2025 (3) TMI 388 - CCI - Law of Competition

Microsoft Defender bundling with Windows OS dismissed - no competition law violation found under Section 4

CCI dismissed allegations against Microsoft regarding bundling of Microsoft Defender with Windows OS. The Commission found no prima facie violation of ... Unfair competition - abuse of dominant position - imposition of an unfair condition, thereby violating Section 4(2)(a)(i) of the Competition Act, 2002. Does the inclusion of Microsoft Defender with the Windows operating system constitute an imposition of an unfair condition by Microsoft, thereby violating Section 4(2)(a)(i) of the Act? - HELD THAT:- The Commission observes from Microsoft's submissions that there is no compulsion on users to exclusively use Microsoft Defender as their antivirus solution. Users are free to install any third-party antivirus software of their choice, either through the internet or via the Microsoft Store. They can opt to continue using Microsoft Defender or replace it with a non-Microsoft solution on Windows. For antivirus applications that do not register with Windows through MVI, these can run in parallel with Microsoft Defender. However, if a user installs a third-party antivirus solution that registers itself with Windows through MVI as providing real-time protection, Microsoft Defender will automatically disable its real-time protection functionality. The Commission further notes that OEMs are also permitted to pre-install alternative third-party antivirus software on desktops and laptops running Windows OS. Additionally, other OS providers, such as macOS and ChromeOS, also include built-in antivirus functionality in place. Therefore, in the absence of an element of compulsion or imposition, prima facie there appears to be no violation of Section 4(2)(a)(i) of the Act. Has Microsoft's conduct resulted in an impediment to technical and scientific development in the market for antivirus applications, thereby violating Section 4(2)(b)(ii) of the Act? - HELD THAT:- The Commission notes that the Informant has not provided any evidence to substantiate that there has been any actual or potential impediment to technical and scientific development on account of Microsoft’s practices. Additionally, the Commission observes that there are many developers of antivirus software, and each of these providers routinely introduce new features and enhance their offerings to provide better services to customers. This ongoing innovation in the sector indicates that Microsoft's inclusion of Defender has not stifled technological advancement or deterred competition - allegations against Microsoft in respect of any actual or potential impediment to technical and scientific development appear to be largely speculative and lack relevant proof of harm, and prima facie there appears to be no violation of Section 4(2)(b)(ii) of the Act. Does Microsoft's conduct of bundling its own security software, Microsoft Defender, with the Windows Operating System violate Section 4(2)(d) of the Act? - HELD THAT:- The Commission does not agree with Microsoft’s integrative approach, which suggests that Microsoft Defender is merely a core security feature of Windows OS. The Commission highlights that there are independent manufacturers specializing in the development of antivirus software, indicating a separate consumer demand and, therefore, a distinct market for antivirus solutions. Furthermore, the Commission has already determined prima facie that Microsoft holds a dominant position in the ‘market for computer security (antivirus) software for Windows OS in India’. Given this, the first two conditions for anti-competitive tying—(i) the existence of two separate products and (ii) dominance in the tying product market (Windows OS) appear to be met in this case - the Commission is of the view that the allegation of the Informant under Section 4(2)(d) of the Act is not made out. Has Microsoft leveraged its dominant position in the market for operating systems for personal computers in India to safeguard its position in the market for computer security (antivirus) software for Windows OS, thereby violating Section 4(2)(e) of the Act? - HELD THAT:- The Commission notes that for a charge of leveraging to sustain, there must be evidence of an active restriction or conditionality imposed, rather than merely providing a product or service for use. In the present case, there is no indication that Microsoft has placed any restrictions or mandatory conditions on users regarding the use of Microsoft Defender. Consumers have the freedom to install and use third-party antivirus applications of their preference, without any technical or contractual barriers preventing them from doing so. Additionally, the cybersecurity market remains highly competitive, with several established players actively operating and offering a range of antivirus solutions. Therefore, in the absence of compelling evidence of restrictive practices, the allegation that Microsoft has leveraged its dominance in the operating system market to protect its position in the computer security software market, in violation of Section 4(2)(e) of the Act, does not appear to be substantiated. Has Microsoft restricted the development and market access of rival security software developers by making MVI membership a mandatory requirement for listing in the Microsoft Store thereby violating Section 4(2)(c) of the Act? - HELD THAT:- In response to the Informant’s claim regarding Kaspersky Lab’s antitrust complaints filed in 2016 with Russia's Federal Antimonopoly Service and in 2017 with the European Commission and the German Federal Cartel Office, alleging that Microsoft leveraged Windows 10 to promote its own antivirus software over third- party alternatives, Microsoft stated that it reached a settlement agreement with Kaspersky in 2017. Microsoft further clarified that the settlement had a global impact, leading to changes in Windows that were also implemented in versions released in India and remain available to users in the country - the Commission does not find alleged contravention of the provisions of Section 4 of the Act against Microsoft being made out. In view of the foregoing, the Commission is of the opinion that there exists no prima facie case of contravention and the information filed is directed to be closed under Section 26(2) of the Act. Conclusion - i) There is no prima facie case of contravention of Section 4 of the Competition Act, 2002, against Microsoft. ii) The information filed was directed to be closed under Section 26(2) of the Act. iii) The Commission granted confidentiality to the Informant and Microsoft for specific documents and information submitted during the proceedings. Application disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Competition Commission of India (CCI) were:Whether the inclusion of Microsoft Defender with the Windows operating system constitutes an imposition of an unfair condition, thereby violating Section 4(2)(a)(i) of the Competition Act, 2002.Whether Microsoft's conduct resulted in an impediment to technical and scientific development in the market for antivirus applications, violating Section 4(2)(b)(ii) of the Act.Whether Microsoft's bundling of its own security software, Microsoft Defender, with the Windows Operating System violates Section 4(2)(d) of the Act.Whether Microsoft leveraged its dominant position in the market for operating systems for personal computers in India to safeguard its position in the market for computer security (antivirus) software for Windows OS, thereby violating Section 4(2)(e) of the Act.Whether Microsoft restricted the development and market access of rival security software developers by making MVI membership a mandatory requirement for listing in the Microsoft Store, thereby violating Section 4(2)(c) of the Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Inclusion of Microsoft Defender with Windows OSRelevant Legal Framework and Precedents: Section 4(2)(a)(i) of the Competition Act, 2002, addresses the imposition of unfair conditions by a dominant entity.Court's Interpretation and Reasoning: The Commission noted that users are not compelled to use Microsoft Defender exclusively; they can install third-party antivirus software. OEMs can also pre-install alternative antivirus software.Key Evidence and Findings: Microsoft allows third-party antivirus software to run alongside Defender, and other OS providers include built-in antivirus functionalities.Application of Law to Facts: The lack of compulsion or imposition by Microsoft means there is no prima facie violation of Section 4(2)(a)(i).Conclusions: No violation of Section 4(2)(a)(i) was found.Issue 2: Impediment to Technical and Scientific DevelopmentRelevant Legal Framework and Precedents: Section 4(2)(b)(ii) concerns hindrance to technical or scientific development.Court's Interpretation and Reasoning: The Commission found no evidence of impediment to development due to Microsoft's practices. The market remains dynamic with continuous innovation.Key Evidence and Findings: Multiple antivirus developers continue to innovate, and Microsoft does not access privileged information from competitors.Application of Law to Facts: The allegations lacked substantiation of actual or potential harm to development.Conclusions: No violation of Section 4(2)(b)(ii) was found.Issue 3: Bundling of Microsoft Defender with Windows OSRelevant Legal Framework and Precedents: Section 4(2)(d) addresses anti-competitive tying of products.Court's Interpretation and Reasoning: The Commission identified four conditions for tying: separate products, dominance in the tying product market, lack of choice for consumers, and restriction of competition.Key Evidence and Findings: Microsoft Defender is integrated into Windows OS but users have the freedom to choose third-party solutions.Application of Law to Facts: The conditions for anti-competitive tying were not met as users are not coerced to use Defender, and competition in the antivirus market remains robust.Conclusions: No violation of Section 4(2)(d) was found.Issue 4: Leveraging Dominance in OS MarketRelevant Legal Framework and Precedents: Section 4(2)(e) concerns leveraging dominance in one market to protect another.Court's Interpretation and Reasoning: The Commission found no evidence of restrictions or conditions imposed by Microsoft on users regarding antivirus software.Key Evidence and Findings: The cybersecurity market remains competitive with multiple players.Application of Law to Facts: The absence of restrictive practices means no leveraging of dominance was found.Conclusions: No violation of Section 4(2)(e) was found.Issue 5: Restriction of Market Access through MVI MembershipRelevant Legal Framework and Precedents: Section 4(2)(c) addresses denial of market access.Court's Interpretation and Reasoning: The MVI program is optional and designed to enhance security solutions. Non-MVI developers are not restricted from distributing their applications.Key Evidence and Findings: Non-MVI applications can operate concurrently with Microsoft Defender and notify users of updates.Application of Law to Facts: The program is a facilitative measure rather than a gatekeeping mechanism.Conclusions: No violation of Section 4(2)(c) was found.3. SIGNIFICANT HOLDINGSThe Commission concluded that there was no prima facie case of contravention of Section 4 of the Competition Act, 2002, against Microsoft. The information filed was directed to be closed under Section 26(2) of the Act. The Commission granted confidentiality to the Informant and Microsoft for specific documents and information submitted during the proceedings.