Competition Commission of India: While deciding upon the complaint filed against Google alleging contravention of the provisions of the Competition Act, 2002 the bench of Ashok Kumar Gupta (Chairperson), Sangeeta Verma and Bhagwant Singh Bishnoi (Members), held that Google has a dominant position in the market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India; and it has abused its dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(a)(ii), Section 4(2)(b)(ii), Section 4(2)(c) and Section 4(2)(e) of the Competition Act, 2002.
The Bench also directed Google to cease and desist from indulging in anti-competitive practices that have been found to be in contravention with Section 4. The Commission also imposed a penalty of Rs. 936.44 crore upon Google for violating Section 4 and directed it to deposit the penalty amount within 60 days of the receipt of this order.
Facts and Allegations:
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The informants stated that Google’s business model is based on interaction between the online products and services it offers free of charge to users and its online advertising services, from which it derives most of its revenue. It was also stated that Google's core products include- Google Chrome, YouTube, Gmail, Google Maps and Play Store etc., and these services collectively are part of Google Mobile Services (GMS).
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The Informant further stated that in addition to its core products, Google also launched a Unified Payment Interface (UPI) based payment app called Tez in India, which was rebranded as Google Pay in order to unify Google's payment offerings globally under the ‘Google Pay' brand.
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The Informant alleged that Google, through its control over the Play Store and Android Operating System (OS), is favouring Google Pay over other competing apps. As per the Informant, this amounts to abuse of its dominant position by Google in violation of various provisions of Section 4 of the Act.
Investigations by the Director General [DG]: During the investigation, the DG identified certain other parties which were concerned with the products of Google like Google Play Store and Google Play Billing System (GPBS) within the scope of the present investigation. Based on the analysis of the factors specified in the Competition Act, DG delineated- Market for licensable mobile OS for smart mobile devices in India; Market for App Stores for Android OS in India; and Market for apps facilitating payments through UPI, as relevant markets.
The DG concluded that Google is dominant in the relevant markets for licensable mobile OS for smart mobile devices in India and the market for App store for Android OS in India. It was further noted that Google imposed unfair and discriminatory conditions in violation of Section 4 of the Competition Act, 2002.
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.
Concerning pre-installation of Google Pay app, the DG noted that the facility of preinstalling their apps is also available to other competing UPI apps like Paytm, PhonePe etc. No exclusivity was observed by the DG in the agreements entered into by Google with Original Equipment Manufacturers (OEMs) so far as pre installation of competing UPI apps is concerned. Thus, the investigation did not find sufficient evidence to indicate that Google has abused its dominant position so far as the issue pertaining to preinstallation of Google Pay UPI App is concerned.
Analysis and Findings of the Commission: The Commission perused the matter in a detailed manner and observed the following-
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Relevant Markets:
The Commissions noted that in licensable mobile operating system in India makes it evident that Google's Android OS has successfully reaped the indirect network effects that characterize the market of operating systems, which essentially are multi-sided platforms. With its large user base, Android OS is the most preferred licensable OS for app developers, and it is the most valued licensable operating system for any new OEM.
All relevant factors that define competition landscape, indicate that the relevant market of licensable mobile operating systems in India has tipped in favour of Google Android OS. Thus, the Commission concluded that Android OS and thereby, Google, enjoys a dominant position in the relevant market of licensable operating systems for smart mobile devices in India.
Concerning relevant market for app stores for Android OS in India, the Commission noted that Play Store is by far the most important app marketplace on the Android ecosystem. Play Store is significant from the point of view of smart mobile device users who consider this as a ‘must have' app and it is perceived to be indispensable for reaching out to the entire spectrum of Android device users.
The dominance of Play Store stems from the strong indirect network effects that work in its favour, with its large user base as well as a large number of app developers who depend on Play Store to access these users and maximise their reach and revenue potential. These factors, along with Play Store's automatic update functionalities; its close integration with Google Play Services; lack of substitutability between android app store and other OS app stores; and high entry barriers, lead to a reasonable conclusion that Google Play Store occupies a dominant position in the relevant market of app stores for Android OS in India.
Concerning market for apps facilitating payments through UPI in India, the Commission was of the view that this market is a unique relevant product market given its rapid growth trajectory since 2016. In relation to relevant geographic market, the conditions of competition for supply of UPI apps in homogenous across India including the regulatory framework was noted by the Commission. Consequently, the Commission deemed it appropriate to consider ‘India’ as the relevant geographic market for apps facilitating payments through UPI.
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Alleged Abuse of Dominant Position:
Perusing Section 4 of the Competition Act, the Commission identified 3 issues namely-
Whether making the use of GPBS, exclusive and mandatory by Google for App developers/owners for processing of payments for App and in-app purchases and charging 15-30% commission is violative of Section 4(2)? The Commission was of the view that information available on record is not sufficient to give a finding on the monetization model, followed by Google.
Whether exclusion of other UPI apps/mobile wallets as effective payment options on Play Store is unfair and/or discriminatory as per Section 4(2)? The Commission was of the view that Google has differentiated between Google Pay UPI app and other competing UPI apps such as, BHIM, Paytm, PhonePe, etc. by integrating its own payment offering using intent flow technology, while the other UPI apps have access to only the collect flow technology on the Play Store. It was concluded that Google has discriminated between developers of similarly placed apps for equally placed transactions.
The Commission also noted that Google's conduct is also resulting in denial of market access to competing UPI apps and the network effects will lead to a situation where Google Pay's competitors are at a competitive disadvantage in the long run.
It was pointed out that being the gateway to Android smartphones due to dominance in the relevant markets, Google is uniquely placed to (and is) leveraging this dominance in favour of Google Pay.
Whether pre-installation and prominence of Google Pay app is in violation of Section 4(2)? The Commission noted that the investigation did not examine the aspect of default status of G-Pay, regarding which the Commission was of the view that setting Google Pay app as the default payment application can outweigh, or even nullify, the benefits of having multiple payment applications pre-installed.
It was further pointed out that the DG has not examined the implication of tying Google Pay app with the other apps/ services of Google under the Revenue Sharing Agreements. Accordingly, the Commission was not inclined to give any finding on this aspect as well, and the same was left open for appropriate scrutiny.
Conclusions Drawn:
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Making access to the Play Store, for app developers, dependent on mandatory usage of GPBS for paid apps and in-app purchases constitutes imposition of unfair condition on app developers.
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Google is found to be following discriminatory practices by not using GPBS for its own applications i.e., YouTube.
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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, which amounts to limiting technical development in the market for in-app payment processing services. Mandatory imposition of GPBS also results in denial of market access for payment aggregators as well as app developers.
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Practices followed by Google has resulted in it 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 Competition Act.
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Different methodologies used by Google to integrate its own UPI app vis-à-vis other rival UPI apps with the Play Store, has resulted in violation of Sections 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Competition Act.
Remedies/Directions:
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Google must ensure that its policies are in alignment with the special responsibilities cast upon it being a dominant entity holding the position of a gatekeeper in the Android ecosystem.
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Google shall allow, and not restrict app developers from using any third-party billing/ payment processing services, either for in-app purchases or for purchasing apps. Google shall also not discriminate or otherwise take any adverse measures against such apps using third party billing/ payment processing services, in any manner.
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Google shall not impose any Anti-steering Provisions on app developers and shall not restrict them from communicating with their users to promote their apps and offerings, in any manner.
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Google shall set out a clear and transparent policy on data that is collected on its platform, use of such data by the platform and also the potential and actual sharing of such data with app developers or other entities, including related entities.
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Google shall not impose any condition (including price related condition) on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to the app developers.
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Google shall not discriminate against other apps facilitating payment through UPI in India vis-à-vis its own UPI app, in any manner.
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The Commission allowed Google, the period of three months from the date of receipt of this order to implement necessary changes in its practices and/or modify the applicable agreements/ policies and to submit a compliance report to the Commission.
[XYZ v. Alphabet Inc., 2022 SCC OnLine CCI 63, decided on 25-10-2022]
Advocates who appeared in this case :
For Alphabet Inc., Google LLC, Google Ireland Limited, Google India Private Limited and Google India Digital Services Private Limited (Opposite Parties/Google)- Mr. Sajan Poovayya, Senior Advocate with Mr. Karan Chandhiok, Ms. Deeksha Manchanda, Ms. Raksha Aggarwal, Ms. Avaantika Kakkar, Mr. Kaustav Kundu, Ms. Ruchi Verma and Mr. Tarun Donadi, Advocates along with Ms. Auraellia Wang, Mr. Thomas Bohnett and Ms. Smita Ann Andrews;
For Match Group, Inc.- Mr. Jayant Mehta, Senior Advocate with Ms. Sonam Mathur, Ms. Dinoo Muthappa, Mr. Abir Roy, Mr. Dhruv Dikshit, Advocates along with Mr. Mark Buse, Representative of Match Group;
For Alliance of Digital India Foundation- Mr. Abir Roy and Mr. Vivek Pandey, Advocates along with Mr. Tom Thomas, Representative of ADIF.
*Sucheta Sarkar, Editorial Assistant has prepared this brief.