SUMMARY
The CCI found Google prima facie in violation of various sections of the competition law
The CCI's director general has been directed to file a detailed report with two months after conducting an investigation into the matter
The development comes close on the heels of Google delisting apps of multiple Indian startups for not complying with its user choice billing system
Following a recent standoff between Indian startups and Google, the Competition Commission of India (CCI) on Thursday (March 15) ordered a probe into the tech giant’s contentious user choice billing system.
The antitrust watchdog prima facie found Google in violation of various sections of the competition law. The CCI’s director general has been directed to file a detailed report within two months after conducting an investigation into the matter.
“In view of the foregoing, the Commission is of the prima facie view that Google has violated the provisions of Section 4(2)(a), 4(2)(b) and 4(2)(c) of the Act, as elaborated supra which warrants detailed investigation… The Commission also directs the DG to complete the investigation and submit a consolidated investigation report within a period of 60 days from the date of receipt of this order,” the CCI order said.
The order comes in response to three separate cases filed by People Interactive India (parent entity of Shaadi.com), Mebigo Labs (Kuku FM’s parent), and industry bodies Indian Broadcasting and Digital Foundation (IBDF) and Indian Digital Media Industry Foundation (IDMIF) against the tech giant.
All three parties accused Google of violating Section 4 of the Competition Act. The biggest grievance was the 11% to 26% commission charged from app developers even on payments made through alternate billing systems.
As per the startups, the excessive service fee has led to the app developers having less resources at their disposal to develop their app offerings. Moreover, they also alleged that several of them would be forced to shut shop owing to high operational costs, causing denial of market access to such app developers.
The Fine Print
In its ruling, the CCI acknowledged Google’s “unassailable” position in the app market. It noted that Google claimed to require just 6% of the revenue share from paid downloads and in-app purchases (IAPs) to break even on the services provided by the Google Play Store.
Highlighting the disparity in Google’s claims and actual charges it levies from apps, the Commission said, “Google is charging four to five 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 competition watchdog also made a slew of other observations:
- The Android app marketplace space is characterised by significant entry barriers and virtually absence of any competition
- Google enjoys a strong ‘network effect’ of a large base of users and apps developers, making the tech major’s position unassailable in the app store market
- Prima facie, the present Android app marketplace ecosystem is not self-correcting and thus, does not enable determination of fair market price
- App developers have insignificant bargaining power against Google and are forced to accept terms that deter legitimate competition
- App developers have no choice but to agree to the terms and conditions unilaterally decided by Google or lose access to a vast pool of potential Indian Android users
- Google has used its virtual monopoly power to reap trading benefits which it would not have reaped if there had been effective competition
- Given this complete dependence of app developers on Google Play, the price being charged by the big tech major appears to be unfair in itself
- The revenue distribution model within the Google Play Store appears skewed in favour of Google, with app developers potentially facing substantial costs
Among other things, the CCI also took cognisance of industry bodies IBDF and IDMIF’s contention that Google was discriminating among similarly placed apps in the OTT space.
“The app Amazon Prime Video app offers IAPs but the use of GPBS (Google Play Billing System) has not been mandated on that app so it is free to use its own embedded payment system. It is therefore alleged that Google is selectively and arbitrarily imposing its payments policy upon certain app developers in a discriminatory manner,” noted the CCI order.
The order comes close on the heels of Google delisting a host of Indian apps from its Play Store on March 1 for not complying with its user choice billing system. Impacted by this, Indian startups made a beeline to meet union ministers and other senior officials of the Ministry of Electronics and Information Technology.
After multiple meetings between startups and ministers Ashwini Vaishnaw and Rajeev Chandrasekhar, the tech giant eventually agreed to reinstate the apps it delisted on March 5.
