its online partners and its agreements with those online partners were found to be one-sided, with enough scope for arbitrary conduct, which is considered an unfair practice.
  • Through its agreements with customers licensing AdWords application programming interface (API), Google placed restrictions (eg, provisions on termination without reason) which could be used to discourage advertisers from multihoming, thereby denying market access to competitors.

Google filed detailed objections to the director general's findings and raised certain preliminary and jurisdictional issues.

On consideration of the detailed objections filed by Google, the CCI gave its findings on each issue in a detailed order by a four-to-two majority decision.

Preliminary objections

At the outset, the CCI dealt with the preliminary objections raised regarding whether Section 4(a) of the act applied, as it was contended that the services offered by Google were free and therefore no purchase or sale of goods or services occurred. However, the CCI disagreed and held that users offered indirect consideration to Google by:

  • using Google searches; and
  • permitting Google to collect their personal information, which facilitates Google's ability to generate revenue.

The CCI also considered the fact that the data obtained from its users was subsequently used for targeted advertising by Google. Thus, it was held that the online search services offered by Google were not entirely free, as claimed.

Relevant market

For the purposes of competition law analysis, on examination of the factors under Sections 19(6) and 19(7) of the act, the CCI agreed with the director general's assessment that the relevant markets were:

  • online general web search services in India; and
  • online search advertising services in India.

Dominant position

With regard to Google's dominant position, the CCI agreed with the director general's finding. Considering Google's high market shares, the market structure and the technical advantages enjoyed by Google, the CCI held that Google was dominant in both the relevant markets for online general web search services and the market for online search advertising services in India (Paragraph 125).

The CCI also emphasised the special responsibility and obligations that Google had as the dominant undertaking and "the gateway to the internet for a vast majority of users" – with special emphasis on the digital market – to ensure not only the fairness of all online web searches and search advertising results, but also the fairness of online markets, given that these are primarily accessed through Google (Paragraphs 196 and 202).

Abuse of dominance

Bias search results The CCI agreed with the director general's report and held that Google was engaging in search bias in its specialised results designs (ie, universal results, OneBox and commercial units). However, the CCI found that there was abuse of dominance only with respect to Google's universal results before 2010 and the commercial units.

Universal results Universal results are groups of results for a specific type of information, such as news, images and local businesses. The CCI found that the ranking of universal results before 2010 was not strictly determined by relevance and was instead pre-determined. The CCI further held that Google's practice before 2010 of displaying its universal results on fixed positions was unfair, as it created a misleading façade that such results, which appeared prominently in response to queries, were algorithmically determined based on relevance. It was also held that such conduct fell foul of Section 4(2)(a)(i) of the act (Paragraph 216).

However, the CCI disagreed with the director general's finding that Google continued to provide biased universal results after 2010, noting Google's submission that it had no means to evaluate results generated by different search services or to select among them, because it has no information on their ranking functions (Paragraphs 218 and 219).

OneBox The CCI disagreed with the director general's finding that there was bias in the sources that Google selected for OneBox content, as there was no actual evidence of such bias to show that Google selected inferior information in this regard (Paragraph 230).

Commercial units Commercial units are result types that Google sets apart from free search results. It shows commercial units in the space used for ads which are above or at the right-hand side of free search results. Google distinguishes commercial units from free search results with a label indicating commercial units as 'sponsored'. In India, Google presently shows commercial units for shopping and flights only. The hotel commercial unit is no longer available. The CCI noted that by integrating commercial units for content categories such as flights with Google's own search options and specialised services and placing them prominently on the SERP, Google was able to drive traffic to its own pages and generate revenue through ads and sponsored results. The CCI also took note of Microsoft's submissions, which had been provided to the director general in relation to a heat map, and agreed with the director general's findings that development of search engine optimisation services helped to improve rankings in general Google searches (Paragraphs 238 and 242).

Thus, in terms of Google's flight unit in India, the CCI found that the primary competition concern emanated out of its prominent placement on Google searches, in addition to providing disproportionate portions of the webpage to such unit. Moreover, it contained a link to 'search flights', which took users to the Google Flights page and not to a third-party website such as 'MakeMyTrip.com' or 'Yatra.com'. Therefore, the CCI held that Google was guilty of search bias, as it put its flight unit in an unduly prominent and disproportionate place on general searches in order to direct traffic to its specialised search service. The insertion of Google's flight unit prominently above the blue link results in general searches denied third-party travel verticals the opportunity to be displayed on that key real estate. Thus, the CCI held that as a result of the displacement of algorithmic results, third-party travel verticals were driven to buy Google search advertising, since this was perhaps the only option left for them to re-acquire visibility and traffic – albeit at a higher cost.

The CCI held that since most vertical search service providers have revenue generation models which are heavily dependent on user traffic, such an unfair diversion of traffic by Google may have hindered third-party travel verticals from acquiring sufficient volumes of business, with the effect that equally efficient websites and specialised search service providers were potentially unable to sustain and survive in the market for flight search services. Thus, the CCI held that Google was leveraging its dominant position in general web searches to promote its commercial flight unit.

Further, through its search design, Google had not only placed its commercial flight unit in a prominent position on the SERP, but also allocated disproportionate real estate to those units, resulting in either lowering or removing other verticals that were trying to gain market access. In addition, Google provided links which lead users of Google's flight units to its specialised search results page (Google Flight), potentially depriving users of additional resources. This conduct was held to amount to an unfair imposition on users availing of search services, in contravention of Section 4(2)(a)(i) of the act (Paragraphs 248 and 253).

Unfair conditions on advertisers According to the director general's findings with respect to Google's advertising platform (ie, AdWords), the data provided by Google to AdWords' advertisers was opaque, since it focused only on one performance metric (ie, the one to 10 quality score), which the director general considered to be of "very limited utility".

However, on reviewing the information, the CCI noted that Google provided other metrics and tools for assessing ad and campaign performance, such as the click-through rates, bid estimates, average position, conversions, time of day reporting, geographic targeting, bid simulators, campaign drafts and experiments, and auction insight reports. Thus, the CCI was unconvinced by the director general's report and observed that Google provided sufficient data to advertisers on the performance of their ads (Paragraphs 268, 269, 272 to 277).

Trademark issues An ancillary issue identified by the director general with respect to online ads was that Google had abused its dominant position by imposing unfair conditions on trademark owners (particularly those that notified their trademarks to Google) by allowing their trademarks to be bid as keywords by third parties in online search advertising, which allowed competitors to free ride on the goodwill and brand value of the trademark owners, thereby hampering fair competition.

However, after considering Google's response and the informants' rejoinder thereto, the CCI found that Google's keyword bidding policy did not prohibit advertisers from bidding on trademarked keywords. Further, Google applied this policy universally, and permitted advertisers to bid on Google's own trademarks as well. It was noted that prohibiting advertisers from bidding on queries that include trademarked terms might result in a perverse situation where Google could not return ads for competitive or complementary products even when users were searching for them. Therefore, by allowing bidding on trademarked items, it increased the relevance of Google's ads, something which also benefits users. The CCI noted that, according to the director general's report, Google had imposed no unfair conditions on users or any conditions through which it aimed to block competitors of trademark owners from bidding on trademarked keywords (Paragraphs 291 and 293).

Ad text policy The CCI disagreed with the director general's findings that either Google had failed:

  • to enforce its ad text policy properly in respect of Consim's trademarks; or
  • to stop Consim's rivals from using Consim's trademark (eg, failure to stop 'Shaadi.com' from using the words 'Bharat matrimony' in its ads).

Instead, the CCI found that Consim had failed to comply with Google's procedure for notifying complaints under its ad text policy by directing such complaints to the designated trademark operations team. The CCI dismissed the director general's finding in this regard (Paragraphs 302 and 314).

AdWords API conditions The director general's report found that Google's AdWords API terms and conditions restricted data interoperability between search advertising platforms and that these restrictions could discourage advertisers from multihoming, thereby resulting in a denial of market access to competitors. However, after considering Google's response and the informants' rejoinder thereto, the CCI held that the director general's findings were speculative in the absence of any actual evidence – in particular, in light of the fact that Google provided evidence to the contrary by showing that advertisers such as MakeMyTrip, 'Yatra.com', 'Flipkart.com' and JustDial experienced no such denial of access or interoperability of data across different advertising platforms (Paragraphs 338, 345, 348, 350, 352, 353 and 354).

Distribution agreements The director general found that Google contravened Section 4(2)(c) of the act on the grounds that two of its distribution agreements (ie, Google's agreement with browsers such as Apple's Safari and Mozilla's Firefox) set Google as the default search engine. The director general's conclusion was based on the fact that such contractual arrangements by Google had the potential to strengthen its market position in online general web search and search advertising by denying access to others.

The CCI held that a default setting does not deny market access to competitors and users are free to switch from the default if they so choose. Further, the CCI held that the director general presented no evidence to show that these two distribution agreements denied market access to rivals. Moreover, the distribution agreements were contestable and Google was stated to have lost one of the two distribution deals – namely, the Mozilla agreement in 2014. It was observed that other search services – including Yahoo!, Yandex and Baidu – are now the default providers on Mozilla's Firefox browser in some countries. Further, it was noted that Microsoft controls search distribution deals with all major personal computer original equipment manufacturers and sets Bing as the default search service (via Internet Explorer and Edge). In view of the foregoing, the CCI opined that Google's distribution agreements were not exclusive, nor had it been established that such arrangements denied market access to any of the competing search engines. The two browser distribution deals with Mozilla's Firefox and Apple's Safari were not exclusive and merely specified that Google should be the default search service on these browsers. However, users were not obliged to use that search service.

The director general found that the default settings created competitive problems because the process for selecting another search service was not apparent for ordinary internet users. However, the CCI observed that the director general's finding did not appear to be based on records of any survey or evidence to that effect. Moreover, the CCI held that default settings cannot be equated with exclusivity because default arrangements leave partners free to provide users with other search service options. Accordingly, the CCI held that no case of contravention of Section 4(2)(c) of the act occurred with regard to the distribution agreements with browsers, since they neither created exclusivity nor denied market access to competing search engines (Paragraphs 360 and 367).

Intermediation agreements The director general found that apart from general online search services, Google offered online search and advertising services on other websites through syndication and intermediation services. With regard to advertising, intermediation can take place for both search and non-search advertising, and Google offered a distinct online search and advertising syndicate service under its AdSense programme, which constituted a distinct relevant market. The director general found that by virtue of its dominance in the online general search, Google was the preferred syndicate partner for most publishers wanting to offer search and advertising services on their websites. According to the director general's report, Google was using its dominance to impose restrictive conditions in its agreements for syndicate search and advertising services. Further, the director general noted that before 2010, Google did not disclose AdSense revenue sharing with online AdSense partners, which was an unfair restriction.

The CCI, after considering Google's response and the informants' rejoinder thereto, noted that Google offered three types of intermediation agreement:

  • search intermediation agreements;
  • search ad intermediation agreements or AdSense for Search (AFS); and
  • display ad intermediation or AdSense for Content (AFC).

These agreements were typically executed either as online agreements or direct agreements, and negotiated with some large publishers (negotiated search agreements). The CCI found that the director general's report provided no evidence of any prohibition on the use of third-party search services or display of third-party ads in the search results (ie, AFS or AFC). Thus, the CCI held that the director general's finding that "there is some scope for Google to interpret these provisions in a manner that in effect imposes exclusivity" was unfounded and without evidence (Paragraphs 403, 406, 413 and 415 to 418).

However, on the Google's negotiated search intermediation agreements, the CCI observed that Google prevented partners with which it had entered into negotiated search agreements from implementing on their websites any search services which were the same or substantially similar to Google's search service. It was held that such prohibitions imposed under the negotiated search agreements were unfair, restricted partners' choices and prevented them from using the search services provided by competing search engines. This amounted to a violation of Section 4(2)(a)(i) of the act. It was also held that by restricting websites from partnering with competing search services, Google was denying its competitors access to the search business and further marginalising competitors and endangering their viability, while strengthening its own position in contravention of Section 4(2)(c) of the act. It was also held that Google was using its dominance in the market for online general web search to impose restrictive conditions in online syndicate search agreement, in violation of Section 4(2)(e) of the act. This conduct created conditions for extending and preserving Google's dominance in search intermediation in perpetuity (Paragraphs 391 and 394 to 397).

CCI remedies

Based on the above findings, the CCI directed Google to:

  • desist from fixing positions in the universal result rankings in future;
  • display a disclaimer in the commercial flight unit box, clearly indicating that the 'search flights' link placed at the bottom leads to Google's flight page and not the results aggregated by any third-party service provider, so that users are not misled; and
  • cease enforcement of the restrictive clauses in its negotiated direct search intermediation agreements with Indian partners, with immediate effect.

Penalty imposed After considering Google's submissions on the issue of relevant turnover (ie, the revenue generated from its India operations in respect of services specified in the CCI's December 20 2017 order, the CCI imposed a penalty of 5% of Google's average total revenue from its India operations from its different business segments for the financial years 2013, 2014 and 2015. The penalty amounted to Rs1.4 billion, which must be paid within 60 days from receipt of the order.

Dissenting order Two CCI members (Mr Sudhir Mital and Justice GP Mittal) found no evidence for abuse of dominance by Google, even in respect of the commercial flight unit, negotiated search intermediation agreements and universal results. Thus, they found that Google had not contravened Section 4 of the act.

Comment

Although the CCI's order is subject to appeal, it has been welcomed by Indian vertical search engines, as it will be instrumental in creating a level playing field for smaller competitors in the face of a tech giant stranglehold over local digital business. Further, while the $21 million fine imposed by the CCI may be small for the global technology giant, the ruling has raised hopes for Indian digital start-ups that are feeling the pressure of Google's dominance.

This is the third international setback for Google since 2017. In a similar case, the European Union's antitrust regulators fined Google $2.7 billion in June 2017 for promoting its own products over others. In April 2017 Google also settled an antitrust matter in Russia out of court with a $7.5 million settlement. Further, in the United States, Google narrowly escaped a lawsuit intended to be filed by the Federal Trade Commission in 2012 for unfair business practices by making a few changes to its policies.

This competition law judgment sends an important message to information technology oligarchs worldwide that India is likely to put up a worthy fight to safeguard the interests of its indigenous stakeholders. Notably, apart from the above, unlike the similar EU investigation, the director general in India could not gather evidence to support the findings on various grounds, which led the CCI to reject them on merits.

For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email (mmsharma@vaishlaw.com). The Vaish Associates website can be accessed at www.vaishlaw.com.

Endnotes

(1) Cases 07/2012 and 30/2012.

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