Competition Commission of India (CCI): The Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members), prima facie opined that alleged conduct on the part of Google merit detailed investigation.
Present information was filed under Section 19(1)(a) of the Competition Act, 2002 by the XYZ — Informant against Alphabet Inc. — OP 1, Google LLC — OP 2, Google Ireland Limited — OP 4 and Google India Digital Services Private Limited — OP 5 alleged contravention of provisions of Section 4 of the Competition Act, 2002. OPs collectively referred to as ‘Google/Opposite Parties’.
Factual Matrix
Informant averred that other than Android and Google Search, Google’s core products include a web browser and online video streaming service as web-based e-mail service, an online mapping, navigation and geolocation service, an app store, etc. The said services are part of Google Mobile Services i.e. the bundle of Google apps and services that Google licenses to smartphone manufacturers/Original Equipment Manufacturers.
Re-branding of ‘Tez in India’ to ‘Google Pay’
In addition to the core products of Google, Google launched a Unified Payment Interface (UPI) based payment app called Tez in India, which was rebranded as Google Pay. With UPI, everyone with a bank account in India can create a Virtual Payment Address and start transacting using a mobile phone.
OP-1 is to be the holding company of OP-2.
Allegations | Google Pay being favoured over the Android Operating System
Informant alleged that Google, through its control over the Play Store and Android Operating System (OS) is favouring Google Pay over other competing apps, to the disadvantage of both i.e. apps facilitating payment through UPI, as well as users.
Informant has alleged that Google, through its control over the Play Store and Android Operating System (OS), is favouring Google Pay over other competing apps, to the disadvantage of both i.e. apps facilitating payment through UPI, as well as users.
As per the Informant, the above amounts to an abuse of its dominant position by Google in violation of various provisions of Section 4 of the Act.
Analysis
Opposite Parties requested the Commission to dismiss the Informant’s confidentiality claims including on his identity. It has been stated that Google’s ability to sufficiently defend its position will be compromised if it cannot have access to the background context and other facts relevant to the present issues, including whether or not the Informant has sufficient standing.
Commission noted that allegations of the Informant are primarily two-fold i.e. :
(a) mandatory use of Google Play’s payment system for purchasing the apps & In-App Purchases in the Play Store
(b) excluding other mobile wallets/UPI apps as one of the effective payment options in the Google Play’s payment system.
In relation to mandatory use of Play’s payment system for paid apps & in-app purchases, the Commission is of prima facie view that mandatory use of application store’s payment system for paid apps & in-app purchases restricts the choice available to the app developers to select a payment processing system of their choice especially considering when Google charges a commission of 30% (15% in certain cases) for all app purchases and IAPs.
The resultant market power being enjoyed by Google due to its grip over the Android ecosystem apparently resulted in ‘allegedly’ high commission fee of 30%.
As per the Informant, other payment processing solutions charge a significantly lower fee for processing payments.
While stating that the ‘allegedly’ high fee would increase the cost of Google’s competitors and might affect their competitiveness, Commission opined that it is of prima facie view that imposition of such condition is unfair in terms of Section 4(2)(a) of the Act. Hence various pleas of Google like offering a secured system, the necessity of Play’s billing system etc., can be appropriately examined during the investigation.
Commission also noted that the mandatory use of application store’s payment system for paid apps & in-app purchases along with the associated issue of alleged ‘high’ service fee/commission has been a matter of concern in other parts of the world as well.
Adding to the above, bench stated that the conduct of Google amounts to imposition of unfair and discriminatory condition, denial of market access for competing apps of Google Pay and leveraging on the part of Google, in terms of different provisions of Section 4(2) of the Act.
Pre-installation and prominence of Google Pay on Android Smartphones
Pre-installation of GPay may create a sense of exclusivity and default as users may not opt for downloading competing apps.
It appears that Google already has a significant market presence in UPI based digital payment applications market and it may affect the evolving and transitory market in its favour. In such a stage of evolution, Google using its market position in applications relating to licensable mobile OS, search engine, app store, browser, etc. to enter into contractual arrangements with OEMs for pre-installation of GPay, may disturb the level playing field.
in view of the state, Commission agreed with the Informant and prima facie opined that alleged conduct on the part of Google merit detailed investigation.
Search manipulation and Bias by Google in favour of Google Pay
Informant contended that Google rigged its featured app lists in favour of Google Pay.
Informant alleged that the prominent placement of Google Pay amounts to a violation of Section 4 of the Act as it results in:
(i) imposition of an unfair condition on users and the broader payments ecosystem including other apps facilitating payments through UPI;
(ii) imposition of a discriminatory condition on mobile wallets and other apps facilitating payment through UPI;
(iii) limitation of technical and scientific development;
(iv) denial of market access; and
(v) leveraging.
Commission further opined that manipulation of features on/by the dominant platform, along with other self-preferencing means, may work as a potent instrument to divert traffic to its newly launched app and thus interfering with the process of ‘competition on the merits’.
Having considered the allegations holistically, the Commission noted that except the bald assertions made by the Informant, nothing on record is there to evidence such manipulation as alleged by the Informant hence Commission opined that no investigation could be ordered on the basis of assertions made by the informant which are neither corroborated or otherwise substantiated.
The mere allegations in the form of screenshots which are not supported/corroborated by any other material, cannot be the basis for launching an anti-trust inquiry.
Decision
In view of the above, the Commission held that a detailed investigation is warranted as OPs have contravened various provisions of Section 4 of the Competition Act, 2002.
Commission directed the Director-General to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act.
Hence, a case is made out against Google for directing an investigation by the DG. [XYZ v. Alphabet Inc., 2020 SCC OnLine CCI 41, decided on 09-11-2020]
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