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2022 (10) TMI 953 - Commission - Indian LawsAnti-competitive agreements - abuse of dominant position in the markets for licensable mobile OS for smart mobile devices and app stores for Android OS - the Commission agrees with the findings of the DG and holds that all licensable smart mobile device OSs are part of the same relevant market - consideration of relevant markets - alleged contravention of various provisions of Section 4 of Competition Act, 2002 - HELD THAT - No doubt, the DG has been vested with the limited powers of Civil Court as also the power to conduct search and seizure operations, however, it is for the DG to exercise such powers in the manner as deemed appropriate in the facts and circumstances of each case. No party, much less a party under investigation, can dictate as to the mode and manner of investigation to be undertaken by the DG. As previously pointed out, the role of DG during investigation is essentially fact finding in nature by collecting documents and evidence and to present its recommendations to the Commission based on their analysis. While conducting the investigation, it is neither requirement of the law nor any obligation of the investigator to consult each and every affected or interested participant. On careful perusal of the Investigation Report, the Commission is satisfied that the DG has contacted a cross-section of stakeholders including third parties and in this view of the matter, the allegations, and suggestions of bias in investigation as attributed by Google to the DG lack merit and are rejected. Having perused the investigation report, the Commission is satisfied that while analyzing the allegations and reaching its recommendations, the DG has not relied upon such orders and the same are based upon the documents and evidence gathered during the course of investigation. The reference to the prima facie order as made by the DG in the Investigation Report is only to understand the scope of investigation and such reference, by no stretch of arguments, be construed as swaying the independence of the recommendations made by the DG. In fact, if the argument of Google is taken to its logical conclusion, there can be no independent adjudication by the authority also (in this case, the Commission) after making a prima facie opinion while ordering investigation. The antitrust investigation is complex in nature and require greater understanding of the subject and so long as the recommendations are made in an independent manner based on material and evidence gathered during investigation, mere reference to such reports for the limited purpose of understanding the issues in itself cannot be said to sway, much less vitiate, the conclusions arrived at by the DG - the Commission is afraid that the submissions of Google are contrary to the express provisions of General Regulations. Unlike civil courts where cross-examination is a matter of course, cross-examination before the DG or the Commission is highly circumscribed by regulatory framework nd can be granted on fulfilling requirements of Regulation 41(5) of the General Regulations. It is, thus, evident that the Commission or the DG has the discretion to take evidence either by way of Affidavit or by directing the parties to lead oral evidence in the matter. However, if the Commission or the DG, as the case may be, directs evidence by a party to be led by way of oral submissions, the Commission or the DG, as the case may be, if considers necessary or expedient, may grant an opportunity to the other party or parties, as the case may be, to cross-examine the person giving the evidence. Thus, it is only when the evidence is directed to be led by way of oral submissions that the Commission or the DG may grant an opportunity to the other party or parties to cross-examine the person giving the evidence, if considered necessary or expedient. Hence, even when the evidence is led by oral submissions, the Commission or the DG retains the discretion to consider the request for grant of opportunity to the other party or parties to cross-examine the person giving the evidence if the same is considered necessary or expedient. The Commission delineates the following relevant market(s) in the present matter a. Market for licensable OS for smart mobile devices in India b. Market for app stores for Android smart mobile OS in India c. Market for apps facilitating payment through UPI in India The Commission holds Google to be dominant in in the first two relevant markets i.e., market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India. Further, Google is also found to have abused its dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(a)(ii), Section 4(2)(b)(ii), Section 4(2)(c) and Section 4(2)(e) of the Act, as already discussed in the earlier part of this order. In terms of the provisions of Section 27 of the Act, the Commission hereby directs Google to cease and desist from indulging in anti-competitive practices that have been found to be in contravention of the provisions of Section 4 of the Act - Google, however, is allowed three months from the date of receipt of this order to implement necessary changes in its practices and/or modify the applicable agreements/ policies and to submit a compliance report to the Commission in this regard. Levy of penalty - HELD THAT - The Commission takes a serious note of such glaring inconsistencies and wide disclaimers in presenting various data points by Google. The Commission is constrained to observe that despite commanding enormous resources, Google has failed to provide the data in the manner sought by the Commission despite grant of sufficient time, as sought by it. Be that as it may, in the interest of justice and with an intent of ensuring necessary market correction at the earliest, the Commission decides to proceed to quantify the provisional monetary penalties on the basis of the data presented by Google. Accordingly, the Commission decides to take the revenue data of Google s business operations in India, as submitted by it vide submission dated 06.10.2022, as relevant turnover for computation of quantum of penalty. Determination of an appropriate amount of penalty to be imposed - HELD THAT - The Commission is of the view that the ends of justice would be met if a penalty of 7 % of the relevant turnover. Accordingly, the Commission imposes a penalty on Google @ 7 % of its average of the average of relevant turnover for the last three preceding financial years 2018-19, 2019-20 and 2020-21, as provided by Google - the Commission imposes a penalty of Rs. 936.44 crore upon Google for violating Section 4 of the Act. Google is directed to deposit the penalty amount within 60 days of the receipt of this order. The Commission deems it appropriate to deal with the request of the parties seeking confidentiality over certain documents / data / information filed by them under Regulation 35 of the General Regulations, 2009 (as amended). Considering the grounds given by the parties for the grant of confidential treatment, the Commission grants confidentiality to such documents / data / information in terms of Regulation 35 of the General Regulations, 2009, subject to Section 57 of the Act, for a period of three years from the passing of this order. Application disposed off.
Issues Involved:
1. Mandatory use of Google Play's billing system (GPBS) for app purchases and in-app purchases. 2. Exclusion of other UPI apps/mobile wallets as effective payment options on Play Store. 3. Pre-installation and prominence of Google Pay UPI App (GPay). Detailed Analysis: 1. Mandatory Use of Google Play's Billing System (GPBS): Google requires app developers to use GPBS for processing payments for paid apps and in-app purchases. This policy is part of Google's Developer Distribution Agreement (DDA) and Developer Program Policies (DPP). The DG found that Google's mandatory imposition of GPBS and the anti-steering provisions, which restrict app developers from directing users to alternative payment methods, constitute an imposition of unfair conditions on app developers in violation of Section 4(2)(a)(i) of the Act. Additionally, Google charges a service fee of 15-30% for using GPBS, which is significantly higher than the fees charged by other payment processors in India (0-3%). The DG concluded that Google's service fee is unfair and discriminatory, violating Section 4(2)(a)(ii) of the Act. The DG also found that Google's practices limit technical development and deny market access to other payment processors and app developers, violating Sections 4(2)(b)(ii) and 4(2)(c) of the Act. Furthermore, Google's practices were found to be leveraging its dominance in the market for licensable mobile OS and app stores for Android OS to protect its position in the market for in-app payment processing, violating Section 4(2)(e) of the Act. 2. Exclusion of Other UPI Apps/Mobile Wallets: Google Pay UPI app is integrated with the intent flow methodology, which is more user-friendly and has a higher success rate compared to the collect flow methodology used for other UPI apps. The DG found that this differential treatment gives Google Pay a competitive advantage, resulting in a higher market share for Google Pay in UPI transactions on the Play Store compared to its overall market share. The DG concluded that Google's conduct is discriminatory, violating Section 4(2)(a)(ii) of the Act, and results in denial of market access to competing UPI apps, violating Section 4(2)(c) of the Act. Additionally, Google's conduct was found to be leveraging its dominance in the markets for licensable mobile OS and app stores for Android OS to protect its position in the market for UPI-enabled digital payment apps, violating Section 4(2)(e) of the Act. 3. Pre-installation and Prominence of Google Pay UPI App (GPay): The DG found that Google enters into Revenue Sharing Agreements (RSAs) and Placement Bonus Agreements (PBAs) with OEMs for pre-installation and prominent placement of Google Pay UPI app on mobile devices. However, the DG did not find sufficient evidence to indicate that Google has abused its dominant position in this regard. The DG noted that other UPI apps such as PhonePe and Paytm also have agreements with OEMs for pre-installation of their apps, and Google Pay was pre-installed on less than a significant percentage of total mobile devices sold in India in 2020. Procedural Errors: Google alleged procedural errors in the investigation, including disregarding critical evidence, leading questions to third parties, and failure to consult a representative cross-section of participants. The Commission found these allegations to be without merit, noting that the DG had incorporated Google's responses and given it sufficient opportunities to present its case. Order: The Commission directed Google to cease and desist from anti-competitive practices, including: - Allowing app developers to use third-party billing/payment processing services. - Not imposing anti-steering provisions on app developers. - Ensuring transparency in data collection and sharing policies. - Not discriminating against other UPI apps. Penalty: The Commission imposed a provisional penalty of Rs. 936.44 crore on Google, calculated as 7% of its average relevant turnover for the last three preceding financial years. Google is directed to deposit the penalty amount within 60 days and submit the requisite financial details and supporting documents within 30 days.
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