‘In rush to address grievances of few large competing developers, Android users may end up with sub-optimal user experience’ – Times of India
The past month has been tough for Google in India. The search giant has been fined twice by the country’s competition regulatory body, Competition Commission of India. In the latest ruling, CCI slapped a fresh Rs 936 crore penalty on the US tech giant for abusing monopoly through its app aggregator Play Store. The fine comes within days of the company being ordered to pay Rs 1,338 crore for following anti-competitive practices in relation to Android mobile devices. What are these rules about and how they affect the user? Times of India Tech spoke about this and related issues with Gowree Gokhale who is the head of technology, media, telecom, and IP practice at Nishith Desai Associates. She has been practicing for the last 26 years on various complex techno-legal issues arising in various industries.
What does the CCI order exactly imply for Google and Android
Under both orders multiple directions have been issued to Google with respect to its licensing practices. Some of the directions are vague and will have to be evaluated in the context of the findings and observations in the orders.
The first order directs Google to de-link the licensing of Google’s Play Store from any requirement to pre-install other Google applications, and provide open and non-discriminatory access to PlayStore APIs in order to enable developers to post applications into ‘Android Forks’ (i.e., versions of the Android OS that are developed basis the open source code made available by Google), enable other application stores to be listed on PlayStore, and discontinue ‘anti-fragmentation’ obligations which require modified versions of the Android OS to confirm to certain baseline requirements for ensuring compatibility with third-party applications and remove conditions to prevent the Android ecosystem from being fragmented into non-compatible ‘forks’.
Similarly, the second order requires Google to discontinue any stipulation to mandatorily use its own Billing Systems for the purchase of applications and in-app purchases, and discontinue its current terms and conditions for the provision of App Store-related payment and billing services.
Will developers be happy with the CCI ruling
With the discontinuation of anti-fragmentation obligations, every OEM will be free to launch mobile phones with their own versions of Android OS, which may not be compatible with each other in the absence of any recommended baseline Android implementation standards. In practice when multiple incompatible versions of OS get developed, the developers may have to customise their apps for each version leading to increase in development cost. This may deprive small developers from competing on an equal footing with larger developers and end up tilting the playing field between small and large developers. Overall, the value of the Android ecosystem as a whole may get eroded.
It seems highly improbable that baseline compatibility standards across such fragmented ecosystems would emerge, based solely on market forces. Even if developer consortiums were to establish baseline requirements in the future, the logic of the CCI’s present order on anti-competitive impact could then be extended to such requirements as well – potentially classifying any enforceable requirements as anti-competitive agreements. The question that the CCI should have therefore asked was whether the anti-fragmentation obligations were being imposed uniformly, and whether the gains to user benefit and the application ecosystem outweighed the costs of having fewer Android forks.
What about users? What kind of impact will it have on users
In all the rush to address grievances raised by a few large competing developers, users may end up having to settle with a sub-optimal user experience. One of the most important gains from Google’s anti-fragmentation approach is standardizing security implementation within Android OS and compatible applications.
Given that many applications process users’ personal data, it is imperative that apps should operate only on such versions of the OS which meet the recommended standards of security. In the absence of these obligations, there is a possibility of certain versions of OS coming up that do not have the required compatibility standards to maintain the security of devices. CCI does not seem to have considered this aspect in detail at all. Even otherwise, users may now need to pick and choose between OEMs with multiple Android versions each with its own set of applications – as opposed to one common set of compatible applications across the ecosystem.
Tell us about the implications of CCI’s order on technology innovation efforts in India.
De-linking a platform (open or otherwise) from its desired business models for spending on innovation, security and technical policies, could lead to an altogether inferior product. We have seen this in the case of early platforms of the Web 2.0 era, where platforms without adequate governance and standardization, delivered an inferior user experience, and faded from prominence.
Any supposed gains, such as gains to end users by enabling them to uninstall pre-installed applications, or perceived gains to innovation by enabling developers to create smaller fragmented ecosystems – are minimal, compared to the loss of efficiencies brought about by Android’s policies.
Therefore, only time can tell whether this order is good or not for the app developer community and users. Prima facie at least for platform companies – while evolving new business models, companies may think twice. The platform economy has the potential to develop a unique business model that overall works for the benefit of the ecosystem. If the regulators start picking and choosing one element of that being unacceptable, then the entire model is likely to fail. This may curb innovation in business models in platform companies.
What are the key loopholes in CCI’s order especially for the Android Operating system
While CCI’s finding that Google is dominant in a relevant market as defined by it, may be defendable, the CCI order fails in establishing abuse and its effects on the relevant market through a thorough evaluation of the criteria listed out in Section 19(3). There is either lack of evidence or an appreciation of evidence on record. E.g., there is no end-user or start-up survey.
For instance, local app developers in India have always had the freedom to push their own applications and were not barred from entering into arrangements for pre-installing such applications on phones outside the ambit of Google’s MADA Agreement. However, the CCI’s direction overlooks this and targets a supposed “status quo bias”, i.e., a theory that users will choose to proceed with default and pre-installed applications rather than proactively choose applications which may serve their needs better.
While the European Union concluded on the existence of such a “status quo bias” based on some amount of economic survey evidence, the CCI has not taken any efforts to validate the existence of any “status quo bias”. Instead, it treats the assumption as a matter of fact despite evidence that shows that Indian users are the world’s most prolific app downloaders and side loaders.
Interestingly, public feedback before the Competition Law Review Committee (CLRC) had called for amendments to the Competition Act, 2002 to explicitly link a finding of abuse of dominance to the existence of appreciable adverse effects on competition. The CLRC declined from making such a recommendation, solely because the CCI’s own jurisprudence routinely evaluated effects prior to a finding of abuse, thereby leading to the conclusion that an effects analysis was implicit in the scheme of Section 4 of the Competition Act. Unfortunately, however, in the absence of detailed evidence and analysis on the effects on end consumers and the Android ecosystem, the effects analysis in the CCI’s order appears rushed and emulative of other jurisdictions at best, and superficial at worst.
What does the CCI order exactly imply for Google and Android
Under both orders multiple directions have been issued to Google with respect to its licensing practices. Some of the directions are vague and will have to be evaluated in the context of the findings and observations in the orders.
The first order directs Google to de-link the licensing of Google’s Play Store from any requirement to pre-install other Google applications, and provide open and non-discriminatory access to PlayStore APIs in order to enable developers to post applications into ‘Android Forks’ (i.e., versions of the Android OS that are developed basis the open source code made available by Google), enable other application stores to be listed on PlayStore, and discontinue ‘anti-fragmentation’ obligations which require modified versions of the Android OS to confirm to certain baseline requirements for ensuring compatibility with third-party applications and remove conditions to prevent the Android ecosystem from being fragmented into non-compatible ‘forks’.
Similarly, the second order requires Google to discontinue any stipulation to mandatorily use its own Billing Systems for the purchase of applications and in-app purchases, and discontinue its current terms and conditions for the provision of App Store-related payment and billing services.
Will developers be happy with the CCI ruling
With the discontinuation of anti-fragmentation obligations, every OEM will be free to launch mobile phones with their own versions of Android OS, which may not be compatible with each other in the absence of any recommended baseline Android implementation standards. In practice when multiple incompatible versions of OS get developed, the developers may have to customise their apps for each version leading to increase in development cost. This may deprive small developers from competing on an equal footing with larger developers and end up tilting the playing field between small and large developers. Overall, the value of the Android ecosystem as a whole may get eroded.
It seems highly improbable that baseline compatibility standards across such fragmented ecosystems would emerge, based solely on market forces. Even if developer consortiums were to establish baseline requirements in the future, the logic of the CCI’s present order on anti-competitive impact could then be extended to such requirements as well – potentially classifying any enforceable requirements as anti-competitive agreements. The question that the CCI should have therefore asked was whether the anti-fragmentation obligations were being imposed uniformly, and whether the gains to user benefit and the application ecosystem outweighed the costs of having fewer Android forks.
What about users? What kind of impact will it have on users
In all the rush to address grievances raised by a few large competing developers, users may end up having to settle with a sub-optimal user experience. One of the most important gains from Google’s anti-fragmentation approach is standardizing security implementation within Android OS and compatible applications.
Given that many applications process users’ personal data, it is imperative that apps should operate only on such versions of the OS which meet the recommended standards of security. In the absence of these obligations, there is a possibility of certain versions of OS coming up that do not have the required compatibility standards to maintain the security of devices. CCI does not seem to have considered this aspect in detail at all. Even otherwise, users may now need to pick and choose between OEMs with multiple Android versions each with its own set of applications – as opposed to one common set of compatible applications across the ecosystem.
Tell us about the implications of CCI’s order on technology innovation efforts in India.
De-linking a platform (open or otherwise) from its desired business models for spending on innovation, security and technical policies, could lead to an altogether inferior product. We have seen this in the case of early platforms of the Web 2.0 era, where platforms without adequate governance and standardization, delivered an inferior user experience, and faded from prominence.
Any supposed gains, such as gains to end users by enabling them to uninstall pre-installed applications, or perceived gains to innovation by enabling developers to create smaller fragmented ecosystems – are minimal, compared to the loss of efficiencies brought about by Android’s policies.
Therefore, only time can tell whether this order is good or not for the app developer community and users. Prima facie at least for platform companies – while evolving new business models, companies may think twice. The platform economy has the potential to develop a unique business model that overall works for the benefit of the ecosystem. If the regulators start picking and choosing one element of that being unacceptable, then the entire model is likely to fail. This may curb innovation in business models in platform companies.
What are the key loopholes in CCI’s order especially for the Android Operating system
While CCI’s finding that Google is dominant in a relevant market as defined by it, may be defendable, the CCI order fails in establishing abuse and its effects on the relevant market through a thorough evaluation of the criteria listed out in Section 19(3). There is either lack of evidence or an appreciation of evidence on record. E.g., there is no end-user or start-up survey.
For instance, local app developers in India have always had the freedom to push their own applications and were not barred from entering into arrangements for pre-installing such applications on phones outside the ambit of Google’s MADA Agreement. However, the CCI’s direction overlooks this and targets a supposed “status quo bias”, i.e., a theory that users will choose to proceed with default and pre-installed applications rather than proactively choose applications which may serve their needs better.
While the European Union concluded on the existence of such a “status quo bias” based on some amount of economic survey evidence, the CCI has not taken any efforts to validate the existence of any “status quo bias”. Instead, it treats the assumption as a matter of fact despite evidence that shows that Indian users are the world’s most prolific app downloaders and side loaders.
Interestingly, public feedback before the Competition Law Review Committee (CLRC) had called for amendments to the Competition Act, 2002 to explicitly link a finding of abuse of dominance to the existence of appreciable adverse effects on competition. The CLRC declined from making such a recommendation, solely because the CCI’s own jurisprudence routinely evaluated effects prior to a finding of abuse, thereby leading to the conclusion that an effects analysis was implicit in the scheme of Section 4 of the Competition Act. Unfortunately, however, in the absence of detailed evidence and analysis on the effects on end consumers and the Android ecosystem, the effects analysis in the CCI’s order appears rushed and emulative of other jurisdictions at best, and superficial at worst.
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