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Alphabet vs CCI: Inside Google's Challenges in India

Editor, TRANSFIN.
Jan 13, 2022 3:40 AM 6 min read
Editorial

Another day, another investigation into Google.

Last week, the Competition Commission of India (CCI) opened a new front in its scrutiny of Big Tech's business practices in the world’s second-largest digital economy. Acting on complaints received from news publishers, the regulator ordered an inquiry into Google's "abuse of dominance" in the digital news aggregation segment.

Around the same time, the ongoing probe into the company’s Play Store billing practices came up before the Karnataka High Court. This, even as Google Pay, Android OS, and Google Search are also under the antitrust watchdog’s scanner.

Clearly, Alphabet isn’t a model company. Not according to CCI, at least.

Indian regulators’ grievances against Google are similar to their peers’ in the EU and US. They primarily revolve around (1) the company’s Play Store policies, (2) Android OS dominance, and (3) Search dominance.

Let’s explore these accusations one by one…

Breaking the News Industry

How the rise of the internet and social media has contributed to dwindling revenues for newspapers, stolen traffic from news websites, and caused the “downfall of the news publishing industry” is common knowledge now, as a US antitrust committee put it last year.

In 2021, this crisis made the headlines when Australia passed a first-of-its-kind law to compel Facebook and Google to negotiate fair terms with publishers and pay for content. The company was also forced to agree to a $98m deal with French publishers. It also soon launched Google News Showcase in some countries to pay publishers for “the opportunity” to display and distribute their content.

In the world of digital media, Google is the gatekeeper. To quote the CCI, "news publishers are dependent on Google for majority traffic, making it an indispensable trading partner".

What are Indian digital news publishers' grievances, as per the latest investigation?

One: That Google acts as both gatekeeper and competitor. Its news snippets popping in Search and Google News play a significant role in driving traffic towards its website at the cost of the actual news article cited. Even though Google didn't spend any money, energy or resources on reporting the story in question, it gets traction and search volumes at the expense of the actual publisher.

Two: That Google “unilaterally decides the amount to be paid to news publishers” and also the terms of the same.

Three: That Google does not share data on the revenue it earns from advertising on news websites.

Four: That Google only shares a small chunk of its advertising revenue with publishers, and that too in an arbitrary and opaque manner.

And five: That there has been a surge in "zero-click searches" (where user queries are resolved on the results page itself without visiting the target website) from 50% to 65% between 2019 and 2020. And the tech giant’s policy of mandating AMP or Accelerated Mobile Pages for quick mobile searches has led to (1) reduced traffic for the publishers and (2) less footfall for paywall platforms.

 

Pay for Play

Google's Play Store has an in-app purchase system that requires apps to use the same for selling digital content, inclusive of a “hefty” 30% commission fee on subscriptions bought via that system.

Moreover, the company has been accused of “imposing” Google Pay on in-store apps and Original Equipment Manufacturers (OEMs) and manipulating its Search results in favour of its own payments platform. As such, this probe is also an inquiry into Google Pay’s role in the Alphabet ecosystem.

Google’s move to mandate the 30% fee for all apps (as opposed to 2%, as per critics) was consistently delayed due to the CCI investigation and interim complaints. As of today, the move has been postponed again to October 2022.

The Play Store controversy is strikingly similar to the landmark Spotify case between the EU and Apple. Indeed, CCI has affirmed that it will look at App Store next, treating the Google probe as a “precedent” as it feels both companies relate to the “same conduct” with the “same developer community”.

Furthermore, the regulator is likely to get a fillip in its efforts: In August last year, South Korea became the first country to force Play Store to open up to alternative payment systems, as per its not-so-subtly-nicknamed “Anti-Google law”.

 

Allayed by Android

Here, there are two investigations at play. One from April 2019 on Android’s dominance of the smartphone market. And one launched in June 2021 regarding Google’s actions in the smart TV sector.

Three things you need to know. (1) Google has a 65% market share in India’s smart TV segment. (2) Android has a near-98% share of the Indian smartphone market. (3) Google owns Android.

The accusation is similar in both probes: That Google required smartphone (and smart TV) manufacturers "to pre-install Google Play Store" and the "entire suite of Google apps", which violated the fair play clauses stipulated in the Companies Act.

The CCI's findings, which were accessed by Reuters in September, reportedly concluded that the company used its "huge financial muscle" to illegally hurt the competitors, and reduced "the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android". Google has moved the Delhi High Court against the leak.

 

Stifling Search

Alphabet wears many hats. Through its subsidiaries and acquisitions, it has operations in cloud computing, software, hardware, messaging, mapping, video sharing, broadband internet, AI, telecommunications, autonomous driving, biotech etc.

But the vertical for which the company is most well-known for is probably Search - i.e., the ubiquitous Google search engine. It’s what makes Google, well, Google (also why Apple is eager to ramp up its own Search platform and find a way out of its epoch-making deal with Alphabet).

Google’s Search dominance is an easy problem to wrap one’s head around. Google Search is the bread-and-butter for countless businesses. Google also (1) sells its own products, (2) has tie-ups with many companies, and (3) sells prime real estate on its Search homepage for money. By leveraging its dominant position, Google can display Search results favorable to its balance sheet above free ones, even if the latter are more relevant or even more SEO-friendly. (Think of it - how often do you go to the fifth, third, or even second Google Search result page?)

Acting on complaints filed by Matrimony.com and the Consumer Unity and Trust Society (CUTS) in 2012, CCI launched a probe into Google's Search dominance. Six years later, it slapped a ₹136cr ($18.38m) fine on the company for "unduly giving prominent placement...on its search engine result page for directing traffic to its own specialised search service" and stating that Google had a “special responsibility” to ensure that it does not distort competition.

While this fine was a drop in Alphabet’s boundless greenback ocean, the 2012 investigation did help draw Indian regulators’ attention to the burgeoning digital economy and the implications of Big Tech’s rising domination of the space.

 

The Bottom Line

All of Google’s regulatory troubles revolve around the sheer extent of its dominance, which it arguably fosters with its own practices.

Primarily, they concern its chokehold on the Search market, one that isn’t likely going anywhere anytime soon, no matter how many investigations regulators in Delhi, Brussels and Washington launch. Partly because such probes take a long time. Partly because the resulting fines would do little to discipline one of the largest companies on Earth. But mainly because, like it or not, Alphabet is one of the pillars of the internet as we know it. And you can’t bulldoze a pillar without a (costly and as-of-now improbable) contingency plan in place.

Back home, CCI’s zeal in getting Big Tech to toe the line is applaudable. However, regulations are only as good as the laws that back them. And India’s legal environment vis-a-vis tech legislation is still at a relatively nascent stage. Considering how the long-delayed Personal Data Protection Bill continues to be delayed, we may yet be kept waiting.

FIN.
 

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