Kaustubh Patil

The Commission imposed a penalty of Rs. 936.44 Crore on Google for abusing its dominant position in relation to its Play Store policies. The order was passed by the CCI after information under Section 19(1)(a) was provided by XYZ (Confidential Name), Match Group, Inc and Alliance of Digital India Foundation. The Director General of the Indian Revenue Service (DGDS) has concluded that Google has violated the provisions of Section 4(2)(c) of the Act by forcing app developers to exclusively use GPBS for in-app purchases on the Google Play Store. The CCI has imposed a provisional penalty of Rs. 936.44 crore on Google and directed it to deposit the penalty amount within 60 days. The Director General of the Confederation of Commerce and Industry (CCI) has concluded that Google has excluded other UPI apps as effective payment option on the Google play Store. The conduct amounts to violation of the provisions of Section 4(2)(c) of the Act.

INTRODUCTION:

In October, the CCI imposed a penalty of Rs. 936.44 Crore on Google for abusing its dominant position in relation to its Play Store policies.

The order was passed by the CCI after information under Section 19(1)(a) was provided by XYZ (Confidential Name), Match Group, Inc. and Alliance of Digital India Foundation resulting in an enquiry by the CCI for the alleged abuse of dominant position under Section 4 of the Act.

The informant averred that Google enjoys a dominant position in the relevant market(s) for licensable mobile OS for smart mobile devices in India, and the market for app stores for Android mobile OS in India and that Google enjoys a position of strength in both of these markets which enables it to operate independently of competitive forces and to affect its competitors/ consumers as well as these markets in its favour.

The Informant inter alia alleged that Google is abusing its dominant position in the markets for licensable mobile OS for smart mobile devices and app stores for Android OS by:

(a) mandating apps to use Play Store’s payment system and Google Play In-App Billing for charging their users for purchase of apps on Play Store and In-App purchases (which privileges Google Pay over other apps facilitating payment through UPI and mobile wallets), if they want to be listed on the Play Store;

 (b) unfairly privileging Google Pay inter-alia by pre-installing and prominently placing Google Pay on Android smartphones at the time of initial set-up resulting in a “status-quo bias” to the detriment of other apps facilitating payments through UPI as well as other methods of payment; etc.

INVESTIGATION BY THE DIRECTOR-GENERAL:

The DG after investigating in the matter under Section 26(1) of the Act concluded that:

1. Google was found to be following the practices that results in denial of market access for payment aggregators in violation of the provisions of Section 4(2)(c) of the Act
2. Further, by forcing app developers to exclusively use GPBS, Google was found to be leveraging its dominance in market for licensable mobile OS and app stores for Android OS, to protect its position in the market for Android in-app payment processing in violation of the provisions of Section 4(2)(e) of the Act.
3. The DG further concluded that Google has excluded other UPI apps as effective payment option on the Google play Store thereby violating Section 4(2)(a)(i) of the Act.
4. The DG also noted that Google’s conduct is also resulting in denial of market access to competing UPI apps since the market for UPI enabled digital payment apps is multi-sided, and the network effects will lead to a situation where Google Pay’s competitors will be completely excluded from the market in the long run. As per the DG, such conduct amounts to violation of the provisions of Section 4(2)(c) of the Act.
5. Further, being the gateway to Android smartphones due to dominance in the markets for licensable mobile OS and app stores for Android OS, Google was found to be uniquely placed to (and is) leveraging its dominance in favour of Google Pay UPI App in violation of the provisions of Section 4(2)(e) of the Act.

FINDINGS BY THE CCI

1. App developers cannot, within an app, provide users with a direct link to a webpage containing an alternative payment method or use language that encourages a user to purchase the digital item outside of the app (anti-steering provisions). Making access to the Play Store dependent on mandatory usage of GPBS for paid apps and in-app purchases is one sided and arbitrary and devoid of any legitimate business interest. The app developers are left bereft of the inherent choice to use payment processor of their liking from the open market

2. Google Pay has been integrated with intent flow methodology whereas other UPI apps can be used through collect flow methodology. It was noted that the intent flow technology is superior and user friendly than collect flow technology, with intent flow offering significant advantages to both customers and merchants and the success rate with the intent flow methodology being higher due to lower latency.

CONCLUSION BY THE CCI

1. Mandatory usage of GPBS for paid apps and in-app purchases constitutes an imposition of unfair condition on app developers and violates Section 4(2)(a)(i)
2. Non-usage of GBPS for YouTube amounts to discriminatory practice and non- payment of service fee violates Section 4(2)(a)(i) and 4(2)(a)(ii) of the Act.
3. Mandatory imposition of GPBS results in denial of market access for payment aggregators as well as app developers, in violation of the provisions of Section 4(2)(c) of the Act.
4. The practices followed by Google results in leveraging its dominance in market for licensable mobile OS and app stores for Android OS, to protect its position in the downstream markets, in violation of the provisions of Section 4(2)(e) of the Act.
5. Different methodologies used by Google to integrate, its own UPI app vis-à-vis other rival UPI apps, with the Play Store results in violation of Sections 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Act.

PENALTY IMPOSED BY THE CCI

Since Google failed to furnish data on revenue supported by certificates of Chartered Accountants, the CCI imposed a provisional penalty of 7 % of the relevant turnover r for the last three preceding financial years 2018-19, 2019-20 and 2020-21, as provided by Google and imposed a penalty of Rs. 936.44 crore and directed to deposit the penalty amount within 60 days of the receipt of this order.