CCI Imposes Over Rs 936 Crore Penalty On Google For Anti-Competitive Practices

The Competition Commission of India (CCI) has imposed a penalty of Rs 936.44 crore on Google for abusing its dominant position with respect to its Play-Store policies, apart from issuing a cease-and-desist order.

The Commission also directed Google to modify its conduct within a defined timeline.

For app developers, app stores have become a necessary medium for distribution of their apps to the end users and the availability of app store(s) is directly dependent on the OS (operating system) installed on a smart device.

An appreciation of the market dynamics in licensable mobile operating systems in India makes it evident that Google’s Android OS has successfully reaped the indirect network effects.

Google’s Play-Store constitutes the main distribution channel for app developers in the Android mobile ecosystem, which allows its owners to capitalize on the apps brought to market.

Based on its assessment, the CCI found Google to be dominant in the markets for licensable OS for smart mobile devices and market for app stores for Android smart mobile OS, in India.

Selling of in-app digital goods constitutes an important means for app developers to monetize their creations/innovations.

However, for in-app digital goods to be distributed to purchasing users, developers must configure their apps so that all purchases of the digital goods go through Google’s payment system, which processes the transactions.

Google’s Play-Store policies require the app developers to exclusively and mandatorily use Google Play's Billing System (GPBS) not only for receiving payments for apps (and other digital products like audio, video, games) distributed/sold through the Google Play-Store but also for certain in-app purchases - purchases made by users of apps after they have downloaded/ purchased the app from the Play-Store.

Further, 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).

If the app developers do not comply with Google’s policy of using GPBS, they are not permitted to list their apps on the Play-Store and thus, would lose out the vast pool of potential customers in the form of Android users.

The app developers are left bereft of the inherent choice to use payment processor of their liking from the open market.

The CCI has also examined the allegations of exclusion of rival UPI apps as effective payment options on Play-Store. It was found that 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.

Based on its assessment, the CCI concluded that, making access to the Play-Store, for app developers, dependent on mandatory usage of GPBS for paid apps and in-app purchases constitutes an imposition of unfair condition on app developers.

Thus, Google is found to be in violation of the provisions of Section 4(2)(a)(i) of the Act.

Google is found to be following discriminatory practices by not using GPBS for its own applications - YouTube. This also amounts to imposition of discriminatory conditions as well as pricing, as YouTube is not paying the service fee as being imposed on other apps covered in the GPBS requirements.

Thus, Google is found to be in violation of Section 4(2)(a)(i) and 4(2)(a)(ii) of the Act.

Mandatory imposition of GPBS disturbs innovation incentives and the ability of both the payment processors as well as app developers to undertake technical development and innovate and thus, tantamount to limiting technical development in the market for in-app payment processing services in violation of the provisions of the Act.

Thus, Google is found to be in violation of the provisions of Section 4(2)(b)(ii) of the Act.

Mandatory imposition of GPBS by Google, also 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.

The practices followed by Google results in leveraging its dominance in the 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.

Accordingly, in terms of the provisions of Section 27 of the Act, the CCI hereby directs Google to cease and desist from indulging in anti-competitive practices that have been found to be in contravention of the provisions of Section 4 of the Act, as detailed in this order.

In relation to computation of penalty, the CCI noted that there were glaring inconsistencies and wide disclaimers in presenting various revenue data points by Google.

However, in the interest of justice and with an intent of ensuring necessary market correction at the earliest, the CCI quantified the provisional monetary penalties on the basis of the data presented by Google.

Accordingly, the CCI imposed a penalty at 7 per cent of its average relevant turnover amounting to Rs 936.44 crore upon Google on provisional basis, for violating Section 4 of the Act.

Google has been given a time of 30 days to provide the requisite financial details and supporting documents.