CCI orders inquiry into Google for abusing dominant position through User Choice Billing system

CCI orders inquiry into Google for abusing dominant position through User Choice Billing system

Notes that instead of restricting to 6 percent, the company was charging up to 30 percent revenue share on paid app downloads

The Competition Commission of India (CCI) has directed its Director General (Investigation) to examine Google after taking a prima facie view that the company was abusing its dominant position in the market through its User Choice Billing (UCB) system.

In the People Interactive India Private Limited and Ors v Alphabet Inc and Ors case, a Coram of chairperson Ravneet Kaur and members Anil Agarwal, Sweta Kakkad and Deepak Anurag noted that as per Google's internal documents, it could break even by charging 6 percent revenue share on paid app downloads, but was charging up to 30 percent.

The Commission’s order read, "Based on this 6 percent break-even revenue share, Google is charging 4 to 5 times its cost from the app developers. Prima facie, this appears to be disproportionate to the economic value of the services being rendered to the app developers and is an abuse of the dominant position.”

The CCI was hearing a plea by the Indian Broadcasting and Digital Foundation (IBDF), the Indian Digital Media Industry Foundation (IDMIF) and a few other companies. They alleged that Google’s updated payment policies on the Google Play Store violated Section 4 (abuse of dominant position) of the Competition Act, 2002.

In September 2022, Google introduced UCB where app developers offering digital content could offer alternative billing systems (ABS) alongside Google Play Billing System (GPBS) for apps and in-app purchases (IAPs)

The American multinational tech company announced that for transactions processed through GPBS (on apps offering digital content), it would continue to impose a 10, 15 or 30 percent service fee or commission. For ABS transactions, the commission was reduced to 6, 11 and 26 percent.

The companies stated that the policy distorted and disrupted competition in the downstream app markets and favored Google apps while cementing its position in the payment processing market.

The practice led 3 percent of the app developers to bear the entire cost of all developers on the Play Store by charging them an exorbitant service fee/commission without any commensurate additional services. The fee was excessive, as it had no reasonable economic relation to the services provided.

On the other hand, Google contended that the Commission was not a price regulator, and it should show restraint while considering claims about the level of the service fee by Google Play.

However, the CCI stated that when the market was characterized by significant entry barriers coupled with the presence of a dominant player, the anti-trust regulators could intervene if the dominant player engaged in pricing practices harming the consumers.

The Commission held, "While the long-term solution continues to be ensuring a competitive marketplace, in the short term the intervention by the anti-trust regulators to prevent unfair pricing assumes importance in critical internet-based economic activities. In consonance with this approach, Section 4(2)(a)(ii) of the Act specifically proscribes imposition of unfair price in purchase or sale of goods or service by a dominant enterprise.”

The judges noted that app developers had insignificant bargaining power and were forced to accept the terms that deterred legitimate competition and increased the costs of their operations.

The bench added, "Sufficient degree of competition in the available channels for distribution of apps would have allowed the discovery of a competitive and fair price. However, it appears that Google has used its virtual monopoly power to reap trading benefits, which it would not have reaped if there had been effective competition."

The Commission further held that the price charged by Google was unfair, as the app developers were completely dependent on the Google Play Store. They had to spend an additional 20 percent on advertising across the tech giant's platforms and third-party apps. Thus, the revenue flowing to Google suggested a potential imbalance in the ecosystem that needed to be scrutinized.

The CCI also observed that the system was selectively implemented while not providing any objective metric or rationale for distinguishing between digital content/services and physical content/services.

It held that the UCB system's implementation required an investigation by the Director General for potential violation of Sections 4(2)(a), 4(2)(b) and 4(2)(c) of the Competition Act.

Senior Advocate Jayant Mehta appeared for People Interactive India.

Advocates Abir Roy, Aman Shankar, Vivek Pandey, Udit Dedhiya and Sasthibrata Panda appeared for PIIPL and Mebigo Labs.

Senior Advocate Rajshekhar Rao and Advocates Pallavi Shroff, Yaman Verma, Parinita Kare, Ritwik Bhattacharya, Rohan Bhargava, Shivek S Endlaw appeared for IBDF and IDMIF. They were supported by Rishi Sharma and Siboney Sagar, representatives of IBDF and IDMIF.

Senior Advocate Sajan Poovayya and Advocates Karan Singh Chandhiok, Deeksha Manchanda, Avaantika Kakkar, Kaustav Kundu, Tarun Donadi, Bhavika Chhabra, Palash Maheswari, Raksha Agrawal and Aditya Sahagal appeared for Google. They were supported by Google representatives Thomas Bohnett, Aditi Gopalkrishnan and Richa Srivastava.