Google Abused Dominant Position Through Restrictive App Store Billing Policy But Didn't Deny Market Access: NCLAT Reduces Penalty From ₹936 Cr To ₹216 Cr

The National Company Law Appellate Tribunal (NCLAT), New Delhi bench of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member) has partially upheld the decision of the Competition Commission of India (CCI) that Google leveraged its dominance in the Play Store ecosystem to promote Google Play which violates section 4(2)(e) of the Competition Act, 2002. The Tribunal however held that there was no violation of section 4(2)(c) as conduct of Google did not deny market access to the payment processors and aggregators. It observed that reduction of market share by less than 1% cannot be read to mean denial of market access. It further held that Google did not hinder innovation under Section 4(2)(a)(ii) since the broader UPI payment market remained open. The Tribunal reduced the penalty imposed by the CCI from Rs.936.44 crores to Rs. 216.69 crore (imposed earlier in October 2022) based on 'relevant turnover' of Google's Play Store, rather than the turnover of the entire company. Background Google LLC launched an app store for Android phones called Play Store i.e. Google Play. On 17.08.2017, Google India Digital Private Limited launched a payment app- 'Tez' based on Unified Payment Interface (UPI). In August 2018, Tez App was renamed as 'Google Pay'. On 09.11.2020, the Commission directed the Director General (DG) to investigate the Appellant based on information submitted to CCI under section 19. The DG submitted its report on 16.03.2022. On 01.09.2022, Google introduced a user-choice billing pilot for non-game developers in India. On 14.09.2022, the CCI requested financial details of Google Play's revenue and profits in India. Google submitted this information on 06.10.2022. The CCI issued its final order on 25.10.2022 (impugned order). By the impugned order, the Commission issued various directions against the Appellant and imposed a penalty of Rs. 936.44 crore under Section 27(b) of the Act. Alphabet Inc., with three other Google entities (Appellants), challenged the impugned order passed by the CCI under Section 27 of the Competition Act, 2002. Submissions for the AppellantCounsel for the Appellant submitted that the Commission's identification of the market as “apps facilitating payment through UPI in India” was flawed, as all digital payment modes are substitutable from the consumer perspective. It was submitted that Google demonstrated no abuse of dominance in integrating UPI apps differently on Google Play. The Commission misapplied legal tests on dominance. It found Google violated Sections 4(2)(a)(ii), 4(2)(c), and 4(2)(e) despite concluding Google was not dominant. Without dominance, abuse cannot be established. The Commission also erred in alleging leverage under Section 4(2)(e). It failed to (i) define relevant markets, (ii) specify anti-competitive conduct, and (iii) establish a causal link between dominance in one market and influence in another. It was submitted that the Commission incorrectly held that Google Play's Billing System (GPBS) violated Section 4(2)(a)(i) without applying the “fairness or reasonability test” as laid down by the CCI in Indian National Shipowners' Assn. vs. ONGC. The observation that GPBS was “one-sided and arbitrary” and devoid of any legitimate business interests was without any basis. Further, the Commission failed to demonstrate that Google's conduct caused anticompetitive effects in the undefined downstream markets. It was submitted that the Commission was required to carry an 'effect analysis' to prove an abuse of dominance, as held in Google LLC & Anr. vs. CCI (1st Google Case). Shri Sajan Poovayya challenging the penalty imposed under Section 27(2) submitted that the CCI erred in quantifying the penalty based on Google's entire turnover in India rather than Google's relevant turnover i.e. turnover attributable to Google Play. It was also submitted that DG's investigation ignored the principle of natural justice by excluded key stakeholders from its inquiry, including Google's largest competitor for app distribution, Apple. Submissions for the Respondent Counsel for the Respondent submitted that the Act aims to combat not only anti-competitive harm that has already occurred but also to prevent conduct likely to cause such harm. Referring to the 1st Google Case, it was argued that 'effect analysis' is required to determine abuse of dominance under Section 4, including conduct capable of causing harm. It was contended that the Commission correctly analyzed the DG Report, Google's response, and other evidence, and returned findings on violations of Sections 4(2)(a)(i), 4(2)(a)(ii), 4(2)(b), 4(2)(c), and 4(2)(e). The Commission properly defined the 'relevant market' and held that UPI-enabled digital payment apps and debit/credit cards do not fall in the same market. It was further submitted that Google charges a service...

Google Abused Dominant Position Through Restrictive App Store Billing Policy But Didn't Deny Market Access: NCLAT Reduces Penalty From ₹936 Cr To ₹216 Cr

Tazeen Ahmed

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