Keeping up with Competition - May 2025
A monthly newsletter by Axiom5
Welcome to the twentieth edition of our monthly newsletter, Keeping Up With Competition. The month of April 2025 saw significant activity from the Competition Commission of India (CCI), touching upon the following key issues:
Settlements in Digital markets: In the inaugural settlement decision concerning digital markets, what factors likely influenced the CCI's acceptance of a settlement proposal?
Balancing Pro-Competitive Effects and Anti-Competitive Effects: How did the CCI, in its assessment of the digital cinema exhibition market, navigate the tension between pro-competitive justifications for business models and anti-competitive effects stemming from restrictive agreements?
This newsletter provides summaries of the cases that address the following:
CCI accepts Google’s Settlement: The CCI accepted Google's settlement proposal under Section 48A of the Competition Act, 2002 (Act) in relation to concluding its investigation into alleged anti-competitive practices by Google and smart TV manufacturers.
CCI imposes penalty on UFO Moviez and Qube Cinema for Anti-Competitive Content Supply Restrictions: The CCI imposed penalties totaling INR 269.83 Lakh on UFO Moviez and Qube Cinema for anti-competitive practices involving restrictive content supply clauses in DCE lease agreements, violating Section 3(4) of the Act. The CCI assessed the appreciable adverse effect on competition (AAEC) by examining barriers to entry and market foreclosure, analyzing the existence of tie-in arrangements, exclusive supply agreements, and refusal to deal, while ultimately finding that the pro-competitive justifications did not outweigh the anti-competitive harm.
The following sections provide a more in-depth look at these developments.
Setting a Precedent: Google's Smart TV Settlement with CCI (CCI’s order available here)
The CCI recently concluded a case involving allegations of anti-competitive practices against Google and several smart TV manufacturers. This case was initiated by informants Mr. Kshitiz Arya and Mr. Purushottam Anand, and related to claims that these entities had violated provisions within Section 3 and Section 4 of the Act. According to informants, Google was abusing its dominant position in the Indian smart TV operating system market. The informants alleged that agreements like the Television App Distribution Agreement (TADA) and Android Compatibility Commitments (ACC) contained restrictive conditions that limit smart TV manufacturers' (OEMs) freedom and hindered competition. Specifically, the informants claimed Google mandated the pre-installation of its Play Store and other apps as a condition for licensing the Android TV OS, limiting OEM choice and unfairly favoring Google's applications. They also alleged that the ACC prevented OEMs from developing or using alternative Android versions, stifling innovation. The informants also contended that Google tied its YouTube app with the Play Store, forcing pre-installation and harming competition in the video streaming market.
CCI's Preliminary Findings and Director General’s (DG) Investigation: Contravention of Section 4 of the Competition Act
The CCI formed a prima facie view that Google contravened various provisions of Section 4 of the Act and directed the DG to investigate the allegations under Section 26(1) of the Act. The DG's investigation report detailed the following key conclusions:
Relevant Markets and Google’s Dominance: The DG defined two relevant markets: (1) licensable smart TV device operating systems in India, and (2) App Stores for Android smart TV OS in India. The investigation concluded that Google held a dominant position in both. This finding was based on Google's market share, size and resources, control over Android OS, the necessity of a Google account, entry barriers, consumer dependence, lack of OEM countervailing power, and Android's network effects.
Unfair Conditions (TADA): The mandatory pre-installation of Google's applications under the TADA amounted to the imposition of unfair conditions on smart TV device manufacturers, thereby contravening the provisions of Section 4(2)(a)(i) and 4(2)(d) of the Act. This finding was based on an examination of the clauses of the TADA, the limited ability of OEMs to negotiate the terms of the agreement, the essential nature of the Play Store, and the tying of apps under Google's TV Services (GTVS).
Restrictions on Android Forks - Android Compatibility Commitments (ACC): Google's practice of making the pre-installation of its proprietary applications (particularly the Play Store) conditional upon signing the ACC agreement restricted the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android (i.e., Android forks). This conduct was found to have limited technical or scientific development and resulted in the denial of market access to developers of Android forks, thereby violating Sections 4(2)(b)(ii) and 4(2)(c) of the Act.
Tying of YouTube: Google abused its dominance by mandatorily tying YouTube with the Play Store, violating Section 4(2)(e). This was based on YouTube's large user base and revenue, low competitor downloads, prominent placement, and uninstallability. The DG, considering the online video hosting market as secondary, noted pre-installation wasn't technically needed. Additionally, mandatory pre-installation of the entire GTVS suite under TADA, with app placement restrictions, was deemed unfair to OEMs and limited competition for other apps.
No "Refusal to Deal" or "Exclusive Dealing": The investigation into allegations of "refusal to deal" and "exclusive dealing" under Section 3(4) of the Act, concluded these claims were unsubstantiated. The DG found that OEMs lacked discretion in the terms of the TADA and ACC agreements due to their dependence on Google's licensable Android OS for Smart TVs and the "must have" nature of Google's apps like the Play Store, characterizing the relationship as one of indispensability rather than unjustified refusal.
Google's Settlement Proposal
Google submitted a formal Settlement Application under Section 48A of the Act, outlining the measures it proposed to take to address the CCI's concerns, which included the following elements:
Standalone License for Play Store and GPS: Google proposed to introduce a new licensing agreement, designated as the New India Agreement, which would allow OEMs to license the Google Play Store and Google Play Services (GPS) separately for compatible Android smart TV devices sold in India. Under the New India Agreement, OEMs would not be required to pre-load any other Google service, providing them with greater flexibility and choice. Google also committed that this new agreement would not include any placement or default requirements for the Play Store or any other Google service.
Waiver of ACC Requirement in TADA: Google proposed to eliminate the requirement in the TADA to have a valid ACC for devices shipped into India that do not include Google apps. This commitment aimed to address the concern that the ACC restricted OEMs from developing and selling devices running on alternative versions of Android. By waiving this requirement, Google signaled a willingness to allow OEMs greater flexibility in their product offerings. Google also committed to formally communicating this change to its Android TV partners in India through an official letter and amending the TADA template to reflect this waiver.
Reminder of Existing Flexibility: Google proposed to send a letter to all its Android TV partners in India, reminding them of the flexibility they already possessed under their current agreements. This included the option to use the open-source Android OS for smart TVs without being obligated to take any applications from Google or sign an ACC. Additionally, Google would remind OEMs of their ability to develop smart TVs using other competing operating systems.
Commitment Period and Compliance: Google stated that it would adhere to the settlement proposals for a period of 5 years. To ensure accountability and transparency, Google also expressed its willingness to submit regular compliance reports to the CCI, confirming its adherence to the obligations outlined in the settlement proposals.
Clarifications and Updates: Throughout the settlement process, Google provided clarifications and updates to its proposals. Notably, Google informed the CCI about planned changes to its commercial offerings at a global level relating to Android TV. These changes included Google's decision to not certify new Android TV models starting from July 1, 2025. While this meant OEMs would not be able to certify new Android TV models after June 2025, Google clarified that it would continue to support existing devices through ongoing arrangements until the end of 2029.
CCI's Assessment of the Settlement Application
The CCI found Google's settlement proposal adequate in addressing the DG's concerns. The New India Agreement, allowing OEMs to license the Play Store and GPS separately, was seen as a key step in resolving mandatory pre-installation and the alleged tying of YouTube, fostering competition by enabling the pre-installation of alternative apps. Waiving the ACC under the TADA was also acknowledged for promoting competition and innovation by allowing OEMs to develop devices with alternative Android versions, encouraging R&D and product differentiation.
Regarding the proposed license fee under the new agreement, the CCI recognized Google's rationale for compensation and noted that OEMs licensing the Play Store independently could offset costs through promotional agreements, fostering competition. The CCI also considered the continuation of the original TADA alongside the new agreement as beneficial, providing OEMs with greater choice and control over their device offerings based on consumer demand and business needs..
Dissenting Opinion
While the CCI majority accepted Google's settlement, one member, Mr. Anil Agrawal, dissented. His primary objection was the continued existence of the TADA alongside the New India Agreement. He argued that the TADA, previously found to be anti-competitive, should be either modified to fully comply with the law or completely replaced. The dissenting member opined that offering OEMs a choice between a paid, less restrictive New India Agreement and a "free" but restrictive TADA would likely maintain the existing anti-competitive market dynamics. He also pointed out the lack of a remedy in Google's proposal for the DG's finding regarding mandatory Google buttons on remote controls under the TADA. Ultimately, the dissenting opinion called for a more decisive solution with a single, compliant licensing system and the complete removal of the TADA's restrictive practices..
Conclusion: Implications of Indian Competition Regime’s first ever settlement application
The CCI’s order concluding its case against Google and smart TV manufacturers marks a significant juncture in the Indian competition landscape, notably as the first ever settlement application under Section 48A of the Act. This decision sets a precedent for future antitrust resolutions in India, signaling a willingness by the CCI to explore alternative mechanisms to resolve concerns. Google's settlement is anticipated to bring positive changes by granting OEMs greater flexibility in app pre-installation and the ability to develop devices with alternative operating systems, potentially increasing competition and innovation in the smart TV market. Consumers could benefit from a wider variety of smart TV options on diverse platforms, potentially leading to more competitive pricing and features. OEMs like Xiaomi and TCL gain more autonomy in device design and app strategies. This could also positively impact competing operating systems like Amazon's Fire OS, potentially increasing their adoption. The settlement may also lead to greater fragmentation in the Indian smart TV OS market as OEMs explore alternatives to Google's pre-bundling requirements, potentially resulting in a more diverse range of smart TVs with varied operating systems and user interfaces.
The experience gained from this first settlement under the amended Competition Act could provide valuable lessons for the CCI in navigating future antitrust cases involving digital platforms and in refining its approach to utilizing the settlement mechanism.
CCI Penalizes UFO Moviez and Qube Cinema Technologies for Imposing Restrictions on Content Supply (CCI’s order available here)
The CCI passed an order concerning an information filed by PF Digital Media Services Ltd. and Mr. Ravinder Walia against UFO Moviez India Ltd. (OP-1), Scrabble Digital Ltd. (OP-2), and Qube Cinema Technologies Pvt. Ltd. (OP-3). The Informants, PF Digital Media (a post-production processing company) and Ravinder Walia (a film producer), alleged that UFO Moviez and its subsidiary Scrabble Digital, along with Qube Cinema Technologies, were engaging in anti-competitive practices related to the supply of Digital Cinema Equipment (DCE) on lease to Cinema Theatre Owners (CTOs) and the provision of Post-Production Processing (PPP) services. The core of the allegations centered on the restrictive clauses in the equipment lease agreements between UFO Moviez/Qube Cinema Technologies and CTOs. These clauses allegedly mandated CTOs to exclusively source content (cinematograph films) from the DCE suppliers or their affiliates, effectively preventing processing and exhibition of films processed by rival PPP service providers like PF Digital Media. This was purportedly achieved through technical means, such as firewalls on the DCEs that would only accept Key Delivery Messages (KDMs) generated by the preferred PPP providers (Scrabble Digital and Qube Cinema Technologies).
The Informants contended that this conduct amounted to anti-competitive agreements under Section 3 of the Act, specifically tie-in arrangements (tying the lease of DCE to the procurement of content from the same supplier), exclusive supply agreements (restricting CTOs from obtaining content from other suppliers), and refusal to deal (preventing CTOs and producers from working with alternative PPP providers). They also alleged abuse of dominant position under Section 4 of the Act, arguing that UFO Moviez and Scrabble Digital were leveraging their dominance in the relevant markets to protect Scrabble Digital's position in the PPP market.
CCI’s findings: Vertical Restraints result in AAEC
Based on the investigation conducted by the DG, the CCI examined the conduct of UFO (OP-1 and OP-2 collectively) and Qube Cinema Technologies (OP-3) under Section 3(4) of the Act, which deals with vertical agreements likely to cause an appreciable adverse effect on competition (AAEC).
Relevant Markets: The CCI defined two relevant markets: (i) the market for the supply of DCE on lease/rent to CTOs in India, and (ii) the market for PPP services in India. The CCI defined the market noting the price differences between lease and purchase of DCEs and rejecting arguments to include E-Cinema equipment in the relevant market.
Market Power: The CCI found that both UFO Moviez and Qube Cinema Technologies held significant market power in the market for leased DCI-Compliant DCEs, citing their substantial market shares and widespread presence across the country, including in multiplexes. The CCI also noted their vertical integration into other aspects of the entertainment sector.
Tie-in Arrangement: The CCI found UFO Moviez and Qube Cinema Technologies engaged in tie-in arrangements violating Section 3(4)(a). Their DCE lease agreements mandated CTOs obtain content from them, considering that they tie their DCE leases to content supply/PPP services, thus restricting CTO choice. The CCI concluded a violation despite the fact that CTOs voluntarily partnered with UFO Moviez and Qube and these service providers subsidised the significant costs of the DCEs (to the benefit of the CTOs) by bundling content with the DCEs.
Exclusive Supply Agreement: The CCI also found that UFO Moviez and Qube Cinema Technologies were involved in exclusive supply agreements. The agreements restricted CTOs from acquiring or otherwise dealing with any cinematograph film other than that which has been processed by the respective Opposite Party or its affiliates. This was supported by agreement clauses, statements from CTOs, and submissions from film producers and distributors who experienced difficulties in exhibiting content processed by third-party labs on DCEs supplied by UFO or Qube.
Refusal to Deal: The CCI concluded that the conduct of UFO Moviez and Qube Cinema Technologies constituted a refusal to deal. By imposing restrictions on their DCEs that prevented the use of KDMs generated by other PPP service providers, they restricted the ability of CTOs to receive content from alternative suppliers. This was corroborated by statements from informants, CTOs, and producers/distributors who highlighted the technical restrictions and the inability to play content processed by other labs.
Appreciable Adverse Effect on Competition (AAEC): The CCI determined that these vertical restraints resulted in an AAEC in the relevant markets. The impositions created barriers to entry for new players in the PPP market, particularly in DCP cloning and content delivery. Existing competitors, like the Informant, were hindered, and a significant portion of the market was foreclosed. The CCI also noted that these practices could stifle innovation in PPP services by effectively monopolizing any potential advancements within the system of the dominant players.
Contravention and Penalties Imposed
Based on its analysis, the CCI found UFO Moviez India Ltd., Scrabble Digital Ltd., and Qube Cinema Technologies Pvt. Ltd. in contravention of Sections 3(4) read with Section 3(1) of the Act .The CCI issued the following directions: (1) The OPs were directed not to re-enter into lease agreements with CTOs that impose restrictions on the supply of content from parties other than themselves or their affiliates and (2) existing lease agreements with CTOs were to be modified to remove clauses imposing restrictions on the supply of content from alternative parties. Applying the relevant turnover concept based on the Competition Commission of India (Determination of Turnover or Income) Regulations, 2024 and the CCI (Determination of Monetary Penalty) Guidelines, 2024, the CCI calculated separate penalties for UFO and Qube Cinema Technologies.The relevant turnover included revenue from DCE lease rentals and PPP services in India (excluding mastering). Considering the contravention's nature and gravity, the CCI imposed a penalty of INR 104.03 Lakh on UFO Moviez and Scrabble Digital, and INR 165.8 Lakh on Qube Cinema Technologies.
Conclusion: Balancing Pro-Competitive Justifications Against Anti-Competitive Effects
While the CCI ultimately found contravention of Section 3(4) of the Act, it engaged with the OPs’ arguments on the potential pro-competitive effects of their business models. The OPs contended that bundling DCE leasing with content supply made digital cinema technology more affordable for CTOs, especially smaller ones, thereby encouraging adoption and reducing piracy. They argued that revenue from content supply and VPF collection subsidized the low-cost leasing, benefiting both CTOs and consumers.
Despite acknowledging the potential benefits championed by UFO and Qube, such as increased accessibility of digital technology for CTOs and the role in VPF collection, the CCI's assessment under Section 3(4) of the Act required an examination of whether these benefits outweighed the AAEC caused by the imposed restraints. The CCI's findings on AAEC focused on the creation of significant barriers to entry for new players in the PPP market, particularly in DCP cloning and content delivery. The CCI found that the exclusive supply agreements and refusal to deal practices foreclosed a substantial portion of the market for existing and potential competitors, hindering their ability to provide PPP services. The CCI's rejection of arguments that the restraints were necessary to enable smaller CTOs to access DCEs and that a composite service negated a tie-in arrangement demonstrates a focus on the restrictive “form” of the agreements rather than on the objective benefits underpinning these arrangements.
While the CCI noted the alleged pro-competitive factors highlighted by UFP and Qube, it did not assess them as relevant as mitigation factors for determining the monetary penalties. The OPs argued that their role in modernizing the cinema exhibition business, making digital technology accessible through subsidized leasing, and contributing to VPF collection should be considered in their favor. While the CCI acknowledged these submissions, it ultimately concluded that these factors were "not related to the impugned conduct" that was found to be in contravention of the Act. This indicates that while the CCI gave due consideration to the arguments of pro-competitive effects during the substantive assessment of contravention, these particular factors were not deemed sufficient to reduce the penalty amount, as they were viewed as distinct from the specific vertical restraints involving exclusive content supply that formed the basis of the finding of contravention.
