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posted 4 years ago
On 9 November 2020, the Competition Commission of India (“CCI”) ordered a detailed investigation into Google’s alleged anti-competitive practices favouring its own digital payment application (Google Pay) on Android based smartphones.
Although the complaint was filed on 21 February 2020, the investigation order took over eight months and was passed after considering various written submissions by Google and the complainant (“Informant”). Despite Google’s request, the CCI did not allow it an oral hearing before ordering the investigation. On the request of the Informant, the CCI decided to keep its identity confidential.
The Informant brought to the CCI’s attention that the European Commission was investigating Apple for the same conduct that was being exhibited by Google in India, i.e., mandating the use of its own payment systems for app and in-app purchases and charging app developers a 30% commission (also known as the ‘Google Tax’). Interestingly, a few days after the CCI order, Apple announced that it would reduce its 30% commission to 15% for small developers (with annual sales less than USD 1 million) from January 2021.
Relevant markets and Google’s dominance
The CCI, prima facie, identified the following relevant markets to assess Google’s dominance:
Alleged abusive conduct of Google which merited detailed investigation
As Play Store’s support webpage itself stated that Google Pay was the only UPI based app allowed as a valid payment method, Google’s conduct required investigation if it abused or leveraged its dominant position by: (a) imposing unfair and discriminatory conditions; and (b) denying market access to competing UPI based apps.
Pre-installation of Google Pay on Android based smartphones could result in users not downloading competing UPI based apps and creating a sense of exclusivity in favour of Google Pay. Google had a significant market presence in the UPI based digital payment apps market which was still evolving in India. During this evolution stage, Google could use its dominant position (of an indispensable business partner) in the Android ecosystem to enter into contractual arrangements with smartphone manufacturers for pre-installation of Google Pay which could disadvantage other competing UPI based apps. Thus, a detailed investigation was required to understand if such contractual arrangements could harm competition in the market for UPI based payment apps.
Allegations rejected for the lack of evidence
The CCI noted that search played an important role in how users discovered apps and prominent search placement would attract maximum user attention and clicks. Positioning and displaying its own apps favourably could divert traffic from competing apps to Google’s own apps. To support its claim of search manipulation by Google, the Informant submitted certain screenshots of search results as evidence. However, in response, Google submitted screenshots of different results for the same search term suggesting that search rankings on the Play Store were dynamic. Since the Informant could not provide any other evidence to suggest search manipulation in favour of Google Pay, the CCI could not form a prima facie opinion which warranted a detailed investigation into this allegation.
Google’s ability to feature Google Pay in the list of ‘top apps’ (simply as a means of self-referencing and without applying objective parameters) could disadvantage competing UPI based payment apps. However, the CCI decided not to investigate this issue as the Informant failed to submit any evidence in support.
Search advertisements allowed any app to pay Google and get a preferential listing on the Play Store. Self-preferencing in search advertisements by Google could be anti-competitive if it provided an undue advantage to its own app over another competing app. No investigation was ordered by the CCI on search advertisement manipulation by Google as the Informant failed to provide any evidence to support this allegation.
It was alleged that: (a) the terms of use of Google Pay allowed Google to collect and use personal data of the user; (b) Google Pay did not comply with the data localisation requirements of the Reserve Bank of India; and (c) Google Pay’s terms of use allowed Google to share user data with its group companies which breached the guidelines laid down by the National Payments Corporation of India (an umbrella organisation for operating retail payments and settlement systems in India). In this regard, the CCI observed that compliance with sectoral regulations/ guidelines had to be examined by the concerned regulator and not by the CCI.
It is no surprise that the CCI has ordered an investigation into the issue of Google charging excessive commission for app and in-app purchases. This issue of so called ‘Google Tax’ or ‘Apple Tax’ is already being investigated in several jurisdictions such as Australia, the European Union, South Korea, and the United States of America. Although the CCI’s approach to investigate such issues is a step in the right direction, the big challenge for the CCI would be to effectively deal with such issues ex-post. The general consensus seems to be that, if not corrected ex-ante, digital markets may get tipped beyond repair (even in the absence of a dominant player). Accordingly, it may be prudent for the CCI to consider certain ex-ante rules to effectively address competition issues in digital markets, before it is too late.
Co-authored by Anmol Malhotra (Associate, DMD Advocates).
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