How Is Google Abusing Its Dominant Position?: A Behavioural Economics Perspective

– Danie Joseph

Introduction

The investigation report of the Competition Commission of India (“CCI”) in June 2021 highlighted an anti-trust concern arising out of the forceful pre-installation of Google’s proprietary apps and inclusion of anti-competitive clauses within agreements with device manufacturers (“OEM’s”) which absolves their ability and the incentive to sell and develop devices operating on modified versions of Android. The report concluded that the mandatory pre-installed apps result in practices that are construed to be monopolistic in nature as it leads to the imposition of unfair conditions on other market peers. The article aims to inspect why Google’s predatory practices are to be considered predatory and result in a monopolistic scenario, and are contrary to the competitive spirit that is encouraged in the market. 

Establishment of Default Consumer Bias

Consumers are resistant to change and inclined to convenience which causes them to avail the option laid out before them rather than examining alternatives. When an option is provided directly and is conveniently accessible, it is the human tendency to prefer this over another alternative option regardless of whether the latter provides a comparative benefit. This is a condition in behavioural economics regarded as “default bias”. In any relevant market, the ability of the dominant player to hold all cards controlling the choice of the consumer may cause repercussions on the development of competition for other players within the same medium. The operating system Android, is owned by Google and its proprietary applications (“apps”) are installed by default on every Android-powered device (for instance, Samsung, OnePlus). In India, Android powers the majority of mobile devices owned by consumers which in turn provides exposure of its apps to a large audience nullifying the ability of other apps to entice the consumer as they opt for the default app provided on their device. Furthermore, Google’s proprietary apps are designed in such a manner that the cross integration of a single user’s information stored over each Google’s applications such as Gmail, YouTube, and Play Store provides Google with the ability to provide personalized services by studying the preferences and henceforth obtaining greater control over the end-user. All of this entitles Google with a large extent of leverage and negates any market share trickling over to the competitors. This serves as the sole reason why large tech companies construe methods to impose default services onto their consumer which indirectly prevents other market players from taking away the attention of the consumer i.e. market share. The major point of rebuttal to such practices is that it serves to the detriment of both consumers and the competitive forces within the relevant market. Consumers are wired into adopting the default options rather than being presented with an alternative which may serve beneficial to them, thus creating roadblocks for other market players from having an equivalent fighting chance to being relevant in the market share and gaining users.

Abuse of Dominant Position

From a closer look towards the submissions made by Google, Android is an open-source platform that provides OEMs who wish to build their device on the Android framework with the choice to opt for “preinstalled Google mobile apps” which can be observed as the false veil of instilling freedom of choice in the market. Google offers its Google Mobile Services (“GMS”) which includes the Google Play Store, Google search widget and various other Google proprietary applications only as a package. As per the observations of the Court, Google Play Store is an essential application that all users expect to be pre-installed on any Android device. Due to all OEMs being forced to ensure the Google Play Store is present on their device they are thereby deprived of their ability to opt out of the GMS and therefore conditional to signing a Mobile Application Distribution Agreement (“MADA”) and Android Compatibility Commitments (“ACC”). Furthermore, the OEMs who sign the MADA/ACC agreements are deprived of the freedom to choose the apps of their choice but constrained to opt for all as a package. As per the submissions of an informant, Google utilizing its prominent position in the market pushed toward installing Google Pay as the default payment option on all Android mobile devices. This preferential placement could lead to users opting for Google Pay over other available UPI-based digital payment apps.

Connecting the dots indicates the execution of MADA/ACC agreements as de facto compulsory and results in all OEMs being subject to the terms and conditions laid down under these agreements by Google, thereby establishing the dominant position of Google in this market. Due to the dominance of the Play Store and Android; the OEMs have to conform to the stipulated terms and conditions imposed by Google which disallows a level playing field for other competitors. The overarching result of the aforementioned rationale leads Google to be in a dominant position that is susceptible to abuse. This consequently results in constraining the ability of OEMs to innovate and develop on a software considered to be open-source and due to the prevalence of GMS apps on every device resulting in the case of “default bias” thereby ensuring the end-user is within its control. Another implication which arises presumably is the OEMs freely endorse Google’s proprietary applications within its devices which further limits the ability to compete effectively.

Google’s practices vis-à-vis the Competition Law

The forceful preinstallation of the entire bundle of Google’s GMS which is conditional to entering into the MADA and ACC agreement, in pursuance of having the Android OS and Play Store App which is seen as a necessity in all devices, results in the contravention of Section 4(2)(a)(i) of the Competition Act which relates to imposition of unfair and discriminatory conditions on the OEM in the purchase of goods and services. The pre-installation of Google’s apps in all devices running on Android has resulted in the inability of device manufacturers to use any alternative versions of Android and reduced the incentive to sell their devices stifling innovation in the market. This limits the scientific and technical development to the prejudice of consumers which is contained within Section 4(2)(b) of the Competition Act. Continual conduct of Google preventing OEMs from dealing in goods on a forked/modified versions of Android through ACC agreement will result in the contravention of Section 4(2)(c) by denying market access to the competitors. Finally, taking advantage of its dominant position in a particular market and leveraging it to gain a dominant position in other relevant markets such as the UPI payment apps market causes a breach of Section 4(2)(e) of the Competition Act.  Therefore, from the violation of multiple provisions of Section 4, it is evident that there is an abuse of the dominant position by Google which is contrary to the objective of the Competition Act and is to be considered anti-competitive.

An established foreign precedent of similar wavelength would be United States v. Microsoft Corp, where Microsoft was accused of forcing the default installation of the Internet Explorer bundled along with the Windows operating system and also imposing technical hurdles in installing any other competitor software, thus creating a monopoly around the computer and internet browser market under the veil of innovation. While the court, in its judgement, propounded that Microsoft was creating a monopoly and had taken steps to eradicate any form of competition within its market, the judgment was later repealed on the grounds of remedy being unreasonable, provoking a settlement between Microsoft and the U.S Government in favor of the former. Nevertheless, it did cause the tech giant to act with caution and impose reasonable terms and conditions with other OEMs. Similar nature of predatory app bundling is observed in the Google’s situation where open-source software is granted to OEMs with the right to modify, copy and redistribute the framework. However, they are succumbed to all of Google’s proprietary apps and further subjected to various agreements which impose certain restriction on the use of the Android software opposed to the free control and usage that is granted under the title of Open-source software.

Conclusion

Google clearly holds the position of dominion over the market players Despite touting the open-source nature of the software, it scrutinizes control via the inescapable agreements entered into by other OEMs and also incidentally benefits from the complimentary endorsement of its apps through its forceful inclusion on every Android licensed device. The matter has been considered by the developed nations as well with the South Korean Regulator fining Google 177 million USD on similar grounds, the European Union imposing a fine on the grounds of anti-competitive behaviour and suppressing competition and the U.S. Department of Justice filing a case against Google’s practices by entering into agreements with other companies such as Apple to ensure its dominance in the search engine market. With such global cues, the report of CCI is an opportunity to encourage the competitive spirit in the Indian network market, thus contributing to the existing international jurisprudence and correcting the market’s monopolistic nature.

Danie Joseph is a penultimate year student of law at St. Joseph’s College of Law, Bengaluru.