Google Play Store Dispute: NCLAT Delhi Directs Google To Deposit 10% Of Penalty Amount

Background Facts

Alphabet Inc. is a multinational technology conglomerate holding company, created through a restructuring of Google on 02.10.2015. It became the parent company of Google and several former Google subsidiaries. Google LLC (formerly Google Inc.) is a Delaware limited liability company and wholly owned subsidiary of Alphabet Inc. Google provides a variety of information technology related services and an internet search service. Google’s core business activities are Chrome, Gmail, Google Drive, Google Maps, Android, Google Play, Search, and YouTube. Google India Private Limited (“Google India”) is an indirect subsidiary of Google LLC.

App stores have become a necessary medium for app developers for distributing their apps to the end users. Google’s Play Store is the main distribution channel for app developers in Android mobiles, which allows its owners to capitalize the apps brought to market.

The Competition Commission of India (“CCI”) Bench comprising of Mr. Ashok Kumar Gupta (Chairperson), Ms. Sangeeta Verma (Member) and Mr. Bhagwant Singh Bishnoi (Member), adjudicated a complaint filed in XYZ (Confidential) v Alphabet Inc.& Ors., Case No. 07 of 2020, wherein allegations of abuse of dominant position by Google were raised.

The app developers essentially monetize their innovations by selling of in-app digital goods. Google’s Play Store policies require the App developers to mandatorily use Google Play's Billing System (GPBS) for receiving payments for Apps and in-app purchases from the Play Store. 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. Thus they lose out the vast pool of potential customers in the form of Android users.

The CCI Bench regarded the act of making access to the Play Store dependent on mandatory usage of GPBS for paid apps and in-app purchases as 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.

The CCI Bench held that Google has violated the provisions of Section 4 of Competition Act, 2002 in the following manner:

• Making access to the Play Store, for app developers, dependent on mandatory usage of GPBS for paid apps and in-app purchases is imposition of unfair condition on app developers.
• Google followed discriminatory practices by not using GPBS for its own applications i.e., YouTube.
• Mandatory imposition of GPBS by Google results in denial of market access for payment aggregators as well as app developers.
• 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.
• Mandatory imposition of GPBS disturbs innovation incentives and limits technical development in the market.

The CCI Bench by invoking its powers under Section 27 of the Competition Act, had imposed monetary 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.

In January 2023, Google filed an appeal before the NCLAT, challenging the Order passed by CCI imposing a penalty of Rs. 936.44 Crore on Google.

Proceedings Before NCLAT

In a hearing held on 11.01.2023, the NCLAT Bench admitted Google’s appeal, subject to deposit of 10% of the penalty amount of Rs. 936.44 Crore. Further, the Bench declined to grant any interim relief. The matter is next listed on 17.04.2023.

Case Title: Alphabet Inc. & Ors. v Competition Commission of India & Ors.

Case No.: Competition App. (AT) No. 4 of 2023

Counsel For Appellants: Mr Harish Salve, Sr. Advocate, Mr Sajan Poovayya, Mr Karan S Chandhiok, Ms Avaantika Kakkar, Ms Deeksha Manchanda, Mr. Kaustav Kundu, Ms Ruchi Verma, Mr. Tarun Donadi,Ms Havika Chabbra, Mr Aaksha Agarwal, Ms Vanya, Ms Gitanjli Duggal, Ms Aditi Gopalakrishnan, Mr Thomas Bohnett, Ms Smita Adrews, Advocates.

Counsel for Respondent: Samar Bansal, Mr Manu Chaturvedi, Advocates for R1. Mr Jayant Mehta, Ms Sonam Mathur, Mr Abir Roy, Dinoo Muthappa, Mr Dhruv Dikshit, Mr Aman Shankar, Mr vivek Pandy, Mr Srikar, Advocates for R2. Mr Abir Roy, Mr. Vivek Pandey, Mr Aman Shankar, Ms Sukanya Vishwanathan, Advocates for R3. Mr T Sundar Ramanathan, Mr Vivek Pandey, Ms Sukanya Viswanathan, Mr. Aman Shankar, Advocate/Intervenor for Matrimony .Com Ltd. Mr. Davander Prasad, Dy. Director CCI.

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