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Consumer Welfare and the International Antitrust Enforcement Pattern: What to Make of India’s Google Decision?

· February 9, 2018

The Competition Commission of India (CCI) opened an investigation into Google focusing on multiple allegations of abuse of dominant position in India.  After a six-year-long investigation, CCI concluded that Google had not abused its dominant position in the majority of the fronts investigated by the Commission (OneBoxes, AdWords, online intermediation and distribution agreements); and only fined the search company for supposed anticompetitive practices related to Flight Search and two other long-discontinued search practices.

When analyzing CCI’s decision, some commentators risk falling into the trap of claiming the Indian decision diverges from that of the US FTC.  Even worse, these observers might use CCI’s decision to validate the recurring claim that US antitrust authorities grant tech companies a free antitrust pass.  Such a view would fail to account for the fact that CCI’s order actually converges with the US approach.  In fact, CCI’s decision is evidence-based, informed by economic analysis and decided under the consumer welfare standard.

Furthermore, such analysis would fail to capture the most relevant aspects of the Indian order, namely: (i) the pro-consumer/pro-innovation argumentation included in the decision; and (ii) the consolidation of a pro-consumer welfare enforcement pattern at an international level.  

Consumers and Innovation Come First According to CCI

CCI’s enforcement of the Indian Competition Act has been significant for the Indian economy as it becomes an important player of the world’s economy.  Despite being in force for less than 10 years, CCI has progressively streamlined the goal of its Competition Act to ensure that competition enhances the benefits to consumers.  

CCI’s Google decision recognizes that when conducting investigations into antitrust violations it has self-imposed a prohibition to scrutinize product designs since undue intervention in designs of the search engine “can affect legitimate product improvements.”  So, unlike its European counterparts, CCI does not impose obligations to redesign the search engine, and accepts that innovation might harm competitors but benefit consumers.

Furthermore, while CCI acknowledges that in India Google “is under an obligation to discharge its special responsibility”, the authority does not suggest that Google should be viewed as an essential facility of the Internet.  

This is particularly important given the fact that the Indian Competition Act borrows heavily from the EU competition provisions, and thus, many would have expected the Indian Google order to follow the EU’s decision in relation to Google Shopping.

In fact, CCI proposes consumer-focused remedies, rather than remedies meant to lift up struggling (and non-innovative) rivals.  Thus, instead of demanding, for example, that Google divest part of its business, redesign its search engine or discriminate against its own algorithm results, CCI requests that Google ensure that consumers are protected and better understand their interaction with the search engine.

Consumer-focused enforcement pattern consolidated at an international level

From an international perspective, if there is one remarkable statement of CCI, it’s that it takes a position against using antitrust laws to impede consumers from enjoying the benefits that innovation can bring about.

In this respect, CCI explicitly states that “[t]he Commission notes that product design is an important and integral dimension of competition and any undue intervention in designs of SERP may affect legitimate product improvements resulting in consumer harm.”

By making such a statement, CCI acknowledges an important aspect of antitrust cases in the digital economy and beyond: that antitrust enforcers should not be carried away by misleading populist perceptions, but remain focused on enforcing the consumer welfare standard.

Worldwide, competition authorities have managed to keep up with the fast changing dynamics of the digital economy.  In doing so, regulators have proven to understand that failure to advance sound antitrust enforcement based on the consumer welfare standard in the tech industry could have severe impact on innovation to the detriment of consumers.  In this vein, competition authorities, including now India, have clearly stated that it is not their institutional role to protect businesses that lag behind innovation.

For example, in 2015 Taiwan’s Federal Trade Commission (TFTC) conducted an investigation into Google’s search practices but reached a different conclusion than the EU counterparts.  The TFTC case handler report concluded that: “The purpose that Google Inc. displays its map service in the prominent position of the search results page is to assist users in finding location information quickly and improving the user’s experience.  If this function is prohibited, the service will become less convenient for users, which is definitely a disadvantage.  More importantly, if the aforesaid function is prohibited, it may deter internet developers from continuing to conduct R&D and to innovate.  Eventually, the prohibition will be regarded as a tool to protect individual competitors only at the expense of market competition and consumer welfare.”   

Another example is the investigation into Google advanced by the Canadian Bureau of  Competition.  In 2016, the Canadian competition authority decided to discontinue its investigation into allegations of abuse of dominance position against Google.  The Canadian authority admitted consulting its international counterparts, including the U.S. Federal Trade Commission and the European Commission, who had conducted similar investigations.  Eventually, the Canadians decided, similarly to U.S. authorities, not to sanction Google, and even recognized that Google practices were pro-consumer, e.g., algorithm changes and search designs, such as OneBoxes, are “beneficial to consumers” and based on “quality or relevancy”.

So, CCI’s Google decision leads us to pose the following question: Is there a consumer welfare enforcement pattern followed by worldwide competition systems when it comes to the digital economy?  The answer seems to be yes.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.