On Tuesday (October 25), the Competitions Commission of India (CCI) imposed a penalty of Rs 936.44 crore on Google for exploiting its dominant position in the market with regard to its Play Store policies. The Commission also ordered Google to alter its conduct within a specific time window.
Competition Commission of India (CCI) imposes a penalty of Rs 936.44 cr on Google for abusing its dominant position with respect to its Play Store policies, apart from issuing a cease-and-desist order. CCI also directed Google to modify its conduct within a defined timeline: CCI pic.twitter.com/5WwKTciXnG
— ANI (@ANI) October 25, 2022
App stores have become a vital means for app developers to distribute their applications to end users, and the availability of app store(s) is directly reliant on the Operating System (OS) installed on a smart device. An analysis of the market dynamics in India for licensable mobile operating systems reveals that Google’s Android OS has successfully reaped the indirect network benefits, as per reports. Google’s Play Store is the primary avenue for app developers in the Android mobile ecosystem. This allows Google to capitalize on the applications brought to the market.
According to the findings of the CCI, Google is dominant in the market for licensable OS for smart mobile devices and app stores for Android smart mobile OS in India.
In-app digital goods sales are a significant method for app developers to commercialize their creations or innovations. However, in order for in-app digital goods to be provided to purchasing users, developers must configure their apps so that Google’s payment system processes all digital goods purchases.
Notably, Google’s Play Store policies require App developers to use Google Play’s Billing System (GPBS) not only for receiving payments for Apps (and other digital products such as audio, video, and games) distributed/sold through the Google Play Store but also for certain in-app purchases, which are purchases made by App users after they have downloaded/purchased the App from the Play Store. Google has also been found to be favoring Google Pay over other competing apps through its control over the Play Store and the Android Operating System which leads to disadvantages for both the apps facilitating payment through UPI and the users.
Furthermore, app developers may not provide users with a direct link to a webpage featuring an alternative payment option within an app, nor may they use language that urges a user to purchase the digital item from outside of the app as per the anti-steering provisions.
The CCI has also investigated complaints that competitor UPI apps were excluded from being viable payment options on the Play Store. Google Pay was found to be linked with intent flow methodology, whilst other UPI apps can be utilized with collect flow methodology. It was observed that intent flow technology is superior and more user-friendly than collect flow technology, with intent flow providing major benefits to both customers and merchants, and the success rate with the intent flow methodology is higher due to lower latency. Google has recently revised its rules and now allows competing UPI apps to be integrated with the intent flow, according to the CCI.
“In the light of the analysis of the various evidence, the DG concluded that Google has made the use of GPBS mandatory and exclusive for processing of payments for apps and in-app purchases for the apps downloaded from the Google Play Store. Moreover, the DG found that Google is following discriminatory practices by not using GPBS for its own application, YouTube. Therefore, Google imposes unfair and discriminatory conditions in violation of the provisions of Section 4(2)(a)(i) of the Act. 27,” the CCI order stated.
In terms of penalty computation, the CCI found significant errors and extensive disclaimers in Google’s presentation of key revenue data elements. However, in the interest of justice and to ensure that required market corrections take place promptly, the CCI quantified the interim monetary penalty based on the data given by Google. As a result, the CCI issued a preliminary penalty of 7% of Google’s average relevant turnover, amounting to Rs. 936.44 crores, for violating Section 4 of the Act. Google has been given 30 days to furnish the necessary financial information and supporting documents.
It is worth noting that The CCI imposed a penalty of Rs 1,337.76 crore on the tech behemoth for abusing its market dominance in certain segments of the Indian ecosystem for Android-based mobile devices. Google was told to quit using unethical business tactics by the fair trade regulator on October 20.
