Introduction

The Competition Commission of India recently passed a final order closing a case against Microsoft under the Competition Act (‘Act’). The CCI briefly looked at the allegations made by the Informant in the relevant markets of ‘licensable Operating Systems (OSs) for desktop/ laptops’ and ‘antivirus software for licensable OSs on desktop/ laptop’ and held that there is no prima facie case of violation made out. In such a case, it shut the matter under section 26(2) of the Act. The Commission further granted confidentiality to certain documents filed by the parties under applicable regulations and section 57 of the Act.

Facts of the case

The Informant in this case sought confidentiality over his identity while filing the case. Some of the key allegations as levied by the Informant include the tech giant engaging in bundling its operating software ‘Windows’ with ‘Defender’, i.e. the company’s computer security (antivirus) offering. The Informant as part of its submission alleged that Microsoft is leveraging its dominance in the ‘operating software for desktop/ laptops’ market to cement its position in the antivirus software market. The Informant further alleged that the terms and conditions of the Microsoft Virus Initiative (MVI) program are anti-competitive in nature which ultimately result in foreclosure of the market in favour of the company. Last but not the least, the Informant also alleged that the company obtains unauthorised access to commercially sensitive information of competing antivirus software developers in order to improve its own product thereby distorting the level play field in the market. All these allegations were made in violation of section 4 of the Act, i.e. abuse of dominant position.

Position of the CCI

The CCI passed a final ruling on the basis of rival submissions made by the parties. The CCI did not order a DG investigation into the matter where the investigative wing could examine respondent’s officials on oath and obtain third-party information to verify the claims made by the parties. The CCI based its ruling on Microsoft’s submissions where it observed that there is no compulsion on users to exclusively use Microsoft Defender as their antivirus solution. It further held that there is no impediment to scientific development as OS providers are consistently developing and rolling out new features, updates, and performance upgrades in the market. The Commission copied and pasted the Respondent's submissions on, at least, two occasions as its own observations where it held that the company ‘neither extracts nor has access to any technologically privileged information from other antivirus programs, including those participating in the MVI program’ and ‘MVI program is designed to support organizations in improving their security solutions on Windows by providing necessary tools, resources, and knowledge to develop effective, reliable, and compatible products.’ All in all, no case for violation of the Act is made out by the Informant.

Unresolved issues

The gravamen of the complaint was that Microsoft is bundling its ‘Windows OS’ with ‘Defender antivirus software’ in order to leverage its dominance in the upstream market of licensable Operating Systems (OSs) for desktop/ laptops to cement its position in the ‘antivirus software for licensable OSs on desktop/ laptop’ market. What remains missed in the order is that the Commission, at no point in time, acknowledged the fact that such markets exhibit ‘network effects’ and increased ‘economies of scale’. This aspect is crucial as it is widely perceived that such markets tip-off in the favour of incumbent within a span of 3-5 years and therefore special approach is warranted to intervene in these matters. There is a pronounced risk of leading to a ‘winner-takes-all’ or ‘winner-takes-most’ situation acting as an anathema to competition. Such is the contrast that the government has identified ‘Operating Systems (OSs)’ as one of the core digital services in the draft Digital Competition Bill (DCB), 2024 highlighting this special approach (‘ex-ante’) in order to promote competition in the markets.

The lapse in policy was pervasive. For instance, the Commission while passing a detailed order in the Umar Javeed case, another digital markets case, referred to the business model of the Respondent, i.e. Google. Similarly, it used the ‘special responsibility’ argument to nip the Respondent in another digital markets case (WhatsApp privacy policy case). None of this was utilised in the given case, even though, Microsoft (like Google) remains a multi-product company and it was well beyond the threshold defined for dominance in, at least, one of the delineated RMs.

On merits, one of the key issues identified in the case was differentiation between pre-installation, pre-activation and default status of an antivirus software. The Commission has erred in making this distinction. To put it in other words, pre-installation is a pre-requisite for any software to be pre-activated on a system and a combination of pre-installation and pre-activation could be termed as a ‘default’ setting. The competition authorities across the globe have consistently held that such default settings could be detrimental to competitive process as the same exploits the behavioural bias on the part of the consumers in the favour of the incumbent. The Commission rather juxtaposed its own reasoning on the market by stating that users could multihome antivirus softwares on their systems. The other concern remains Microsoft obtaining commercially sensitive information of competing developers to ultimately better its own offering to the detriment of competition and fair play in the market. The Commission ought to have conducted an independent assessment of such an allegation rather than approving submissions of the Respondent as a ‘finding’.

Conclusion

This is a final order passed by the CCI. The petitioner may file an appeal against the order under section 53(B) of the Act. Given that the Informant in this case hasn't shown any in-personam damage, the grounds of appeal have to be in-rem. Some of the key issues which may find traction at the appellate stage is the past decisional practice of the Commission. Other area of contention could be the vast regulatory and inquisitorial powers vested in the CCI which were given a pass in this case.