Structural vs. Behavioral: Why CCI's Google Settlement Repeats International Antitrust Mistakes

[Kunaal Hemnani is a second-year student at Rajiv Gandhi National University of Law. ]

Introduction

In Kshitiz Arya v. Google LLC, the Competition Commission of India (CCI) faced Google's Television App Distribution Agreement (TADA), where Google misused its dominant position by enforcing restrictive agreements on Original Equipment Manufacturers (OEMs). These restrictive practices included compulsory bundling of the Play Store with the Android TV Operating System (OS) and prevented the use or creation of rival forked Android versions through its Anti-Fragmentation Agreements. CCI’s Director General’s investigation revealed clear violations of section 4(2)(a)(i), 4(2)(d), and 4(2)(e) of the Competition Act, 2002 and established that Google abused its dominant position through unfair installation requirements and bundling arrangements,  systematically restricted competition from rival entertainment applications (Google made it mandatory to install YouTube if the device is using Android as its OS) and compromised market access for the competing services in the Android OS market.

Google’s settlement essentially failed to address the core anti-competitive issues, instead proposing a new parallel “New India Agreement” while the existing problematic TADA stood as it was. The way this agreement is designed puts pressure on OEMs, leaving them with two difficult options: either accept the TADA agreements, which are free but come with strict limitations, or pay licensing fees under the New India Agreement. CCI member Anil Agarwal correctly pointed this out as problematic in his dissenting opinion, particularly since Google admitted in its submissions that it offers only TADA globally but is introducing this double-track solution exclusively for India.

This settlement deal created an illusion of choices while preserving Google’s market dominance, potentially setting a dangerous precedent for future antitrust settlements. This article challenges the order by CCI, firstly, by arguing that CCI should have rejected Google’s proposal in favour of structural remedies that eliminate anti-competitive structures entirely rather than merely providing alternative options that maintain the status quo via behavioral remedies. Secondly, by suggesting alternative structural remedies. Lastly, by showing the failure of antitrust settlements internationally, primarily by trying to implement behavioral remedies. Consequently, highlighting the importance of structural remedies when compared to behavioural remedies.

Behavioural Remedies vs. Structural Remedies

Behavioral remedies typically involve assurances to change specific practices that have been deemed anticompetitive by the antitrust regulators. However, they leave the underlying market structure intact. This unchanged market structure is the root cause of the anticompetitive behaviour that allows companies to preserve their dominant position in the market through different means, but they yield results in the business interest of the company. It is essential to understand that, since fundamentally behavioral remedies overly rely on continued compliance and monitoring, opportunities are created for dominant firms to circumvent the spirit of the settlements while upholding the procedural compliance of the terms of the settlement.

A prominent example of the shortcomings of behavioural remedies is the 2004 discovery by the European Commission of Microsoft’s dominant position abuse in the Personal Computer OS market. It was found that Microsoft was deliberately restricting the interoperability between the Microsoft OS and the competitor’s work group OS, while compulsorily tying its own Windows Media Player to Windows. Consequently, Microsoft was required to disclose complete and accurate documentation of its interface, allowing non-Microsoft servers to seamlessly interoperate with Windows PCs on reasonable terms. The Commission also mandated Microsoft to provide Computer manufacturers a version of Windows OS without Windows Media Player, enabling them to install alternative Media Players. To monitor compliance, Microsoft was subject to continuous oversight and substantial fines (€899 million).

In contrast, structural remedies physically separate businesses or assets, making it effectively impossible for companies to engage in the earlier flagged anti-competitive behaviours. When a company is forced to divest certain services or create independent subsidiaries for that service, structural barriers prevent it from leveraging its dominance in one market to gain advantages in another market. Such an approach addresses the root cause of the imbalance in market concentration by changing the structure of the dominant entity rather than merely treating its symptoms.

The US Department of Justice (DOJ) in an antitrust case against AT&T imposed structural remedies to dismantle the dominance of the telecommunications giant in 1982. After recognising that AT&T had integrated control over local phone service, long-distance service, and telecom equipment manufacturing, a consent decree was passed mandating the fundamental breakdown of AT&T. The telecom giant was then required to divest its local Telephone Operating Companies (TOCs) by converting them into seven independent regional entities known as “Baby Bells” (namely NYNEX, BellSouth, and Pacific Telesis). The application of this structural separation of regional entities effectively ended the vertical monopoly of AT&T, reducing its control over the local and long-distance telecom and equipment market. This further lowered telecom prices and subsequently fostered competition, giving way to innovation in the US telecommunications industry.

Global Case Studies on Failed Antitrust Settlements

The current regulatory dilemma between CCI and Google reflects a concerning pattern where global antitrust settlements have consistently failed to address prominent competition law issues. Such patterns are particularly evident in the analysis of case studies of both the United States and the European Union.

• The American Experience: Form Over Substance

  In the United States, Microsoft's settlement proposal accepted by the FTC in 2001 demonstrated how technically compliant but substantively ineffective remedies perpetuate significant market imbalances. The settlement offer, focusing on Application Programming Interface (API) sharing requirements, avoided structural remedies while only implementing behavioural remedies. This allowed Microsoft to maintain its dominant position of over 90% market share for years. Google’s 2013 Federal Trade Commission (FTC) settlement followed a similar course as search practices permitted websites to opt out of specialized results without particularly addressing the underlying search bias that has continued to cause competitive disadvantages to competitors such as Yelp. Such patterns persist because settlements mainly focus on specific behaviors, rather than underlying market structures. Parallels can be drawn between India’s Google case and remedies followed in the USA, as these remedies create the appearance of a compromise while preserving the firm’s dominant position that gave rise to the anticompetitive behavior in the first place.

• European Regulatory Shortcomings

  Despite its reputation for stringent oversight, the EU has faced similar challenges in antitrust settlements. In Google and Alphabet v Commission, the court imposed a fine of €2.4 billion and required Google to implement an auction mechanism for comparison shopping services as a remedy. Nevertheless, this settlement did not prevent Google from bidding in its own auction, leading to continued dominance in comparison shopping services while its competitors steadily lost market share.

  In another similar instance, the EU Commission, in its 2014 approval of Facebook’s acquisition of WhatsApp, accepted Facebook’s assurance that it couldn’t reliably match user accounts across platforms. Two years after the approval of WhatsApp’s acquisition, Facebook began linking WhatsApp and Facebook data, ultimately rendering the protections in the settlement meaningless. This data integration enabled enhanced user profiling and targeted advertising across platforms, significantly expanding Facebook's data monopoly and market dominance. Ultimately, Facebook was fined €110 million, but it proved insignificant compared to the acquisition’s value of $19 billion.

Alternative Approach to Break Google’s Integrated Dominance

CCI member Mr. Anil Agarwal dissented the Google’s settlement by stating that it upheld the anti-competitive terms in the TADA, such as app bundling and YouTube Play store tying by offering a parallel paid license to the OEMs. He pointed out that these restrictive practices skewed the Smart TV OS market and demanded that the commission mandate Google to draft a new compliant agreement, completely replacing the prior TADA and the New India Agreement. The author proposes a course of action in line with the dissenting opinion of Mr. Anil Agarwal, which could have been taken by CCI instead of the current terms of settlement with Google. The functional separation of Android TV OS from Google’s advertising and content services business would represent significant restructuring that could address the core competition issues in the smart TV market in India. At present, Google controls more than 75% of the smart TV OS, allowing it to seamlessly integrate its content and user assistance services such as YouTube, Google Play, and Google Assistant, whilst creating barriers for other competitors such as Roku and Tizen. The commission, by mandating such a separation, would force Google to operate the Android TV OS, essentially meaning that Google's advertising algorithms, content recommendation engines, and data collection services would be operating independently from its core TV operating services business. This would prevent the company from leveraging its dominance in the OS market to favor its own media and entertainment services over other competitors, such as Amazon Prime Video, Netflix, or Indian streaming platforms such as Hotstar or Zee5. This mandated YouTube divestiture from Android TV eliminates Google's unfair smart TV advantage. By forcing YouTube to compete equally for smart TV placement, Google is prevented from leveraging its dominance in the smart TV OS market to dictate terms or push other services.

CCI could have utilized learnings from the United States v. Microsoft case, where the U.S. District Court initially ordered Microsoft to be divested due to antitrust violations. Ultimately, a settlement was reached where Microsoft agreed to implement behavioural changes, including an internal antitrust compliance program, rather than a divestiture. Regardless, such a judgment could inspire CCI to adopt structural measures in case of abuse of dominance issues involving tech giants.

Conclusion

Regardless of the flaws in the Google-CCI settlement, this case pushes the advancement of settlements in India's competition ecosystem. Anil Agarwal's dissent emphasises the difficulties associated with inadequate remedies, indicating the evolution of enforcement mechanisms. Regulators worldwide acknowledge that structural remedies are more effective than behavioural ones for addressing fundamental issues. India is at a critical juncture, and can gain valuable insights from the failures of countries with developed antitrust jurisprudence. Leveraging these insights in future agreements, India can gain the opportunity to take the lead in formulating effective remedies that restore market balance.