This article is written by Shanay Shroff, 5th Year Student, Symbiosis Law School, Pune.
On 22nd June, the Competition Commission of India (CCI) ordered a probe into Google’s dominance in the licensable operating system (OS) Smart TV market.
The conduct in question is the licensing of the ‘Android TV’ OS that provides an interface for Smart TVs. It is claimed that Google has entered into unlawful agreements with Smart TV Original Equipment Manufacturers (OEMs) and abused its dominant position to the detriment of competition.
In 2018, the CCI observed in its prima facie opinion in Google-Android that Google had abused its dominant position violating Section 4 of the Competition Act, 2002 (the Act) in the market for licensable OS for smart mobile devices. The CCI is also currently investigating whether Google is abusing its dominant position to promote its mobile payment application in the Google-Pay case.
Prevalent Market Conditions That Gave Rise To The Complaint
Smart TV’s require an OS to provide a user interface to access services. Google licenses its OS ‘Android TV’ to Smart TV OEMs similar to how it has licenses Android OS to mobile OEMs. Entering into a licensing agreement with Google provides OEMs with access to the Play Store and other Google Apps. The Play Store is the only gateway to download Apps such as Netflix and Disney Hotstar.
Identifying The Relevant Market And Establishing Dominance
The informants contended that the relevant market is the licensable smart TV OS to the exclusion of non-licensable OS which are native and tied to TV OEMs. For instance, Taizen is the OS developed by Samsung exclusively for its Smart TVs while WebOS has been developed by LG. The informants relied on proxies to demonstrate that in the relevant market Google has a market share of 75% and 6 out of 10 of the major TV OEMs utilise its OS.
Google contended that there is substantial competition at the consumer level and amongst the Smart TV OSs. Google pointed out that the Smart TV sector is fiercely competitive and that it is competing against well-established players like Samsung and LG. Further, content can be streamed through multiple sources like through a device that plugs into a TV, such as Amazon’s FireStick or through other devices like Laptops. Accordingly, having access to the Play Store is not a necessity due to the wide number of alternatives to stream content.
The CCI observed that in the market demarcated by the informants, competitors that utilize their native OS like Samsung and LG would not be relevant as these interfaces cannot be licensed by other OEMs. Further, since the commercial transaction in question involves Google as a licensor and the Smart TV OEMs as a licensee, streaming sticks and other devices cannot be considered.
Expounding upon the nature of the market, the CCI noted that a wide array of applications choices are not important. On the contrary, it is the availability of a few select applications like Netflix, Hotstar, Amazon Prime and Youtube that are valued by consumers and Smart TV OEMs. Accordingly, the App store is the only gateway to download such applications and is indeed a ‘must-have’ for Smart TVs. The CCI also relied on the proxies presented by the informants to reach the prima facie opinion that Google could be dominant in the relevant market considering its market share.
The determination of the relevant market will depend on whether the CCI can definitively ascertain whether licensable Smart TV OS is a distinct market. This will require specific and reliable information which could be challenging to produce. Due to insufficient information, the CCI was forced to dismiss the Whatsapp-Pay case that alleged Whatsapp was abusing its dominant position through its payment services. Market shares alone are considered to be imperfect proxies and insufficient indicators of dominance and direct indicators of dominance such as exclusionary behaviour would need to be considered.
Abuse Of Dominance And Anti-Competitive Agreements
Since an OS is required to provide a user interface, it is alleged that Google is abusing its dominant position because users cannot change the pre-installed OS on their TV. Further, Google is bundling its App store to its OS since the Google Play Store is pre-installed.
Conversely, Google submitted that it is essential to distinguish between its Android Open Source Project (AOSP) and its optional offering, Android TV. The former can be freely licensed by third parties and does not oblige parties to pre-install any of Google’s proprietary apps. On the other hand, Android TV provides a user interface to access applications through the Television App Distribution Agreement (TADA) and contains Google’s pre-installed apps. Google claims that through AOSP that is free and open-source, successful Android forks such as FireOS have been developed by Amazon.
The CCI rejected this contention and observed that the AOSP does not permit OEMs to distribute Google’s Apps and use the Android trademark. To obtain these rights, OEMs are compelled to enter into the TADA and Android Compatibility Commitments(ACC). The CCI noted that since Google Play Store is a must-have app, entering into TADA and ACC effectively become de-facto mandatory to compete.
These agreements compel OEMs to pre-install the entire suite of Google Apps on all their devices to access the Google Play Store. This could amount to Google leveraging its dominant position as its applications like YouTube receive unfair advantages, in contravention of Sec 4(2)(e).
Moreover, the CCI observed that compelling OEMs to install the entire suite of apps disincentivizes OEMs to create their own operating systems through Android Forks. This would violate Sec.4(2)(b) of the Act as it limits technological development to the prejudice of consumers. Sec.4(3)(b) is also violated as OEMs cannot utilize an Android fork developed by a third party denying such developers Market access.
Additionally, the CCI noted that the ACC imposes additional obligations which restrict the freedom of hardware manufacturers in violation of Sec.4(2)(d), amounting to tying in.
It is also conceivable that this conduct amounts to a constructive refusal to deal and an exclusive supply agreement in violation of Sec.3(4) as all major OEMs in the relevant market have been precluded from adopting an alternative better-forked Android OS.
For instance, if an OEM like Xiaomi that manufactures Smart Phones and Smart TVs were to utilize Amazon Fire TV OS, it would be precluded from selling its Smartphones with Android OS and offering popular Google applications like the Play Store and Google Maps.
Prima Facie Case Exists And Examining The Path Forward
In conclusion, it is opined that there exists a prima facie violation of the Act and the CCI has rightly called for a detailed investigation into Google’s practices. Nonetheless, it would be challenging to prove the allegations against Google and it can be argued that its current practices provide considerable efficiencies gains. Android TV has greatly aided nascent Smart TV manufacturers like Xiaomi and Vu to take on established OEMs like Samsung, LG and Sony. Google has helped increase competition and make Smart TVs more affordable for consumers.
The final outcome will depend on the identification of the relevant market and establishing dominance which will require evidence through direct indicators such as actual exclusionary behaviour and would also hinge on the verdict in Google-Android.