Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION

UNIVERSITY

Lucknow

Faculty of Law

PROJECT ON

[Study of CCI Order in Google Inc’s Abuse of Dominance]

For

COURSE ON ‘COMPETITON LAW ’

Submitted by

[Vidita Katyayini Pandey ]

Academic Session: 2017-18

Under the Guidance of

Mrs. Shipra Dubey

Ast. Prof. in Law & Faculty for Private International Law
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University
 TABLE OF CONTENT

1. Abuse of Dominant position in India competition Law

 Relevant Market
1) Product Market
2) Geographical Market
 Determination of Dominant Position
 Abuse assessment Of
2. Study of CCI Order in Google Inc’s Abuse of Dominance
 Introduction
 Abuse of Dominance
 Background
 Facts
 Show Cause Notice against Google’s Failure in Compliance
 Arguments in the proceeding under Section 43
 CCI Order in the Case
3. Analysis Report
4. Bibiography
Abuse of Dominant Position in Indian Competition Law:

In a path breaking judgment delivered by the Competition Commission of India (hereinafter

‘CCI’ or ‘the Commission’), fourteen car manufacturers were penalized, the amount adding up to
INR 2544.65 crores, for anti-competitive practices which included grossly marking-up the prices
of original car parts. They (the manufacturers) found to have abused their dominant position in
the market of car parts.
In this post, the issue of ‘abuse of dominant’ position as per S.4 of the Competition Act (‘the
Act’) shall be analysed. The three steps to determine a contravention of S.4 shall be discussed in
terms of factors considered by the Commission to assess each, and lastly, penalising powers of
the Commission will be looked into.

1. Relevant Market
The first thing to be determined in cases of alleged abuse of dominant position is the 'relevant
market' in which the accused party has a dominant position. The purpose served by delineating a
relevant market is to define the scope within which the position of an enterprise is to be tested for
dominance and abuse thereof. The 'relevant market' is defined in terms of 'product' and
'geography', that is to say, the relevant market identifies the particular product/service or class of
products produced or services rendered by an enterprise(s) in a given geographic area.
Identification also includes identification of enterprises that compete to supply those products or
services.

A. Product Market
Both the dimensions of the relevant market are governed by several factors. For example,
product market has been defined to comprise all those products or services that are regarded as
interchangeable or substitutable by the consumer, because of characteristics of the products or
services, their prices and intended use.1The CCI held that relevant product market is to be looked
at form both demand and supply perspectives based on the characteristics of the product, its price
and intended use. So, in the BCCI case, the relevant market was decided on the consideration of
demand substitutability of various forms of entertainment. It was held that a cricket match could
not be held to be substitutable by any other sport based on neither characteristics nor the
intention of the viewer to watch a cricket match. Substitutability of products was in question
again in Schott glass case where transparent and amber tubes made of the same type of glass and
for the same purpose (storing chemicals), were held to be unsubstitutable because light sensitive
chemicals could not be stored in transparent tubes.
The relevance of defining a relevant product market is made clear by this hypothetical used by
the CCI- "Simply because many wholesale traders of grains also do wholesale trading of
vegetables does not imply that grains and vegetables are substitutable or that grains and
vegetable mandis are interchangeable."

1
Atos Worldline v Verifoneindia, Case No. 56 of 2012, ¶6.3
B. Geographical Market
Relevant geographic markets could be local or national depending upon the facts in each case,
but it cannot be global.2These are areas where demand and supply of goods of services can be
said to be homogenous and distinguishable from markets in neighboring areas. Naturally, several
factors then, like regulatory trade barriers, local specification requirements, national procurement
policies, adequate distribution facilities, transport costs come under the purview of consideration.
Therefore, if all such factors were uniform throughout the country vis-à-vis a product, the whole
country would be the relevant geographical area. If not, then areas displaying uniformity would
be. The intention of the consumer may also be used in defining the relevant geographical
boundary. In a case of purchase and allocation of apartments, the Commission upheld
"geographic region of Gurgaon" to be the relevant market because it observed that it was the
intention of the buyer to buy an apartment in Gurgaon because it had developed a unique brand
image over the years, a characteristic which other regions did not share.

2. Determination of dominant position

Having determined the relevant market, the second step lies in determining whether the
enterprise holds a dominant position in that market. Under the provisions of the Act, dominance
refers to the ability of an enterprise to operate independently of market forces, and its position of
strength, which enables it to affect competitors or consumers or the relevant market in its
favour.3
Various factors to be taken into account for determination of dominance are listed under S. 19(4)
of the Act. Consequently, it might be said that market share, though a major factor, is not the sole
yardstick in determination of dominance. This viewwas reaffirmed in Mr.RamakantKini v Dr L
H Hiranandani Hospital, Powai, Mumbai. The Commission was assessing the dominance of the
Hiranandani hospital. The relevant market was for provision of maternity services by super
specialty and high-end hospitals within a distance of 12 kilometers from the Hiranandani
Hospital. The Commission, in the case, clarified that the market shares of an entity is 'only one
of the factors that decides whether an enterprise is dominant or not, but that factor alone cannot
be decisive proof of dominance'.
In other cases, the Commission has adopted the practice of looking at the facts in totality to
determine dominance. The case in point being In Re M/s ESYS Information Technologies Pvt
LtdvIntel Corporation (Intel Inc) &Ors. Along with the market share commanded by Intel, the
Commission recognized various other factors- like consumer preference owing to the brand
name, the existence of strong entry barriers in the relevant market, the significant intellectual
property rights of Intel and the scale and scope enjoyed by Intel.
In Pankaj Kumar, the Commission opined that dominant position would be one in which the
enterprise would have the ability to operate independently of competitive forces in the relevant
market. In Sheil, the OEMs were held to be dominant in light of the fact that they had entered
agreements with overseas equipment suppliers (OES) which effectively made the OEMs the sole
proprietors of equipment of their companies, thereby, shielding themselves from competition.

2
BijayPoddar v Coal India Ltd., Case 59 of 2013.
3
In Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd. &Ors, Case No. 03 of 2011¶¶8.1.7, 8.1.8
3. Abuse, assessment of
The mere fact of dominance is inconsequential in so far as attracting the Act is concerned. What
has to be shown is the abuse of the said dominance. An enterprise or a group is said to be
abusing its dominant position if its activities, on perusal, are found to be fit any of the activities
listed under S. 4(2).
Such activities may be divided into two categories- Exclusionary activities and exploitative
activities.
Exclusionary activities are those in which the dominant entity uses its dominance to restrict entry
of competition into the relevant market. For example, in Re Shri ShamsherKataria v Seil Honda,
where there existed agreements between the dominant entities and the Overseas Suppliers of
original car parts which prevented the Overseas Suppliers from supplying parts to independent
repairers, such agreements were held to be anti-competitive as they restricted entry of new firms.
Exploitative activities, meanwhile, are those where the dominant entity exploits its dominance by
imposing discriminatory and/or unjust conditions on other firms or consumers. A case in point
would be Pankaj Agarwal, where, in a case pertaining to allotment of apartments, the contracts
drafted unilaterally by DLF enabled them to be arbitrary about allotment of super-area,
secretative about information relevant to the purchaser, like, the number of apartments on a floor,
and to cancel allotments and forfeit booking amounts. The Commission held the contracts to be
exploitative against buyers, and thus, abusive.

A. The issue of per se violations

An issue at hand while discussing what amounts to abuse is whether commission of any act
falling within S. 4(2) is per se violative of competition law. To elaborate, if an act by a dominant
power, say, unjustly exploits the consumer, but is in pursuance of some policy or rule, would the
dominant entity be held to be abusing its position? No such distinction or characterisation
appears in the Act, but was introduced by the Commission in its decision in Dhanraj Pillay v
Hockey India. In that case, Hockey India, a dominant entity in the market for organisation of
private professional hockey activities in India and for services of hockey players, decided against
adding World Hockey Series in the list of sanctioned events, thus, disincentivising players from
participating in the same. The Commission noted that sanctioning of events was a regulatory
function of Hockey India, and could not be found, per se, of violation of competition laws.
Creating a further distinction between means and ends, the Commission noted that it had to
proven that the clause in contention was applied by Hockey India in a discriminatory/unjust
manner. So, what is left somewhat in the grey is whether the activity is in contravention of the
Act if it results in abuse, or if it is done in a discriminatory manner.
4. Penalties and Sanctions
To an enterprise held to be abusing its dominant position, the Commission can do several things-
 Direct the enterprise to discontinue such acts that amounted to abuse. (S.27(a)). Examples
of use of this power by the Commission can be found in cases likeIn Re Shamsher
Kataria4 and Atos5, where the dominant parties were ordered to cease and desist from
indulging in activities that had been found to be in contravention of S.4.
 Impose penalties of up to ten percent of the average of the turnover for the last three
preceding financial years. (S.27(b)).

4
Supra note 9 at ¶11.
5
Supra note 1 at ¶6.32.
There has been some concern about this provision for though it provides the upper limit, it gives
no guidelines for the calculation of penalties. The Commission, too, is yet to come up with
guidelines of its own. So, as of now, the Commission has complete discretion in calculation of
penalties to be imposed upon each of such person or enterprises which are parties to such abuse.
However, the COMPAT has put some conditions on the Commission so far as awarding
penalties is concerned. In a case, COMPAT admonished CCI for CCI's practice of awarding
large penalties without providing any reasoning for the same. Furthermore, in the same
judgment, COMPAT held that penalties are to be calculated on the basis of the 'relevant
turnover'.6So, in a case of abuse against a multi-product company, the turnover used to calculate
the penalty would be the turnover from the particular product(s) in contention, and not the
overall turnover.
However, irregularity is rampant in this sphere of the functioning of the Commission and the
Appellate Authority, for the COMPAT itself failed to follow its precedent of 'relevant turnover'
in M/s DLF Limited v Competition Commission of India &Ors7. COMPAT did not restrict the
calculation of the penalty on the basis of DLF Limited's turnover arising only from the
residential segment, despite the relevant market in that case being the market for 'high-end
residential accommodation'. COMPAT upheld the penalty levied by the CCI, which was
calculated on the basis of DLF's turnover pertaining to its entire business (i.e., the development
of residential, office and commercial properties).8
 Lastly, the Commission can pass an order to cause the division of the dominant enterprise
such that does not abuse its dominant position. (S.28)
Conclusion
The Competition Act, 2003 is the successor of the Monopolistic and Restrictive Trade Practices
Act, 1969. It underwent great changes in 2007. Thus, the prevalent competition law
jurisprudence in India has ages barely seven years, and may not be as thorough as the US
jurisprudence, which has been evolving since 1901. In spite of that, it is a progressive bit of
legislation which, unlike the MRTP Act which had little tolerance for any dominance, recognizes
the changing market conditions and does not have problems with dominance per se, but it does
not veer away from its objective of keeping the market competitive.

6
M/s Excel Crop Care Limited v Competition Commission of India, Appeal 79 of 2012, ¶62
7
M/s DLF Limited v Competition Commission of India &Ors, Appeal No. 20 of 2011, Appeal No. 22 of 2011, Appeal
No. 19 of 2012, Appeal No. 23 of 2011, Appeal No. 12 of 2012, Appeal No. 20 of 2012, Appeal No. 29 of 2013,
Appeal No. 8 of 2013, Appeal No. 9 of 2013, Appeal No. 11 of 2013
8
Cyril Shroff & Nisha Oberoi, India: Abuse of Dominance, Global Competition Review. Available at
http://globalcompetitionreview.com/reviews/69/sections/235/chapters/2749/india-abuse-dominance/ (last
visited on 05/03/2018).
 Study of CCI Order in Google Inc’s Abuse of Dominance

Introduction

The Competition Commission had ordered probe against Google in four different cases for
alleged abuse of dominant position.9CCI had directed its Director General (DG) to investigate
these cases under the provisions of the Competition Act in two cases filed by Consim Info Pvt
Ltd and Consumer Unity & Trust Society, both against Google Inc and Google India PvtLtd10;
a combined investigation report has been submitted by DG, CCI. DG is the investigation arm of
the regulator and cases are referred to it by the Commission when there is prima-facie evidence
of violations.

The CCI has the power to impose the highest economic penalties in India. In case of
contravention of section 4 of the Act, the CCI is empowered to levy a penalty of up to 10 per
cent of the average turnover of the enterprise for the preceding three financial years or direct the
division of a dominant enterprise. Last year, CCI imposed a fine of Rs 1 crore on Google for
non-cooperation in the investigation. However, as there are no guidelines issued by the CCI in
relation to the determination of penalties, the CCI currently has absolute discretion in relation to
the imposition of a penalty. The CCI further clarified that in case of any non-compliance with the
directions of the director general in future; each instance of non-compliance would be taken
separately as an aggravating factor for the imposition of a fine.11

ABUSE OF DOMINANCE -

Dominance is not considered bad per se but its abuse is. Abuse is stated to occur when an
enterprise or a group of enterprises uses its dominant position in the relevant market in an
exclusionary or/ and an exploitative manner.

The Act gives an exhaustive list of practices that shall constitute abuse of dominant position and,
therefore, are prohibited. Such practices shall constitute abuse only when adopted by an
enterprise enjoying dominant position in the relevant market in India.

Abuse of dominance is judged in terms of the specified types of acts committed by a dominant
enterprise. Such acts are prohibited under the law. Any abuse of the type specified in the Act by
a dominant firm shall stand prohibited.

9
Available At: http://www.cci.gov.in/sites/default/files/Newsletter_document/nl17.pdf(Last visited on 18th
February 2017)
10
Case Nos. 7 and 30 of 2012.
11
Available at: http://indianexpress.com/article/technology/tech-news-technology/google-misusing-search-
dominance-in-india-says-dg-report-to-cci/ (Last visited on 18th February 2017)
Section 4 (2) of the Act specifies the following practices by a dominant enterprises or group of
enterprises as abuses:

(i) Directly or indirectly imposing unfair or discriminatory condition in purchase or sale of goods
or service;

(ii) Directly or indirectly imposing unfair or discriminatory price in purchase or sale (including
predatory price) of goods or service;

(iii) Limiting or restricting production of goods or provision of services or market;

(iv) Limiting or restricting technical or scientific development relating to goods or services to the
prejudice of consumers;

(v) Denying market access in any manner;

(vi) Making conclusion of contracts subject to acceptance by other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection with
the subject of such contracts;

(vii) Using its dominant position in one relevant market to enter into, or protect, other relevant
market.

Background (case study)

The Competition Commission of India (“CCI/Commission”) passed an order on March 26, 2014
imposing a fine of Rs. 10 Million on Google USA and Google India (“Google”) as they had
failed to cooperate with the Director General (“DG”) in relation to an investigation (“CCI
Order”).12 The DG was acting pursuant to information filed by Consim Info Private Limited and
Consumer Unity & Trust Society (“Informants”).

The imposition of penalty arose in the context of collateral proceedings initiated by the DG since
Google, allegedly, was not cooperating with the DG. On an examination of the various notices
sent by the DG, the replies sent by Google, the information supplied and the conduct of Google,
CCI held that Google failed to show cause as to why penalty ought not to be imposed on them.

The present ruling is only confined to imposition of penalty due to a party’s failure to comply
with directions of the DG under Section 43 of the Competition Act, 2002 (“Competition Act”).
Google will have to comply with the directions of the DG and submit the relevant information.

12
Case No. 7 of 2012, In Re: Consim Info Private Limited v. Google Inc., USA and Google India Private Limited and
Case No. 30 of 2012, Consumer Unity & Trust Society (CUTS) v. Google Inc., USA and Google India Private Limited.
After completion of investigation, CCI will examine whether there is a violation of Section 3 and
Section 4 of the Competition Act.

Facts

Cases filed by the informant alleging that Google enjoyed a dominant position and was
conducting its business in a manner that was discriminatory, by manipulating algorithms and was
causing harm to advertisers and indirectly consumers. It was further alleged that by using a
number of vertical services such as Youtube, Google News, Google Maps etc., it mixed many
vertical results into generic search results. Informants contended manipulation in search results
and that there was also denial of access and creation of entry barriers for competing search
engines etc. CCI concluded that prima facie Google’s had abused its dominant position and that a
case had been made within the meaning of Section 26 (1) of the Competition Act. Consequently,
DG was directed to carry out investigation in respect of Case No. 7 of 2012 and Case No. 30 of
2012.13

Show Cause Notice against Google’s Failure in Compliance

During investigations DG sought information through several notices in respect of which DG

contended that Google did not comply.14 Due to Google’s failure to comply with the notices, DG
reported the matter to CCI. It is important to note that CCI has taken a serious note of the
conduct of Google and observed that Google showed an attitude of ‘either withholding the
information’ or ‘furnishing only a part of the information sought’. On account of this, CCI
inferred that there was a ‘willful disregard’ on the part of Google to comply with the information
requests of DG. CCI issued a show cause notice to Google as to why measures under Section 43
of the Competition Act should not be taken against Google (“Show Cause Notice”). Section 43
of the Competition Act provides that if a person to whom directions have been issued, either by
CCI or the DG, fails to comply with such directions, CCI may impose a fine of up to Rs. 1 Lakh
per day of continuing non-compliance subject to a maximum of Rs. 10 Million.15

Arguments in the Proceeding under Section 43

The issue before CCI was confined solely to Google’s compliance with the Show Cause Notice
and not the substantive issues in the cases filed. In its defence, Google contended that Google
there wasn’t unreasonable delay on its part. Google sought to substantiate its bona fides by
demonstrating that it had in fact cooperated with the DG. On the substantial queries raised by the

13
CCI Order dated June 20, 2012.
14
Show Cause Notice references letters dated 12.02.2013, 26.09.2013, 11.10.2013, 13.11.2013, 27.11.2013,
03.12.2013 and 21.12.2013.
15
Available at: http://www.bgr.in/news/cci-probe-against-google-in-four-cases-for-alleged-abuse-of-dominant-
position-arun-jaitley/ (Last visited on 19th February 2017)
DG, Google contended that the queries raised by DG were quite complex, broadly-worded,
reaching into several commercial aspects/transactions and hence these required time to obtain
information. Google contended that in neither case, a timeline of alleged violations was indicated
and consequently, Google was required to obtain information for an undefined period. Google
further contended that the investigation was open-ended and that the investigation expanded over
time and covered everyfacet of Google’s business. With passage of time, information requests
became more frequent and with shorter response times and all of this made the process of
collecting information and presenting the same before the DG in a user-friendly manner
challenging.

Google provided a timeline setting out the sequence of events to demonstrate that it had been
cooperating with DG. While some delay was acknowledged, it was contended that this was
unintentional and onlyfor the purpose of ensuring that complete information was submitted.
Google also sought to allay CCI’s apprehensions that it was withholding anyinformation at all
and in fact was taking all measures possible to furnish information and cooperate with DG.

Google also addressed CCI on issues of law and submitted that for the purpose of exercising
jurisdiction under Section 43 of the Competition Act, there should have been non-compliance
and not belated disclosure, relying on Kingfisher Airlines Limited v. Competition Commission
of India &Ors.16 Google also contended that the Supreme Court had recognized the principle that
penalty was to be imposed only in cases of deliberate non-compliance. Factually, Google sought
to corroborate its contentions with the various submissions and information provided by Google.
Google also placed reliance on Section 43 of the Competition Act and contended that the
provision itself contemplated ‘reasonable cause’ and hence CCI ought to determine with the
delaying submission by Google was with cause or without cause.

CCI Order in the Case

CCI identified following broad topics on which DG had requested information:

 Information related to algorithmic changes – CCI concluded that as on 15.01.2014,

Google had not yet supplied information relating to algorithmic changes;

 Non-submission of agreements – CCI concluded that in spite of extensions, Google did

not supply the requisite information;

 Non-submission of documents relating to Octathorpe and Adsense Account – CCI

concluded that Google had not submitted complete documents relating to the query raised
by DG;

16
Order of COMPAT in Appeal NO. 15 of 2012, dated 29.08.2012.
  Non-submission of documents relating to termination/suspension of tech-support
Adword accounts – CCI concluded that Google did not submit complete documents,
although some documents were indeed filed;

 Non-furnishing of information pursuant to depositions – CCI concluded that Google

failed to produce documents after making oral depositions. CCI noted that Google neither
sought additional time nor made any communication.

In view of the above, CCI concluded that Google failed to comply with directions of DG and that
Google had in fact engaged in dilatory tactics to procrastinate the investigation. CCI rejected
Google’s contentions that the queries were too broad, covered wide-range of subjects and drew
an adverse inference against Google merely because Google conceded that there was delay.
Ironically, even though Google in a show of bona fides acknowledged delay, albeit with cause,
Google’s acknowledgement of delay has been held against it. CCI concluded that Google had
given ‘frivolous’ and ‘vexatious’ pleas in an attempt to stall investigation and Google sought to
avoid compliance. CCI concluded that Google had failed to demonstrate ‘reasonable cause’ as
per Section 43 of the Competition Act. However, in view of the submissions already made by
Google, CCI imposed a fine of Rs. 10 Million, to be deposited within 60 days from receipt of the
CCI Order. CCI further notes that in the event that Google failed to comply with future
directions from either the DG or CCI, additional fine would be imposed – CCI held that each and
every act of non-compliance of Google would give the DG fresh cause of action against Google.
Analysis Report

Response to show cause notices requires extreme care. It is imperative for companies to ensure
satisfactory compliance while responding to show cause notices (See Nishith Desai Associate’s
article on responding to show cause notices)17 in form and substance. Although from Google’s
contentions it would seem that Google did all that it could reasonably be expected to, it would
seem that CCI has unfairly drawn an adverse inference against the belated submission / non-
submission. The rejection of Google’s argument that a distinction should be made between wilful
default and belated submissions would seem harsh. CCI has also not provided any rationale on
the basis of which the maximum amount of Rs. 10 Million has been imposed, particularly, when
CCI notes that Google’s submission of some information was in fact a mitigating circumstance.

CCI has shown willingness to exercise all powers that it may have to ensure objectives of CCI
are fulfilled. Consequently, companies should take notices from CCI (and for that matter, any
sectoral regulator) extremely seriously as the consequences of non-compliance can be quite
drastic. Google has the right to appeal under Section 53B of the Competition Act. Given the
adverse inferences drawn, Google may be tempted to challenge the CCI Order. For its part, we
can expect CCI to get stricter with other companies and not hesitate to impose fine under the
Competition Act. Imposition of fines and drawing adverse inferences are harsh measures and it
would be reasonable to expect that CCI comes out with guidelines on imposing fines.

17
Show Cause for Litigation, VivekKathpalia and M.S. Ananth, Nishith Desai Associates, Hindu Business Line,
availableat: http://www.thehindubusinessline.com/opinion/show-cause-for-litigation/article4891879.ece.(Last
visited on 5th February 2018)
 BIBIOGRAPHY

1. Atos Worldline v Verifoneindia, Case No. 56 of 2012, ¶6.3

2. BijayPoddar v Coal India Ltd., Case 59 of 2013.
3. In Re Shri Shamsher Kataria v. Honda Siel Cars India Ltd. &Ors, Case No. 03 of
2011¶¶8.1.7, 8.1.8
4. M/s Excel Crop Care Limited v Competition Commission of India, Appeal 79 of 2012, ¶62
5. M/s DLF Limited v Competition Commission of India &Ors, Appeal No. 20 of 2011, Appeal
No. 22 of 2011, Appeal No. 19 of 2012, Appeal No. 23 of 2011, Appeal No. 12 of 2012,
Appeal No. 20 of 2012, Appeal No. 29 of 2013, Appeal No. 8 of 2013, Appeal No. 9 of
2013, Appeal No. 11 of 2013
6. Cyril Shroff & Nisha Oberoi, India: Abuse of Dominance, Global Competition Review.
Available at
http://globalcompetitionreview.com/reviews/69/sections/235/chapters/2749/india-
abuse-dominance/ (last visited on 05/03/2018).
7. Available At:
http://www.cci.gov.in/sites/default/files/Newsletter_document/nl17.pdf(Last visited on
18th February 2017)
8. Order of COMPAT in Appeal NO. 15 of 2012, dated 29.08.2012.
9. Show Cause for Litigation, VivekKathpalia and M.S. Ananth, Nishith Desai Associates,
Hindu Business Line, availableat: http://www.thehindubusinessline.com/opinion/show-
cause-for-litigation/article4891879.ece