Google: NCLAT upholds Rs 1,338-cr fine; grants partial relief on four grounds

New Delhi: An appellate tribunal on Wednesday handed out a mixed verdict on Google's alleged anti-competitive practices in the android mobile devise case - upholding a fine of Rs 1,338 crore but scrapping conditions like allowing hosting of third-party app stores on its Play Store.

While upholding the fine imposed by the CCI for exploiting its dominant position in Android, the NCLAT struck down anti-trust regulator order that had said Google will not restrict the removal of its pre-installed apps by the users.

Notably, the NCLAT in its 189-page order, upheld CCI's six directions, including one in which Google was asked to allow the users during the initial device setup to choose their default search engine, and another that made it clear that OEMs cannot be forced to pre-install a bouquet of apps.

Google said it is reviewing the NCLAT order and is in the process of evaluating legal options.

A two-member bench of the National Company Law Appellate Tribunal (NCLAT) has asked Google to implement the direction and deposit the amount in 30 days.

The appellate tribunal said "the impugned order of the Commission is upheld except the four directions" issued and added that Google is "thus not entitled for any other relief except for setting aside the above four directions".

"The Appellant (Google) is allowed to deposit the amount of penalty (after adjusting the 10 per cent amount of penalty as deposited under order dated January 4, 2023) within a period of 30 days from today," it said.

On October 20 last year, the Competition Commission of India (CCI) slapped a penalty of Rs 1,337.76 crore on Google for anti-competitive practices in relation to Android mobile devices. The regulator also ordered the internet major to cease and desist from various unfair business practices.

This ruling was challenged before the NCLAT, which is an appellate authority over the orders passed by the CCI.

A Google spokesperson said: "We are grateful for the opportunity given by the NCLAT to make our case. We are reviewing the order and evaluating our legal options".

The NCLAT order passed on Wednesday marks one of the most high-profile anti-trust battles in the Indian market, involving the tech giant and CCI, and concludes over a month-long day-to-day hearing by the appellate tribunal on the directions of the Supreme Court.

Out of the 10 directions issued by the CCI on October 20, 2022, to Google, the NCLAT upheld the six directions and said it "is allowed 30 days time to implement the measures".

One of the important directions by CCI upheld by the NCLAT said Google will allow the users, during the initial device setup, to choose their default search engine for all search entry points.

The tribunal also upheld five other directions of CCI - that OEMs shall not be forced to pre-install the bouquet app; licensing of Play Store to OEMs shall not be linked with the requirement of pre-installing Google apps.

It also upheld CCI directions that Google will not offer incentives to OEMs for ensuring exclusivity for its search services; not impose anti-fragmentation obligations on OEMs; and the tech giant will not incentivise OEMs for not selling smart devices based on Android forks.

The four directions set aside by the NCLAT include the one which said app developers would be able to port their apps easily onto Android forks. CCI had said Google will not deny access to its Play Services APIs to disadvantage OEMs, app developers and its existing or potential competitors.

The NCLAT said it is clear that the APIs and Google Play Services, which are proprietary items of Google cannot be given in through unhindered access to App developers, OEMs and Google's existing and potential competitors.

"We do not find any material in the impugned order as to why access to such APIs be provided to Google's competitors, App developers and OEMs without going through necessary technical and commercial engagement with Google. Further, APIs have not been found as part of any abusive conduct by the Appellant," it said.

The appellate tribunal also set aside CCI's direction that said Google shall not restrict the uninstalling of its pre-installed apps by the users.

The NCLAT noted that OEMs are also not obliged to install all 11 suites of Apps of Google, thus they are free to not preinstall any of the Apps.

The tribunal reasoned that when the preinstalled Apps are at the choice of the OEMs and they are not obliged to preinstall the entire bouquet of Apps, the directions issued by CCI in this regard appear to be "unnecessary". OEMs are required to pre-installing 11 apps, including Google search services, Chrome browser, YouTube, Google Maps, Gmail or any other application of Google.

In this regard, the NCLAT observed that it neither argued during the proceeding nor found by the CCI that there is any abuse of dominance by Google in the distribution of Apps by developers through its Play Store.

It also struck down two more directions, one of which says Google will allow the developers of app stores to distribute their app stores through Play Store.

It also set aside CCI's direction that Google shall not restrict the ability of app developers, in any manner, to distribute their apps through sideloading.

The appellate tribunal also rejected Google's plea over the computation of penalty, in which tech major contended that revenue from non-MADA (Mobile Application Distribution Agreement) devices should not be considered.

However, the NCLAT said: "It is quite clear from this business model is that there is no single app or service that can be singled out to say that the revenue of Google is derived only out of its user functionality because the user traffic and data comes from not only Google Search and YouTube but also other apps like Google Maps, Google Cloud, Play Store and Gmail etc".

It said, "while calculating the 'relevant turnover', the CCI has correctly considered the sum total of revenue of various segments/heads in India arising out of the entire business of Google India's operations of Android OS-based mobiles".

The tribunal also rejected Google's plea that the principle of natural justice was violated by CCI's probe arm DG. Google in its petition had contended the investigation carried against it by the CCI was "tainted", contending that the two informants on whose complaint the fair trade regulator initiated the enquiry were working at the same office that was investigating the tech major.

Rejecting it, the NCLAT said: "Investigation conducted by the Director General did not violate the principle of natural justice".

(With inputs from PTI)