CCI’s Evolution in Relation to the Smartphone Market

[Sumit Jain is at the Centre for Competition Law and Economics (CCLE)]

Through its order dated 16 April 2019 in Umar Javed v. Google LLC, the Competition Commission of India initiated a probe against Google Inc. for its potential abuse of dominant position on the Android platform. The order remains curious from multiple standpoints. First, it was not made public until as late as 18 June 2019. This not only delayed the public scrutiny of the order, but allowed the Director General (DG) to conduct the investigation away from the public eye. Second, the amount of research the informants have carried out in this case, where they have almost undertaken the Commission’s task by analyzing violations in foreign jurisdictions and drawing a parallel in the Indian context to prove contravention by the said firm, is almost unprecedented.

What remains, however, the most important aspect of the said order is the different approach adopted by the Commission to determine ‘relevant product market’ (RPM) as elaborated in section 2(t) of the Competition Act 2002. In Sonam Sharma v. Apple Inc. (2013), the Commission held that iPhones and other smartphones come under the same RPM and both are substitutable from the demand-side perspective, while in Umar Javeed it differentiated the two deploying the ‘availability of coding platform for third party licensing’ argument.

The facts of the case remain that one informant Sonam Sharma in 2011 alleged that Apple is abusing its dominant position in the smartphone market by forcing buyers to not only opt for certain network providers, but also deploying punitive measures like refusal to accept such handsets for repair in its centres, refusal to allow download of new applications etc. in case they fail to do so. The Commission, while finding no contravention in the said matter, agreed with the DG’s analysis and held that iPhones cannot be declared as a separate RPM. The reasoning adopted by the Commission was that even though iPhones are unique in certain features, it sees ‘reasonable interchangeability’ between them and other smartphones in the market. It did not conduct any consumer centric survey and held that the RPM has to be defined in terms of product substitutability from the demand side.

Fast forward to 2019, and the approach taken by the Commission in Umar Javeed is fundamentally different where it held that “…iOS do not appear to be part of the same market (Android) since they are not available for license by third party OEMs…” [para 14]. Apart from various technicalities in the said order, what remains unique about the matter is that it has de facto defined a separate RPM for iPhones. The reasoning adopted by the Commission where it has held that the ‘coding platform is not available for third party OEMs’ makes a feeble dent on ‘demand side substitutability of the product’ argument deployed by the Commission in Sonam Sharma. There is substantive literature in support of the line of reasoning adopted by the CCI in the latter.

Even though it took almost six years for the Commission to make such a departure, and one may interpret it as inconsistency in its decision making, the overall turn of events would suggest that such a change in approach is warranted. A cursory reading of the Indian GDP figures would suggest that the service sector is making continuous strides since 1950 in terms of share of the economy. In 2019, its share has risen to a whopping 54.4 percent, putting it ahead with the combined numbers of the other two. With such an advent, it is prudent on the Commission’s part to focus on the sector giving maximum yields to the economy and creating markets within the market to curtail economic power of the relevant players, and promote competition.

The aim of the Competition Act, 2002 is not only to take care of the legal precedent, but rather to ensure freedom of trade in best interests of the national economy. The preamble of the Act also places a clear emphasis on ‘…economic development of the country…’ and the said legislation depends a lot on the international jurisprudence for its interpretation. Given that the said firm derives it major profits outside the country, it is prudent for the body to take cognizance of international case law and adapt their influence to Indian case law. Google was recently fined €1.5bn by the European Union for violation of antitrust law and charged with a penalty of Rs. 135 crores in the Indian context for its abuse of dominant position.

The future of the said case remains interesting as the rise of big-tech and the related concern of data-monopolization has turned out to be a nightmare for competition regulators across the globe. If Google is found guilty, it would not only be the second decision against it under the Indian competition law, but it would have larger consequences on other tech firms like Facebook and Amazon. While the informants are likely to place heavy reliance on international case law, where the firm has already been found guilty of contravening the law, it is yet to be seen how the Commission’s interpretation comes about in the Indian context, which has its own complexities.

Sumit Jain

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