CCI’s Decision on Abuse of Dominant Position by Google

[Pallavi Panigrahi is a graduate of National Law School of India University, Bangalore and is currently working at a Corporate Law Firm in Mumbai.

Another post on the topic is available here]

The Competition Commission of India (“CCI”) last month imposed a fine of INR 135.86 crores on search engine giant Google (inclusive of Google LLC, Google India Private Limited and Google Ireland Limited) for abuse of dominant position under section 4 of the Competition Act, 2002 (“the Act”).

Facts

Information against Google was provided by Matrimony.Com Limited and Consumer Unity and Trust Society (CUTS) in two separate instances which were clubbed together as the allegations made were similar, viz, abuse of dominant position by Google in the markets for “online search” and “online search advertising” reflected in terms of search bias, manipulation of results, promotion of Google’s own vertical search sites by blending of its verticals’ results in the organic search results, etc.

Director General’s Investigation

Based on the information provided by the informants and the entire material on record, the CCI directed the Director General (“DG”) to investigate the allegations made against Google.

The DG, upon perusal of relevant information, determined that the primary service in question offered by Google was in the nature of “Online General Web Search Services” and that there could be no substitution between a general search service and a vertical search service or site-specific search service. Similarly, “Online Search Advertising” was significantly different from display advertising, social media advertising, e-mail based or mobile based advertising, etc., as it is linked to user-initiated queries that reflect the specific interests of the user in that instance relating to the subject matter of the query and thereby creates a very effective way of targeting potential consumers. The DG also found that “Online General Web Search Services” and “Online Search Advertising” were not substitutable but rather complementary and hence did not form the same relevant product market. Hence, the relevant markets determined by the DG were – “Market for Online General Web Search Services in India” and “Market for Online Search Advertising in India”.

After establishing the relevant market with the above-mentioned rationale, the DG went on to find that Google consistently maintained a high market share in the relevant markets from 2009 – 2013. Moreover, given that there were significant entry barriers owing to high cost, technology, requirements of scale, etc, Google enjoyed significant power owing to its resources, financial power and commercial advantages. The outcome of the aforementioned factors was that Google’s position of strength enabled it to function independent of competitive forces in the market, thereby rendering it a dominant player.

The DG went on to find that not only did Google enjoy a dominant position in the market, there was substantial cause to hold that there was abuse of the same, based on the following conduct:

– First, Google blended its vertical search services into the general search results in a manner that was not applicable to non-Google vertical search services such that its own specialised search services ranked higher than other vertical search services in the Search Engine Results Page (“SERP”). This affected users as they were not necessarily directed to the most relevant results for their queries. It also hampered competition in ancillary markets that lost out on significant audience. Taken together, this was found to be a violation of section 4 of the Act.

– Secondly, in spite of the presence of required technology, Google did not disclose quality scores to advertisers, even for historical data, and thereby rendered the entire process for placement of advertisements opaque and vulnerable to discriminatory practices thereby falling foul of section 4 of the Act.

– Thirdly, Google was not required to pay any consideration for its in-house ads, thereby giving it a substantial advantage over its competitors. Additionally, Google had access to scores of its competitors and therefore the ability to score its advertisements higher. Checks placed by Google to prevent the same were deemed ineffective and the same was considered to be an abuse of dominant position under section 4 of the Act.

– It was also found that Google placed unfair conditions upon trademark owners by allowing such trademarks to be bid on as keywords by competitors. This is because, as mentioned earlier, results that occupied higher positions on SERP were the ones for which higher bids were placed by concerned entities rather than the ones that were most relevant. This led to situations of use of trademarks of trademark owners by other entities due to higher bidding for such keywords.

– The DG also found that Google was using its dominant position in the relevant market to impose certain restrictive conditions in its agreements for advertising services ranging from prohibiting partners from using services of competitors to placing restrictions on the positioning of ads of competitors. These restrictions were instrumental in preventing competing service providers from achieving the required scale of functioning thereby preventing them from breaking through entry barriers in the market.

CCI’s Analysis

The CCI agreed with the determination of the relevant product market with the relevant geographical market being delineated as India, as the conditions for supply of “Online General Web Search Services” and “Online Advertising Search Services” in India were different from those in other locations, and the dominant position enjoyed by Google in the relevant product market was in India. It also agreed with the determination that Google does indeed occupy a dominant position in the above mentioned relevant markets.

Google’s Online Search Services are Free?

Before going into the details of abuse of dominance found by the DG, the CCI addressed a primary objection raised by Google – that for the application of section 4 of the Act, there had to be a sale of goods or services, but the online search services provided by Google were free and hence would not attract the provisions of section 4 at all.

The CCI categorically disagreed with this contention made by Google. It held that users provided indirect consideration to Google by contributing to the collection of “Big Data” every time they availed of its search services which enabled Google to attract advertisers. Moreover, each time users clicked on advertised links provided by Google, ad-based revenue was generated for the Company.

Hence, the services provided by Google were certainly not free and could attract investigation under section 4 of the Act.

Abuse of Dominant Position

The CCI found that, until 2010, Google followed a mechanism whereby universal search results were assigned pre-determined fixed positions and were not reflective of the most relevant results for the user’s queries. Thus, the CCI agreed with the DG to the extent that this practice of Google till 2010 was indeed a violation of its dominant position.

Moreover, with respect to leveraging of Google’s vertical search services, the CCI agreed with the DG to the extent that the display of Google’s commercial flight units at the top of search results relating to flights also was an instance of search bias as clicking on these prominently placed links directed users to Google’s own vertical sites and not to third party vertical sites.

The CCI also found that Google’s conduct with respect to the terms in the agreements for its negotiated intermediary search services that enabled publishers to display a Google search option for users on their pages demanded exclusivity as these agreements contained terms that prevented publishers from displaying search options from competing search engines. This was held to be violative of section 4 of the Act.

The CCI, however, did not find any abuse of dominant position by Google with respect to the imposition of unfair terms and conditions on advertisers, the use of unfair mechanism in bidding for keywords for the advertisers in the context of trademarks held by such advertisers and the imposition of unfair terms with relation to multihoming (use of advertising campaigns across different platforms) and interoperability of data across platforms.

Based on the above findings, the CCI went on to impose a fine of INR 135.86 Crores (that is, 5% of the average total revenue generated by Google in India across business segments from 2013-2015). It also directed that Google clarify that the commercial flight units displayed prominently in the search results for flights only lead to Google’s flight pages and not that of its competitors. Additionally, Google was directed to remove the clauses leading to exclusivity in its agreements for negotiated search intermediate services.

Analysis

In recent times, Google has been in the dock for violation of anti-trust regulations across the world with regulators coming down hard on the search giant for the manner in which it deals with its search functions. Not long ago, the European Union imposed a record fine of $2.7 billion on Google for anti-competitive behaviour. The finding in that case was a familiar one – Google privileged its vertical search services relating to online shopping in search results at the cost of competitors.

To that end, the finding of the CCI is in line with the global trend. However, it must be noted that the CCI’s finding of anti-trust behaviour on part of Google is a limited one, as the CCI has found in favour of Google on almost all counts barring three tightly circumscribed ones. Moreover, the fine imposed on Google is almost insignificant when compared to the mammoth amount of revenue that the search engine giant generates in India. The directions of the CCI with respect to unfair display of Google’s commercial flight units and unfair terms in its agreements for negotiated search intermediate services come across as mere lip service and do not seem likely to even count as a slap on the wrist for a corporation with the kind of resources and dominance Google has.

With the push for increased digitization in India, this case could have been a seminal one given the extremely dynamic character of Google that simultaneously acts as a provider of services to users and market place for advertisers. With more and more day to day transactions shifting to the digital space, CCI is likely to see numerous such cases in the future. However, whether the CCI’s stance in the instant case becomes something to go by or not remains to be seen.

– Pallavi Panigrahi

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