INDIA. Mumbai: The Competition Commission of India (CCI) imposed a penalty of Rs. 936.44 crores on Google for abusing its dominant position with respect to its Play Store policies, apart from issuing a cease-and-desist order, on Tuesday.
The Commission also directed Google to modify its conduct within a defined timeline and gave 30 days to provide the requisite financial details.
The Commission imposed a penalty @ 7% of its average relevant turnover on a provisional basis, for violating Section 4 of the Competition Act, 2002. It also directed the company to desist from indulging in anti-competitive practices.
For app developers, app stores have become a necessary medium for the distribution of their apps to the end users and the availability of app store(s) is directly dependent on the operating system (OS) installed on a smart device.
An appreciation of the market dynamics in licensable mobile operating systems in India makes it evident that Google’s Android OS has successfully reaped the indirect network effects.
The Commission found Google to be dominant in the markets for licensable OS for smart mobile devices and market for app stores for Android smart mobile OS, in India.
Selling of in-app digital goods constitutes an important means for app developers to monetize 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.
Google’s Play Store policies require the App developers to exclusively and mandatorily use Google Play’s Billing System (GPBS) not only for receiving payments for Apps (and other digital products like audio, video, and games) distributed/sold through the Google Play Store but also for certain in-app purchases (purchases made by users after they have downloaded/ purchased the App from the Play Store).
Besides, app developers cannot, within an app, provide users with a direct link to a webpage containing an alternative payment method or use language that encourages a user to purchase the digital item outside of the app, the Commission’s statement read.
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 and thus, lose out on 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 was unfair, the Commission observed.
The Commission noted that Google Pay has been integrated with intent flow methodology whereas other UPI apps can be used through collect flow methodology. With intent flow offering significant advantages, its success rate is higher due to lower latency.
The Commission concluded that making app developers dependent on mandatory usage of GPBS for paid apps and in-app purchases, constitutes an imposition of unfair conditions.
The mandatory imposition of GPBS, also results in the denial of market access for payment aggregators as well as app developers.
Also, Google was following discriminatory practices by not using GPBS for its own applications i.e. YouTube, which is not paying the service fee being imposed on other apps covered in the GPBS requirements.
The practices followed by Google resulted in leveraging its dominance in the market for licensable mobile OS and app stores for Android OS, to protect its position in the downstream markets.
The different methodologies used by Google to integrate, its own UPI app vis-à-vis other rival UPI apps, with the Play Store resulted in the violation of Sections 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Act.
As such Google shall not restrict app developers from using any third-party billing/ payment processing services, either for in-app purchases or for purchasing apps, the Commission stated.
The above fine is in addition to the fine of Rs 1,337.76 crore imposed on Google for alleged anti-competitive practices, especially related to Android mobile devices on October 20.
In that order, the Commission directed Google not to offer any incentives to smartphone makers for exclusively carrying its search services.
It also asked the company to allow users to choose their default search engine at all search entry points, especially during the initial device setup.
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