NCLAT stays CCI’s 135 crore penalty on Google subject to deposit of 10%

NCLAT stays CCI’s 135 crore penalty on Google subject to deposit of 10%

Chandan Goswami

The National Company Law Appellate Tribunal (NCLAT) today stayed the Rs. 135 crore penalty imposed on Google by the Competition Commission of India (CCI) for indulging in unfair trade practices, subject to the deposit of 10% of the penalty amount.

A bench of Chairman Justice SJ Mukhopadhaya and Justice Bansi Lal Bhatt passed the order in a plea by Google seeking a stay on the operation of the CCI order.

Although the Bench did not grant a stay on the order as a whole, it has stayed a direction made by the CCI to Google in para 422 of the order passed in February this year. That para states,

“So far as the contravention noted by the Commission in respect of Flight Commercial Unit is concerned, the Commission directs Google to display a disclaimer in the commercial flight unit box indicating clearly that the “search flights” link placed at the bottom leads to Google’s Flights page, and not the results aggregated by any other third party service provider, so that users are not misled.”

Appearing for Google before the NCLAT, Senior Advocate Abhishek Manu Singhvi contended that the CCI’s ruling was erroneous, as it did not point to any evidence that Google unfairly compelled users to take ‘search services’ by its manner of display of the Google Flights unit. He further submitted that the search engine displays Google Flights above its free results and marks it as “sponsored” as part of its ad-funded business model.

As regards the penalty, Dr. Singhvi referred to the Supreme Court’s decision in Excel Crop Care Limited v. Competition Commission of India, in which it was held that penalty under Section 27 of the Competition Act can only be imposed on turnover pertaining to products and services that are the subject of contravention.

Since the CCI only found deficiencies with regard to the company’s Flights unit, he argued that a penalty of only Rs. 5 lakh (calculated on the basis of turnover of Google Flights) would have to paid.

Appearing for the, Senior Advocate Amit Sibal interpreted the ruling in Excel to mean that the total turnover of the company is to be taken into consideration, and not just the turnover for alleged violation.

After hearing the arguments, the NCLAT admitted the appeal and passed an interim order staying the direction given by the CCI at para 422 of its order.

It also held,

“…we direct that if the Appellants’ deposit 10% of the penalty amount imposed on Appellant(s) by way of FDR in favour of Registrar, NCLAT within four weeks, the impugned order so far it relates to penalty also shall remain stayed.”

Back in February this year, a 4:2 majority of the CCI had found Google guilty of abuse of its dominant position under Section 4 of the Competition Act, in complaints filed in 2012 by and Consumer Unity & Trust Society.

After establishing that Google occupied a dominant position in the ‘Online General Web Search’ and ‘Web Search Advertising services’ markets, the CCI had found that the search engine was abusing the same, on three counts.

First, placement of its Universal Results before 2010 were pre-determined and not based on relevance, which was unfair to the users. Second, prominent display and placement of Commercial Flight Unit with link to Google’s specialized Flight search service is unfair imposition and deprives users of additional choices. And third, prohibitions imposed on publishers under the negotiated search intermediation agreements are unfair as this restricts their choice of partners.

Therefore, the four members of the CCI decided to impose a penalty on Google at the rate of 5% of its total average revenue generated from India operations for the financial years 2013, 2014, and 2015, amounting to a total of Rs. 135.86 crore.

Corrigendum: This article initially stated that the CCI order was stayed, while the NCLAT had stayed only a part of it. The error is regretted.

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