In a relief to Android app developers and innovators, an Indian court has rejected Google’s appeal against an anti-monopoly court order that directs Google to not impose its own payment system on app developers that forces them to cough up commission as high as 30% and prevents them from offering cheaper payment options to the app users.

Upholding the order of Competition Commission of India (CCI) passed on 25 October 2022, the National Company Law Appeals Tribunal {NCLAT) also reduced the penalty of Rs.936.5 crore [USD 1.094 billion] to Rs.217 crore [USD 254 million] imposed by CCI.

NCLAT accepted Google’s contention that penalty of 7% can be computed only on the  “relevant revenue”  generated from Google Play Store, not the total revenue of Google in India..

However, NCLAT has upheld most part of the Competition Commission’s order that prescribes “behavioral remedies” for acceptable conduct in Indian market that has largest number of smartphone users.

Google in its contentions before the NCLAT challenged the findings of the CCI. It alleged wrong tests have been applied by CCI for assessing its market practices and the payment model. It said with its share of less than 1% in the India’s UPI payments system, it can hardly be accused of anti-competitive practices. “The Commission failed to note that Google Play constitutes only a miniscule portion i.e. less than 1% of the wider digital payment ecosystem in India.”

Google joins WhatsApp in getting hamstrung in India’s steely regulatory gridlock and earning a hard-hitting order with hefty fine from the market competition watchdog CCI.  WhatsApp also incurred a fine of Rs 214 crore (USD 25 million) for forcing its users to accept its policy of using their personal data for ads, or leave the platform. WhatsApp appeal is being heard in NCLAT which has temporarily lifted the ban on data sharing for advertisement purpose. But the two are not alone. Another bigtech OpenAI has questioned the very locus of Indian courts when challenged by Indian media companies from using their datasets for developing its ChatGPT artificial intelligence (AI) model.

What Was The CCI Order?

Notably, prior to the order the Competition Commission got an investigation done by a Director General level officer.

In its order, The Competition Commission observed that Google was found to be in violation of the provisions of Competition Act 2002 in the following:

1. “Making access to the Play Store, for app developers, dependent on mandatory usage of GPBS [Google Play Billing System] for paid apps and in-app purchases constitutes an imposition of unfair (condition) on app developers.”
2. “Google is found to be following discriminatory practices by not using GPBS for its own applications i.e., YouTube. 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.”
3. “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.”
4. “Mandatory imposition of GPBS by Google, also results in denial of market access for payment aggregators as well as app developers.”
5. “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.”
6. “Different methodologies used by Google to integrate its own UPI app vis-a-vis other rival UPI apps with the Play Store.”
7. “The Commission holds Google to be dominant in the first two relevant markets i.e., market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India. Further, Google is also found to have abused its dominant position.”
   

Directions to Google: Behavioral Remedies

1. Prohibition on Blocking Third Party Billing  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.
2. Prohibition on Anti-Steering Provisions  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. 
3. Prohibition on Control of App Users  Google shall not restrict end users, in any manner, to access and use within apps, the features and services offered by app developers. 
4. Transparency in Data Policy  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.
5. No Leveraging of Transactions Data  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. 
6. No Unfair  Conditions on App Developers  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. 
7. Publish Payment Policy  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). 
8. No Discrimination for Opting Out of Google UPI  Google shall not discriminate against other apps facilitating payment through UPI in India vis-avis its own UPI app, in any manner.”
   

Commission’s Observations and Counters to Goggles Appeal

“Why No GPBS On Its Own YouTube?”
“It has also been found during investigation that Google is following discriminatory practices by not using GPBS for its own applications i.e., YouTube. Therefore, the Commission concurs with the finding of the DG that Google has imposed unfair and discriminatory conditions in violation of the Act. This also amount to imposition of discriminatory pricing as Google’s own apps i.e., YouTube is not paying the service fee as being imposed on other apps covered in the GPBS requirements,” the Commission noted.

“Google to be dominant in the market for licensing OS for smart mobile device in India and market for app stores for android smart mobile in India. Google charges service fee which in few cases extend to 30% of revenue which is unfair and discriminatory. Google has also been adopting discriminatory practices.”

“Google is paying only fee of 2.35% to payment processor with regard to its app ‘YouTube’ whereas it imposes service fee of 15 to 30% on other apps. Discriminatory practices result in competitive disadvantages to the competitor of Google in downstream market by increasing their costs.”

“Those Who Do Not Use GBPS, Can Not List Their Apps On Play Store”
The Commission noted that Google has made the use of GPBS mandatory and exclusive for processing of payments for apps and in-app purchases. If the app developers do not comply with Google’s demand 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. Further, 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. The Commission held that the conduct of Google constitutes an imposition of unfair condition on app developers.

Mandatory GPBS Limits Innovation, Stifles Competition, Raises Costs
“Mandatory imposition of GPBS limits innovation in the market. Evidences were placed before the DG, by other market players to the effect that charging of exorbitant service fee of 15 to 30% has a cascading impact. Increased cost is to be absorbed by the developer leaving lesser amount to research to improve app quality. The mandatory requirement for GPBS has significant negative effect on the improvements and innovative solutions that third party payment processors would be able to bring to the market.”

Google’s Data Collection Policy shows that it “has access to significant volume and category of granular data of the app users including complete personal as well as financial transaction information. By having control on the data, Google is in position to put its competitors in a disadvantageous position in the downstream market. Google has provided unfairly long settlement period which is being perpetuated through mandatory GPBS.”

“Unlike, industry practice of making payment in 2-3 days, Google provides itself a leeway wherein the payments are released after a gap of 15 to 46 days from the day of transaction, this is unfair for app developers especially small app developers. If the app developers would have freedom to choose a payment processor of their choice, they would be able to receive payment in shorter time.”

“Non-UPI and UPI Modes Not the Same Market”
“The submission of the Appellant that other digital payments like wallet, debit card, credit card, net banking are substitutable with payment through UPI app cannot be accepted. The Commission has considered the submissions elaborately and has returned its finding. The Commission has rightly held that UPI enable digital payment apps and debit/credit cards based payments do not fall in the same market. The Commission has also noticed the difference between payment through UPI and net banking and held that there is no substitutability between payment through UPI and transfer through net banking. Similarly, the Commission has also examined and held that payment to UPI and mobile wallets are two different things.”

“CCI Can Not Wait for Actual Harm To Be Done To Competition”
Rejecting Google’s contention that no harm was visible on which such order could  be passed, the Commission said this means “the Commission would always have to wait for actual harm in the form of market distortion and consumer detriment to occur and would be barred from protecting the consumer before such harm has occurred.” “… a holistic reading of the Competition Act 2002 would show that it aims to combat the evils of not only anti-competitive harm that has already occurred but also to prevent conduct likely to cause such anti-competitive harm.”