By Tilak Dangi, a fourth-year student at NALSAR, Hyderabad
The lockdown has seen rapid growth in the use of video conferencing platforms. Data shows that Zoom and Skype have noted the highest increase of 185% and 100% respectively in Daily Active Users in three months in India. In the race to capture the market of virtual video conferencing applications, Google has been unable to capture a large market share so far. However, it does not want to stay behind. Consequently, Google has recently announced deeper integration between Gmail on mobile and Google Meet (‘Meet’) video conferencing service. The intention behind the integration is clear: Meet wants to tackle the market share among the technology giants for the market of virtual video conferencing applications.
This article will analyse Google’s integration within the parameters of section 4(2)(d) & section 4(2)(e) of the Competition Act, 2002 (‘the Act’). Section 4(2)(d) prohibits one entity from concluding 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. Section 4(2)(e) prohibits entity using its dominant position in one relevant market to enter into or protect, other relevant markets. The author asserts that Google is using its large consumer base of e-mail users to enter into the video conferencing market.
- The market where the entity is in a dominant position.
- The market which the same entity aims to enter into or protect.
However, both these relevant markets must be distinct from each other. Section 4(2)(d) of the Act mentions two different products which require to establish two distinct relevant markets:
- The market of the primary product; and
- The market of the supplementary product which, by their nature have no connection with the primary product.
Section 19(7) of the Act mentions the factors to determine the relevant market. In the present fact scenario, one relevant product market would be of e-mail services and another would be of virtual video conferencing. That being said, Google may argue that both the markets are the same since both provide for online communication. Therefore, the determination of demand-side and supply-side substitutability of both the product is required to establish that both the products are not substitutes for each other.
- Supply-side substitutability
The services provided by Gmail are emailing services that users can access through the web and using third-party programs that synchronize email content through Post Officer Protocol and Internet Message Access Protocol. On the other hand, Meet provides video meeting platforms wherein 100 users can connect. The programs through which both of the applications run are different and therefore, one product cannot substitute the other because of a change in price, for instance.
- Demand-side substitutability
E-mail provides a consumer with services such as sending and receiving messages electronically. Additionally, the sender and receiver do not need to be online at the same time. However, Meet provides a consumer with video conferencing services similar to face-to-face communication between two or more people while all consumers are required to be online at the same time. Thus, e-mail is a textual conversation between two or more members over the internet while video conferencing is a real-time video conversation over the internet. Both the applications serve a different purpose and therefore, the consumers will not reasonably switch to the other commodity if the price of one commodity increases or decreases.
Therefore, considering factors mentioned under section 19(7) of the Act, both the products are not supply-side or demand-side substitutable in the relevant geographic market of India.
Position of Dominance
While determining the position of dominance when an allegation is made under sections 4(2)(d) and 4(2)(e) of the Act, it is not necessary for a product to be dominant in the second relevant market also. As held in the National Stock Exchange of India v. Competition Commission of India (‘NSE case’), it is enough even if the enterprise wishes to use its strength in the market of its dominance to enter into or to protect itself in the other market. Therefore, the issue before the CCI is going to be: whether Google is in a dominant position in the market of e-mail services in India?
Section 19(4) of the Act prescribes various factors that the CCI may need to consider in assessing a dominant position, such as market share, size, resources, competitors, economic power, commercial advantages, vertical integration, and etc.
While the data of the number of users in India of Gmail is not publicly available, certain factors can be used to attribute the dominance of Google. Gmail enjoys 43% of market share worldwide followed by Apple’s iPhone having 27% and Apple Mail of 9% and 7 more competitors. On October 26, 2018, Gmail stated that it has over 1.5 billion active users through a tweet. In 2011, Gmail’s market penetration in India stood at 62%, the highest in the world as per digital marketing intelligence firm Comscore. Google has certain advantages that its product provides; it gives more than 15 gigabytes of storage, compared to the free version of Yahoo! Mail and MSN Hotmail that only give 1GB and 250MB respectively. Unlike its competitors, all of whom attempt to shove paid premium services with premium features, Gmail offers all its features to all its users without any such charges. Moreover, Gmail has vertical integration with Duo, YouTube, Photos, Google web platforms where Google is already declared in the dominant position. Considering the size of the subscribers of Gmail, the small size of its competitors, the technological and economic advantage it has; the dominance can be safely attributable to Google in the relevant market.
Violation of Section 4(2)(d)
For proving the case under section 4(2)(d) of the Act, the CCI after establishing dominance has to determine two factors:
- Sufficient market power; and
- An element of coercion i.e., the customer is coerced to take or purchase a second product if she wishes to buy a particular product.
In the case of Sonam Sharma v. Apple Inc, the CCI noted that price bundling is a strategy whereby a seller bundles together many different good items for sale and offers the entire bundle at a single price.
In the present factual scenario, if the user intends to install or update Gmail to use the email services, the user by default will be availing Meet even if the user does not require the same. In essence, Meet will come along with Gmail by default. A consumer who only intends to use Gmail will be arm-twisted into installing Meet also even when the user does not want or require it. Secondly, if the user only wants to install Meet, it requires Gmail ID, hence mandating someone to have a Gmail ID to use Meet.
The situation is very similar to that of United States of America v. Microsoft Corporation, wherein a US District Court held Microsoft in violation of competition law as it integrated its operating system and web browser.
Violation of section 4(2)(e)
For establishing the case under section 4(2)(e) of the Act, the CCI after establishing dominance has to determine two questions:
- Whether Google enjoyed advantages in the video conferencing market by virtue of its dominance in the e-mail market?
- Whether Google customers in the e-mail market were potential customers in the video conferencing market?
For any new application, creating a market share is a tough task. In a market where there are established players, competing merely based on features and quality is in itself not enough, but the competitor is required to increase knowledge about its product to achieve the consumers in the market. The Gmail application is already downloaded in all the Android phones in India due to its prior contract. Therefore, Google seems to increase the consumer base of Meet through Gmail’s consumers who are potential customers of the virtual video conferencing market and thus abusing its dominance.
Foisting Meet into Gmail, while it functionally makes no sense whatsoever as the services of Gmail are different from that of Meet, is what Google can do to raise awareness of Meet to increase its market share, compete with rivals of virtual video conferencing market through existing consumer base of Gmail market.
Rule of Reason Approach (Anti-competitive effects)
The CCI has started following the rule of reason approach i.e., establishing an abuse of dominance by determining anti-competitive effects of the conduct. The question then arises here is: are there are any anti-competitive effects in the other market, i.e. the market of virtual video conferencing?
Google may argue that since Meet is only an additional feature in Gmail, the same by its very nature does not force consumers to switch to Meet and does not restrict them to use any other video conferencing applications, therefore neither creating any entry barriers for new entrants nor driving out existing competitors out of the market. However, product bundling and entering another market through the dominant market may have following anti-competitive effects:
- The bundling of both the products may shift the consumer base of existing competitors who only deal within the video conferencing market and therefore, threatens to eliminate them from the market.
- The conduct may create entry barriers for new entities to solely enter into the market of video conferencing.
- The exit of the existing competitors and entry barriers for new entrants will also harm consumers as they might end up having no more choices within the product. Moreover, bundling is per se coercive for consumers who do not want both the products.
The European Commission has previously in the European Union v. Google Android, declared that Google had been using product bundling as a strategy to capture market share in new markets. Google is already facing antitrust issues in various domains; such integrations would bring to light more such issues as the intention behind the same is clear and is not a fair play in the market. There are not many cases under section 4(2)(e) of the Act in India. The COMPAT in the NSE case was decided only based on the absence of two distinct markets. It thereby did not touch upon the next questions. Hence, it would be interesting to see how the CCI deals with such matters if the allegations of the same are filed.
(The author thanks R. Kavipriyan and the Editors of the Blog for the inputs on this article.)