Prima facie abuse of dominance by Google: CCI calls for DG investigation into Google Play Store payment system, exclusivity given to GPay

The Competition Commission of India (CCI) has ordered for a Director General (DG) investigation into allegations that Google is favouring its Google Pay (GPay) payments system over other apps, through its control over the Play Store and Android Operating System.

In its order passed yesterday, the CCI has taken the prima facie view that the conduct of Google amounts to imposition of unfair and discriminatory conditions, denial of market access for apps competing with Google Pay, and leveraging of its position in the markets, thus amounting to an abuse of dominant position in terms of Section 4(2) of the Competition Act, 2002.

The order passed by Chairperson Ashok Kumar Gupta and Members Sangeeta Verma and Bhagwant Singh Bishnoi was passed based on information submitted by an anonymous informant.

The informant had alleged that Google enjoyed dominance in the following relevant markets:

a) market for licensable mobile OS for smart mobile devices;

b) market for app stores for Android OS; and

c) market for apps facilitating payment through UPI.

It was contended that the tech giant was abusing its dominant position by,

• Unfairly privileging Google Pay by prominent placement on the Play Store, Android OS and Android based smartphones;

• Rigging its featured app lists to include Google Pay in categories;

• By manipulating the search advertisements algorithm on the Play Store in favour of Google Pay;

• By pre-installing and prominently placing Google Pay on Android smartphones;

• Mandating apps to use Play Store’s payment system and Google Play In-App Billing for charging their users;

• Imposing unfair terms on users by requiring them to use Google Pay which is not in compliance with the data localisation directive issued by Reserve Bank of India and the guidelines issued by NPCI.

At the outset, Google challenged the locus of the informant, whose identity was not revealed. It referred to a recent decision of the National Company Law Appellate Tribunal (NCLAT), which stated that information could be filed under the Act only by a person who has suffered invasion of his legal rights.

It went on to make the following submissions to counter the informant’s allegations:

• Google does not favour the GPay app in Play’s search rankings

• It does not grant unmerited prominence to GPay in Play and both Google and non-Google services,

• It does not manipulate ads on Play and it ranks ads on the basis of the same principles (bid amount, relevance, and quality)

• The GPay app is not preinstalled on all Android devices and is not the default payment app.

• The GPay app is not the exclusive payment method on Play.

Dealing with the issue regarding the informant’s anonymity, the CCI held,

“Informant need not necessarily be an aggrieved party to file a case before the Commission. Neither the Act specifies any such requirement explicitly, nor the same can be implicitly read into the provisions which clearly point towards the inquisitorial system envisaged by the Parliament. Further, it is because of the inquisitorial scheme of the Act, that the Commission in appropriate cases, defends its orders in higher forums, regardless of the fact as to who brought such case before it, which is not a normal feature in adversarial proceedings.”

It then went on to deal with the allegations set forth in the information received.

Exclusivity regarding mode of payment for app purchase

The Commission took the prima facie view that mandatory use of the Google Play Store payment system for paid apps and in-app purchases restricts the choice available to app developers to select a payment processing system of their choice. This, especially considering the fact that Google charges a commission of 30% (15% in certain cases) for all app purchases. It went on to note,

“Further, considering that Play is the dominant source of downloading apps in the Android OS (90% of the downloads) and its condition requiring use of application store’s payment system for paid apps & in-app purchases, it appears that Google controls the significant volume of payments processed in this market. The resultant market power being enjoyed by Google due to its grip over Android ecosystem apparently resulted in ‘allegedly’ high commission fee of 30%. As per the Informant, other payment processing solutions charge significantly lower fee for processing payments…such ‘allegedly’ high fee would increase the cost of Google’s competitors and thus might affect their competitiveness vis-à-vis Google’s own verticals.”

The Commission also noted that it needs to be seen whether Google would have access to data collected from the users of its downstream competitors, which would enable it to improve its own services. The order reads,

On the point of exclusivity given to Google Pay on the Play Store, the Commission took the prima facie view that the user experience while using Google Pay was better as compared to using other UPI (Unified Payments System) based apps.

“This difference has the potential to shift users towards adopting Google Pay over other UPI based payment apps. Therefore, it becomes critical to examine whether such difference in the process, favoured Google Pay to the disadvantage of other competing apps. Further, given the apparent better user experience for intent flow, it also needs to be examined whether Google allows other UPI based payment apps to be integrated using intent flow.”

Pre-installation and prominence of Google Pay on Android smartphones

The CCI held,

“It is observed that pre-installation of GPay may create a sense of exclusivity and default as users may not opt for downloading competing apps. 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…

…Although, Google has contended that such arrangements are optional, its market position in different streams of smart mobile device ecosystem cannot be discounted in the relationship with OEMs."

Thus, it held that it was appropriate to understand the nature of such contractual arrangements and whether they harm the process of competition in the market for UPI-based payment apps. This aspect is also required to be investigated by the DG.

On the allegations of search manipulation and bias by Google in favour of Google Pay, and prominent placement of Google Pay on the Play Store, the CCI held the evidence put forth by the informant to be inadequate, and thus did not order a probe into these aspects.

On the alleged exclusivity requirement imposed by Google resulting in unfair terms being imposed on users, it was held,

“…NPCI vide letter dated 31.01.2020 has informed RBI that Google is fully compliant with the requirements of relevant RBI circular dated 06.04.2018. In relation to data sharing requirements of NPCI, Google has submitted that GPay app (Tez) was launched in compliance with the relevant circular of NPCI, and that formed the basis of NPCI’s approval for the app…The Commission observes that compliance with the sectoral regulations/guidelines by any regulated entity has to be examined by the concerned regulator.”

In view of these observations, the CCI has directed the DG to complete the investigation into the above mentioned aspects within sixty days.