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CCI Imposes ₹936.44 Crore Cost On Google, Says Google Play's Mandatory Billing System For Paid Apps & In-App Purchases Unfair

25 Oct 2022 2:42 PM GMT
CCI Imposes ₹936.44 Crore Cost On Google, Says Google Plays Mandatory Billing System For Paid Apps & In-App Purchases Unfair

The Competition Commission of India on Tuesday said it 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 and restrain from indulging in anti-competitive practices.

The order has been passed in respect of the "mandatory" usage of Google Play's Billing System (GBPS), for paid apps and in-app purchases - which the CCI said 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 [Competition] Act," it said.

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 Commission found Google to be dominant in the markets for licensable OS for smart mobile devices & market for app stores for Android smart mobile OS, in India," the CCI said in a press release.

CCI said selling of in-app services constitutes an important means for app developers to monetise 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," the competition regulator said.

The regulator further said that Google's Play Store policies require the App developers to exclusively and mandatorily use GPBS not only for receiving payments for Apps, distributed or sold through the Google Play Store, but also for certain in-app purchases.

"If the app developers do not comply with Google's policy of using GPBS [Google Play's Billing System], 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. 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," it said

The CCI said it examined the allegations of exclusion of rival UPI apps and found that Google Pay has been integrated with "intent flow methodology" whereas other UPI apps can be used through "collect flow methodology".

"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. Google has informed the Commission that it has recently changed its policy and has allowed rival UPI apps to be integrated with intent flow," the body explained in its press release.

The 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," it said further.

The CCI further said it 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 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," it held.

According to the CCI, the 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

CCI further said Google's practice of not using GPBS for Youtube is discriminatory. "This also amount 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," it said.

Directing Google to cease and desist from indulging in anti-competitive practices, the CCI asked it to implement following measures:

  • 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.
  • 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.
  • Google shall not restrict end users, in any manner, to access and use within apps, the features and services offered by app developers.
  • 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.
  • The competitively relevant transaction/ consumer data of apps generated and acquired through GPBS, shall not be leveraged by Google to further its competitive advantage. Google shall also provide access to the app developer of the data that has been generated through the concerned app, subject to adequate safeguards, as highlighted in this order.
  • 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.
  • Google shall ensure complete transparency in communicating to app developers, services provided, and corresponding fee charged. Google shall also publish in an unambiguous manner the payment policy and criteria for applicability of the fee(s).
  • Google shall not discriminate against other apps facilitating payment through UPI in India vis-à-vis its own UPI app, in any manner.

The CCI made following observations in the order:

  • Google enjoys a very strong position in the relevant market and the same is not upended by competition from third party app stores. Its Play Store is by far the most important app marketplace on the Android ecosystem.
  • Investigation has revealed that in addition to imposing a mandatory obligation to use Google Play Billing System, Google also restricts the ability of app developers to inform consumers within an app of the ability to purchase in-app content elsewhere
  • The app developer has no choice but to agree to the terms and conditions unilaterally decided by Google, otherwise they will not be able to access a vast pool of potential Android users in India.
  • Google receives the payments within a shorter and strict deadline from the payment aggregators. However, Google fails to observe such strict timeline when it comes to making payment to app developers wherein the payments are released after a gap of 15 to 46 days from the day of the transaction.
  • The Commission is of the view that gatekeepers like Google should not use their un-assailable position to require the app developers, which are dependent on them, to use any of their additional or other service together with its core services viz. app store services.
  • The Commission is of the view that the mandatory imposition of GPBS forecloses the opportunity for other payment processing service providers to serve the app developers in relation to the processing of payments for paid apps and IAPs.
  • Google would have access to competitively significant data of various apps listed on Play Store. Usage of GPBS by these apps, further adds to collection of additional data points from the users. Access to this data set of the downstream competitors, will result in competitive advantage for Google's owned services.

In a similar order, the CCI last week imposed a penalty of Rs. 1337.76 Crore on Google under Section 27 of the Competition Act, 2002, for abusing its dominant position in multiple markets in the Android Mobile device ecosystem.

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