Google’s Many Battles With Indian Startups, Regulators

At the fag end of 2022, Google CEO Sundar Pichai landed in India for the big tech major’s flagship event, Google For India summit. During his December visit, he met Prime Minister Narendra Modi and even shared a stage with IT Minister Ashwini Vaishnaw.

The trip had come at a time when Google got pulled up by the Competition Commission of India (CCI) for abusing its dominance in the Android devices market and its Play Store policies.

During this visit, Pichai spoke about Indian startups in detail and lauded the sophistication of the homegrown ecosystem. Little did he know that a few months later, the tech juggernaut would be at the daggers drawn with the very startups he had been all praises for.

In the past few weeks, Indian startups, including the likes of Matrimony, Shaadi and MapmyIndia have publicly questioned and taken potshots at Google.

So far, Indian startups have dragged Google to courts over the latter’s contentious user-choice policy and Matrimony.com has even obtained an injunction against the tech major in this regard. While Google was supposed to implement the mandates by April 26, there has been radio silence on whether it was actively enforcing those rules.

Though the tech giant has been at the centre of a regulatory quagmire in India for a while, a quiet storm has been brewing against it for some time now.

The first major hit came in the form of two back-to-back penalties by CCI after the competition watchdog found the company guilty of employing anti-competitive practices in the Indian market for perpetuating its dominance in the digital arena.

However, while the fines were somewhat of an issue, the bigger concern at Google seemed to be the sweeping reforms needed to comply with CCI’s directives. While the Android ruling deserves a story of its own, the Play Store policies emerged as a bastion of resistance by Indian startups. 

In its Play Store ruling, CCI left nothing to the imagination and termed the mandatory imposition of Google’s in-house billing system, called Google Billing and Payments System (GBPS), as hindering innovation, which resulted in the denial of market access for payment aggregators as well as app developers.

Indian Authorities Vs Google

The Play Store verdict culminated into a two-year-long investigation, which commenced after an anonymous informant filed a complaint against Google with the CCI in early 2020. After a gap of eight months, the competition watchdog ordered a full-fledged probe into Google. 

Over the course of the year 2021, US-based Match Group, which counts brands such as Tinder, Hinge, Match, OkCupid and Plenty Of Fish as its subsidiaries, also filed a case with the CCI against Google. Close on the heels of that, the Alliance of Digital India Foundation (ADIF) also filed a complaint against the US-based tech major. 

Over the course, CCI took separate calls on both complaints and merged them with its original case. After much back and forth, August 2022 changed the course of the investigation as CCI began final hearings on the matter. In a span of two months, Google was found guilty of flouting norms and was charged 7% of the average India revenues in the past three years, or equivalent to INR 936 Cr.

Of all the things CCI pulled up the company for, GBPS saw specific attention owing to concerns around 15-30% commission charged to developers. While 15% was charged on the first $1 Mn revenue earned by the developer each year, anything beyond that attracted a commission of 30%.

CCI also slammed Google for mandating its payment system and sought reforms allowing developers to use third-party payment systems.

The story moved forward and Google mounted multiple legal defences in the Android devices cases even as they flattened out one by one in India Courts, from appellate tribunals such as NCLAT to the Supreme Court. Alongside, Google acted swiftly and stopped the implementation of GBPS and began working on new norms that would replace its existing in-app billing policy.

While this panned out, another trouble was brewing for the company around the corner. The Parliamentary Standing Committee on Finance summoned Google executives as part of a fact-finding mission to look into the anti-competitive stance of big tech players.

Google told the panel that just about 3% of the developers on the Play Store paid a commission while the rest were its developer tools and services for free.

This is what opened the floodgates of litigation for the company.

First Whispers Of Trouble 

In its only public reaction to date, Google, in January 2023, termed the antitrust directives a big blow to digital adoption in the country.

By this time, an SC bench was hearing Google’s appeal in the Android devices case. In what was one of the first public bids by an Indian startup to counter Google in the court of law for alleged anti-competitive policies, OSlabs Technology, the parent company of app marketplace Indus App Bazaar, filed an impleadment plea before the Apex Court challenging Google’s plea for quashing the CCI directives. 

Close on the heels of that, geotech startup MapMyIndia also filed an plea before the SC, seeking to make it a party to the case and accused the tech major of depriving the market of competition. 

Sensing trouble, Google filed an appeal with NCLAT against CCI’s INR 936 Cr penalty and, alongside, announced sweeping changes to its Play Store policies to comply with CCI’s rulings. While a startup termed the changes ‘cosmetic’, it was here that ADIF first raised the issue of hefty commissions, in the range of 11%-26%, that would eventually form the bedrock of its case against Google. 

In February this year, Google extended the ability to offer third-party payments to all developers while ADIF underlined that it was exploring all options to challenge tech major’s new user choice billing mechanism. By March, Indian startups banded together with ADIF and were seen chalking out plans to take legal action against the tech giant. 

After a protracted legal trouble that largely ended up against it, Google then suddenly, in April, withdrew its NCLAT petition with respect to CCI’s Play Store directives. 

The Digital David Vs Goliath

Around this time, began a full-fledged legal war between Google and Indian startups. In quick succession, ADIF with the tacit support of homegrown startups, moved the Delhi High Court, with a 744-page plea, seeking to keep the new user choice billing system in abeyance.

The move was backed by startups such as MapmyIndia, Paytm, Matrimony, and TrulyMadly. 

In the weeks after, the HC heard the two sides even as CCI was also roped in as a party to the case. In the ensuing drama, ADIF counsel urged the court to direct the competition watchdog to take up the complaints of the Indian startups with regard to flouting anti-competitive norms by Google.

In its plea, ADIF noted that the new payment norms were a ‘cloaked version’ of the previous billing regime and were part of Google’s attempts to circumvent CCI’s directions. 

Subsequently, the HC, in a mixed verdict for both sides, issued directions to the competition watchdog to look into the matter and filed a report in the matter. 

As the proceedings of the case went on, BharatMatrimony, part of Matrimony.com, also mounted a legal challenge against Google, but, this time, the startup cited violations of RBI’s Payments and Settlements System Act to bolster its case. 

The plea was built on the premise that Google was flouting RBI guidelines by charging commissions from developers when the PSS Act, specifically, forbade companies from charging users for certain digital payments.

In what was a major verdict in favour of startups, the Madras HC barred Google from delisting the Matrimony app for non-compliance with the new billing mandates until June 1. 

In a spate of public statements, Indian startup founders such as Matrimony CEO Murugavel Janakiraman termed Google a threat to Indian startups while Shaadi CEO Anupam Mittal likened the tech major to ‘Digital East India Company’ for charging Lagaan from Indian developers. 

While this played out, infighting also broke out at IAMAI as founders expressed their displeasure over the industry body’s overtures towards tech giants in the case of a separate competition-related saga involving Google, much to the chagrin of Indian startup members. 

Google And Its Many Battles In India

This is not the first instance where Google has landed in hot waters in the country. It has had run-ins, in the past, with government agencies for failing to curb fake news on its platforms. Google has invited the ire of officials over the slow processing of takedown requests and failure to crack down on digital lending apps.

In addition, a Parliamentary panel’s report on big tech directly took potshots at Google and called for institutional reforms to reign in such players. 

In the middle of a regulatory quicksand, Google could also face heat in the future from the Committee on Digital Competition Law (CDCL), which is in the process of formulating digital competition rules. 

Besides a plethora of legal cases that it is fighting with other entities, Google also seems to be directly hit by sweeping regulatory reforms undertaken by the government in the digital space in the past few years. Be it the new IT amendments or the proposed Digital India Act, Google is at the centre of it all. 

Making matters worse are proposed self-regulatory organisations (SROs) and appellate tribunals, which put Google liable and answerable to complaints from Indian users. Additionally, the Telecommunication Bill, which is looking at regulating OTT messaging apps, could also impact its offerings and increase compliance.

These mandates have made the journey a tad bit difficult for the tech major, which counts India as one of its biggest markets. A case in point is FY22 numbers, which saw Google India generating about INR 24,926.5 Cr in gross advertisement revenues. In addition, the Indian arm’s total revenue from operations stood at INR 9,286 Cr ($1.13 Bn) against a net profit of INR 1,238.9 Cr in FY22. 

While the latest data is scarce, Google last claimed that Indian apps and games witnessed a 200% increase in monthly active users and an 80% increase in consumer spending in 2021 versus 2019. The company also said that time spent by Indian users on apps also grew by 150% during the same period.

Google had a near total monopoly in the Indian search market at the end of 2022, accounting for a market share of 99.74%. Google’s Android also had a clear monopoly in the operating system market in India, with a 95.26% market share. Despite being a big user base for Google, India still contributed a mere $1.1 Bn to the company’s total $279.8 Bn revenue in FY22.

While India presents a massive opportunity for Google, the regulatory and legal troubles have chipped off some sheen from the Indian markets. While India would continue to remain its focus, Google refuses to catch a breath, moving from dousing one fire to another.