Competition law and policy operate in complex economic, socio-political and legal environments of a country. With increase in the number of anti-competitive practices by big corporates, the competition watchdog assumes a greater regulatory role to ensure level playing fields for the players.

The recent fine imposed by Competition Commission of India on global internet search giant Google amounting to Rs.135.86 crore for abusing its dominance and biased search practices in India on complaints filed by Bharat Matrimony, a matrimonial website and CUTS, a non-profit body in 2012, sparks a mixed reaction among economists and legal practitioners.

This is the second major anti-trust salvo against Google after the European Commission imposed a record 2.4 billion euro ($3 billion) fine on the company for favouring its shopping service and demoting rival offerings. The European Commission has accused Google of illegal, monopolistic practices, stating that the company has abused its position as market leader by prioritising its own services in search results and diverting traffic away from its competitors. The abusive conduct of Google in a dominant position had the effect of restricting the competition or, in other words, its conduct is capable of having such an effect.

With 450 million Internet users and about 35 million online shoppers, India taps a huge e-commerce market. Companies – right from retail shops to consumer goods sellers – are entering the Web space to attract potential customers. The multinational giant Google, being the gateway to the Internet for a vast majority of internet users, enjoys a dominant position in the online web search market. It is a curator of all kinds of private data of users across the globe which makes it obligatory for Google to be fair and above suspicion. In view of the dominant position of Google, the CCI decision appears to be a trend setter in the domain of online marketing.

The complaint before the competition watchdog encompasses the following. Google made a whopping $28 billion from Ad Words (Google makes most of its money from search advertising—a product it calls AdWords) in 2010 alone and it enjoys a humongous 85 per cent share in the online search engine market. Despite allegations of antitrust and trademark violations against Google being writ large, it cleverly revised its trademark policy in 2010 with a view to allow larger pool of keywords for advertising, leading to an abuse of its dominant position which attracts Section 4 of the Competition Act, 2002. The Commission was saddled with the task of examining as to whether this sort of policy triggers an anti-competitive behaviour or not.

Having done a thorough probe and in-depth analysis, the CCI found a prima facie abuse of dominant position by Google in its online advertising. The DG explored the taxonomy of dominant behaviour through reports received from a number of other companies (such as Microsoft, Yahoo, Rediff, Facebook, MakeMyTrip, TripAdvisor, Yatra, Cleartrip, Flipkart, Times Internet, JustDial, Info Edge, Network18 and more than 10 major ad agencies) demonstrating a stronger case against Google.

Google was found to be favouring its own services and of its partners by manually manipulating its search results, manipulating the search algorithm to suppress results of competition and unfairly promoting its own services like Google News, YouTube, Google Maps etc. which reduces traffic to competing specialised search services, prohibited advertisers from advertising on words that might be confused with Google’s trademarked words, making it difficult for advertisers to use competing platforms by imposing prohibitive switching costs.

Competition law does not sympathise with companies that grow too large and powerful with monopolistic ambition. The dominance of the market share of the company leads to potential abuse of its dominant position against rivals, consumers, suppliers and customers. Since Google is an essential trading partner because of its dominance, advertisers are forced to stay with it. Google has the advantage of leveraging its dominance in the market for online general web search and to strengthen its position in the market for online syndicate search services. Many competitors have been denied access to the online search syndication services leading to sufficient positive externalities for Google.

As per the DG report of CCI, Google was found to be abusing its dominant position in online general web search and web search advertising services in India since it was conducting its business in a discriminatory manner, causing harm to advertisers and consumers. However, the CCI failed to find any contravention in respect of Google’s specialised search design, AdWords, online intermediation and distribution agreements.

However, the quantum of penalty is a pittance since the company apparently showed only “direct sales” figure to the CCI without disclosing revenue earned indirectly through India. Due to the weak accounting framework to capture the indirect revenue generated through India by such global e-retailers, the penalty figure is quite small.

The ruling is more significant since more and more technology MNCs are set to expand their services in all segments of our day-to-day transactions ranging from payments to pizza delivery. The competition watchdog has ventured to steer the narrow path of penalising the errant business entities and assumed a larger role of protecting the interest of the consumers at large from resultant price increase due to anti-competitive conduct or fraudulent competition. This ruling of the CCI will definitely embolden anti-trust watchdogs of other jurisdictions to deal with the complexities of the ever-expanding technological landscape.

Competition Law jurisprudence is quite nascent in India; it is imperative that the competition regulator be extra cautious while dealing with technology companies because of their dominant technological complexities and prowess. Many apparent and hypothetical anti-competitive practices could be woven around wrong narratives or improper understanding of the market dynamics and their interface with the ever-expanding technological complexities. Competition law must serve to the benefit of the consumer even by allowing companies to take better leverage of the advantages of scale so long as they are not anti-competitive.

The writer is an Advocate, Supreme Court of India