CCI orders probe into Google's User Choice Billing system

The Competition Commission of India (CCI) on Friday directed its Director General (Investigation) to investigate Google after taking a prima facie view that the company is abusing its dominant position in the market through its User Choice Billing (UCB) system [People Interactive India Private Limited and Ors v Alphabet Inc and Ors]..A coram of Chairperson Ravneet Kaur and members Anil Agarwal, Sweta Kakkad, and Deepak Anurag noted that as per Google's internal documents, it could break even by charging 6% of the revenue share on paid app downloads, but was charging upto 30%."Based on this 6% break-even revenue share, Google is charging 4 to 5 times of its cost to the app developers which on a prima facie level appears to be disproportionate to the economic value of services being rendered to the app developers and appears to be an abuse of dominant position by Google," the Commission's order stated..The Commission was hearing a plea by Indian Broadcasting and Digital Foundation (IBDF), the Indian Digital Media Industry Foundation (IDMIF) and a few companies alleging that Google’s updated payment policies on Google Play Store violated Section 4 (abuse of dominant position) of the Competition Act..In September 2022, Google introduced UCB where app developers offering digital content can offer alternative billing systems (ABS) alongside Google Play Billing System (GPBS) for apps as well as in-app purchases (IAPs)Google announced that for transactions processed through GPBS (on apps offering digital content), it would continue to impose a 10%, 15% or 30% service fee or commission. For ABS transactions, the commission was reduced to 6%, 11% or 26%..As per the informants, the policy skews and disrupts market competition in the downstream app markets and continues to favour Google's apps while cementing its position in the payment processing market as well. They alleged that the model made only 3% of the app developers bear the entire cost of all the developers on the Play Store by charging them an exorbitant service fee / commission without any commensurate additional services.Further, Google’s service fee was also alleged to be excessive on the ground that it has no reasonable economic relation to the services provided by Google..On the other hand, among other things, Google contended that the Commission is not a price regulator, and it should show restraint while considering claims about the level of the Google Play service fee. .The Commission stated that where the market is characterized by significant entry barriers coupled with the presence of a dominant player, the antitrust regulators may intervene if the dominant player engages in pricing practices that harm consumers or stifle competition."While the long-term solution continues to be ensuring a competitive marketplace, in the short term the intervention by the antitrust regulators to prevent unfair pricing assumes importance in critical internet based economic activities. In consonance with this approach, Section 4(2)(a)(ii) of the Act specifically proscribes imposition of unfair price in purchase or sale of goods or service by a dominant enterprise," it observed. .Based on Google's internal documents, the Commission noted that it could break even by charging only 6% of the revenue share of app purchases as well as IAPs.It observed that app developers have insignificant bargaining power and are forced to accept terms that deter legitimate competition and increase costs of their operation."Sufficient degree of competition in the available channels for distribution of apps would have allowed discovery of a competitive and fair price. However, it appears that Google has used its virtual monopoly power to reap trading benefits which it would not have reaped if there had been effective competition," the Commission stated. Given this complete dependence of app developers on Google Play Store, the price being charged by Google appears to be unfair, the Commission further held.Further, the Commission noted that developers have to additionally spend 20% on advertising across Google's platforms and third-party apps.Such a portion of revenue flowing to Google suggested a potential imbalance in the ecosystem that necessitated a thorough examination, it said.The Commission further observed that the system was also being selectively implemented while also not providing any objective metric or rationale for distinguishing between digital content/services and physical content/services..Accordingly, the Commission took the prima facie view that the User Choice Billing (UCB) system's implementation required an investigation by the Director General for potential violation of section 4(2)(a), 4(2)(b) and 4(2)(c) of the Competition Act..Senior Advocate Jayant Mehta appeared for People Interactive India Private Limited (PIIPL).Advocates Abir Roy, Aman Shankar, Vivek Pandet, Udit Dedhiya and Sasthibrata Panda from Sarvada Legal appeared for PIIPL as well as Mebigo Labs..Senior Advocate Rajshekhar Rao along with advocates Pallavi Shroff, Yaman Verma, Parinita Kare, Ritwik Bhattacharya, Rohan Bhargava, Shivek S Endlaw from Shardul Amarchand Mangaldas appeared for IBDF and IDMIF. They were accompanied by Rishi Sharma and Siboney Sagar, representatives of IBDF and IDMIF..Senior Advocate Sajan Poovayya and advocates Karan Singh Chandhiok, Deeksha Manchanda, Avaantika Kakkar, Kaustav Kundu, Tarun Donadi, Bhavika Chhabra, Palash Maheswari, Raksha Agrawal and Aditya Sahagal from Chandhiok & Mahakan appeared for Google. They were accompanied by Thomas Bohnett, Aditi Gopalkrishnan and Richa Srivastava, representatives of Google..[Read Order]