The Competition Commission of India (CCI) on October 25 announced that it has concluded its investigation into Google Play Store, fining the company ₹936 crores (US$ 113 million) and ordering it to implement the following changes to its app store within three months:
- App developers must be allowed to use third-party billing systems: “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,” the order states. Currently, app developers are required to use Google Play’s Billing System (GPBS) and pay the company a commission between 10-30 percent. Recently, however, Google announced that certain app developers in select countries can use third-party billing systems.
- No 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,” the order states. Anti-steering provisions refer to rules that disallow app developers from directing users to external web pages containing an alternative payment option or even using language within the app that encourages a user to purchase the digital item outside of the app.
- No restrictions on what users can access: “Google shall not restrict end users, in any manner, to access and use within apps, the features and services offered by app developers.”
- Transparent data use 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,” the order reads.
- Data cannot be used to further Google’s own competitive advantage: “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,” the order states. Developers have complained time and again that Google uses data to its own advantage such as to build competing apps.
- No unfair conditions on 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,” the order reads. This broadly worded decision could be used to crack down on this commission charged by Google, which developers have argued as being too high and disproportionate for the services that the company provided.
- Complete transparency in fees: “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),” the order reads.
- No discrimination against other UPI apps: “Google shall not discriminate against other apps facilitating payment through UPI in India vis-à-vis its own UPI app, in any manner,” the order states. UPI players complained that Google Pay is provided as the default app for Play Store purchases, making it harder for other UPI apps to compete in this market.
In response to the decision, a Google spokesperson told MediaNama:
“Indian developers have benefited from the technology, security, consumer protections, and unrivaled choice and flexibility that Android and Google Play provide. And, by keeping costs low, our model has powered India’s digital transformation and expanded access for hundreds of millions of Indians. We remain committed to our users and developers and are reviewing the decision to evaluate the next steps.”
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Why does this matter?
This decision is the result of three complaints filed against the Google Play Store including complaints by Tinder-parent Match Group and an association of start-ups in India called the Alliance of Digital India Foundation (ADIF). The most significant challenge to the Play Store came from the latter in November 2020 after Google announced in September 2020 that the use of the in-app billing system is mandatory for all apps. Indian startups immediately rebuked it and filed a complaint with CCI through ADIF.
The order makes India the second country, after South Korea, to mandate Google allow third-party billing systems. Other countries are, however, not far behind in imposing similar mandates on Google. For example, the Netherlands has mandated this for dating apps, the EU has included provisions in its upcoming Digital Services Act (DSA) to this effect, and the US is looking to pass the Open Markets Act.
The order comes right on the heels of CCI on October 20 fining Google ₹1338 crores (~$162 million) for abusing its dominant position in the multiple markets related to its Android ecosystem and prescribing a stringent list of modifications that Google must pursue to its Android policies.
The order also foreshadows what is to be expected from the CCI investigation into Apple, which was launched in December 2021.
Which practices of Google Play are anti-competitive?
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.
CCI listed the following practices of Google that are in contravention of various provisions under Section 4 of the Competition Act, 2000:
- Mandatory use of Google Play Billing for Play Store access: “Making access to the Play Store, for app developers, dependent on mandatory usage of GPBS for paid apps and in-app purchases 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 Act,” CCI noted. “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, 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,” CCI added.
- Google not using GBPS for its own apps like YouTube: “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. Thus, Google is found to be in violation of Section 4(2)(a)(i) and 4(2)(a)(ii) of the Act.”
- Imposition of GBPS curbs innovation: CCI noted that 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.”
- Denial of market access to developers and competing payment aggregators: The “mandatory imposition of GPBS by Google, 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,” CCI stated.
- Protecting dominance in downstream markets: CCI observed that “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.”
- Integration of Google Pay with Play Store: “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 observed. “It was found that Google Pay has been integrated with intent flow methodology whereas other UPI apps can be used through collect flow methodology. It was noted that 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,” CCI added.
Monetary penalty not final: CCI
As in the Android case, the ₹936 crores fine imposed by CCI on Google is not final. The regulator noted that “there were glaring inconsistencies and wide disclaimers in presenting various revenue data points by Google” and hence it issued provisional monetary penalties.
Google has been given 30 days to provide the requisite financial details and supporting documents, after which the fine will be recalculated.
Note: This post was updated with Google spokesperson’s comments on October 26, 10:00 am.
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