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TMI Blog2020 (11) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... is stated to be based on interaction between, the online products and services it offers free of charge to users on one hand and, on the other, its online advertising services, from which it derives majority of its revenues. The Informant has further averred that other than Android and Google Search, Google's core products include, a web browser (Google Chrome), an online video streaming service (YouTube), a web-based e-mail service (Gmail), an online mapping, navigation and geolocation service (Google Maps), an app store (Play Store), etc. These services are part of Google Mobile Services (GMS) i.e., the bundle of Google apps and services that Google licenses to smartphone manufacturers/Original Equipment Manufacturers (OEMs). 3. The Information further provides that in addition to the core products of Google, on 18.09.2017, Google launched a Unified Payment Interface (UPI) based payment app called Tez in India, which was rebranded as Google Pay on 28.08.2018 in order to unify Google's payment offerings globally under the 'Google Pay' brand. UPI is an initiative of National Payments Corporation of India (NPCI) which allows integration of multiple bank accounts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing payment through UPI. 7. In relation to market for licensable mobile OS for smart mobile devices, the Informant has submitted that from a demand-side perspective, basic and feature phone OS cannot be installed on smart mobile devices because of their extremely reduced functionalities. Further, even from a supply-side perspective, the differences in functionalities mean that the development of a smart mobile OS requires significant time and resources, regardless of whether the OS developer in question has already developed a basic and feature phone OS. The Informant has also averred that there is no substitutability between mobile OS for smart mobile devices and desktop/computer OS. Further, from the perspective of the OEM, a non-licensable mobile OS made by a vertically integrated developer for its own products, is not a substitute for a licensable mobile OS for smart mobile devices. Therefore, non-licensable mobile OS are not part of the same market as that of licensable mobile OS for smart mobile devices. The Informant has also placed reliance on decision of the European Commission European Commission (EC) decision in Case AT 40099-Google Android (EC Android Decision) wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substitutable with other modes of digital payment. 10. In relation to relevant geographic market, the Informant has submitted that the relevant geographic market for the markets mentioned above is national in scope and the same is evident from Google's own internal structuring, which created a separate entity to run India operations. The Informant has also placed reliance on Google Android Order of the Commission for the same. The Informant also states that even if the worldwide markets for licensable OS for smart mobile devices and app stores for Android are considered as the relevant geographic markets, there would be an insignificant to no change in the assessment of dominance of Google and therefore, detailed analysis of market definition is not necessary. 11. The Informant has also averred that Google enjoys a dominant position in the relevant market(s) for licensable mobile OS for smart mobile devices in India, and the market for app stores for Android mobile OS in India. It has been submitted that Google enjoys a position of strength in both of these markets which enables it to operate independently of competitive forces and to affect its competitors/consumers as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apps to use Play Store's payment system and Google Play In-App Billing for charging their users for purchase of apps on Play Store and In-App purchases In-app purchasing refers to the buying of goods and services from inside an app on a mobile device, such as a smartphone or tablet. IAPs allow developers to provide their apps for free. (which privileges Google Pay over other apps facilitating payment through UPI and mobile wallets), if they want to be listed on the Play Store; and c.) imposing unfair terms on users by requiring them to use Google Pay which is not in compliance with the data localisation directive issued by Reserve Bank of India and the guidelines issued by NPCI. 13. Further, the Informant vide letter dated 23.06.2020, brought to the notice of the Commission, a recent investigation launched by the European Commission (EC) in relation to abuse of dominant position by Apple Inc. The Informant averred that the conduct of Apple being investigated by the EC in Europe is being carried out by Google in India. The Informant pointed out similarities between the conducts of Apple in Europe and Google in India i.e. like Apple (as set out in the Press Release of EC), as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns as to why the same needs to be maintained. The Informant inter alia submitted that it has locus to file the Information as there is evidence of having suffered an invasion of legal rights both as a consumer, and generally as a beneficiary of healthy competitive practices; the Competition Commission of India (General) Regulations, 2009 impose a positive obligation upon the Commission to maintain confidentiality over the identity of any Informant, who requests confidentiality; disclosing the identity of the Informant to Google would lead to a chilling effect in such cases being brought to the Commission for fear that in each case the opposite party would be able to ascertain the identity of an Informant and take retaliatory actions against such an Informant; and if Google's argument is to be accepted, the Commission can never initiate an investigation based on information received through its Anonymous Module, or suo moto, based on evidence it sees in the public domain. The Informant has further averred that Section 19(1) of the Act simply states that, "the Commission may inquire into any alleged contravention of the provisions ... either on its own motion or on-(a) receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lts in Play based on multiple criteria which do not favour the GPay app (Tez). Further, Google has every commercial incentive to ensure that its search rankings in Play provide users with high quality, relevant apps that are responsive to the user's query. ii. Google does not grant unmerited prominence to GPay in Play and both Google and non-Google services, including Google's rivals, can and do appear in Users' Choice, Editors' Choice, and Top Charts lists. Regardless, these lists and awards do not foreclose competition and they are not essential for success of an app. iii. Google does not manipulate ads on Play and it ranks ads on the basis of the same principles (bid amount, relevance, and quality), and Google provides advertisers with sufficient information to allow them to manage their campaigns. Google's ad service allows users choice, does not foreclose, and is non-discriminatory. iv. The GPay app (Tez) is not preinstalled on all Android devices and is not the default payment app. Google's licenses for Android and Play do not require OEMs to preinstall the GPay app (Tez) on their Android devices or to set the service as the default. Rather, Goog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions on record and decided to pass an appropriate order in due course. Analysis 22. At the outset, the Commission notes that besides filing objections to the allegations made by the Informant, the Opposite Parties, placing reliance on a recent decision of the Hon'ble National Company Law Appellate Tribunal (NCLAT) in Samir Agarwal v. Competition Commission of India [Competition Appeal (AT) No. 11 of 2019 decided on 29.05.2020] (hereinafter, 'Samir Agarwal case'), stated that due to anonymity sought by the Informant, they have not been able to make submissions on the important procedural safeguard related to 'locus' of the Informant to file the present Information. Accordingly, the Opposite Parties have requested the Commission to dismiss the Informant's confidentiality claims including on his identity. It has been stated that Google's ability to sufficiently defend its position will be compromised if it cannot have access to the background context and other facts relevant to the present issues, including whether or not the Informant has sufficient standing. 23. In relation to relevance of 'locus' of an Informant for initiating proceedings be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who wants to file an information under Section 19(1)(a) nor prescribed any condition which must be fulfilled before an information can be filed under that section. There is nothing in the plain language of Sections 18 and 19 read with Section 26(1) from which it can be inferred that the Commission has the power to reject the prayer for an investigation into the allegations involving violation of Sections 3 and 4 only on the ground that the informant does not have personal interest in the matter or he appears to be acting at the behest of someone else. As a matter of fact, the Commission has been vested with the power to suo moto take cognizance of any alleged contravention of Section 3(1) or Section 3(4) of the Act and hold an inquiry. This necessarily implies that the Commission is not required to wait for receipt of a reference from the Central or the State Government or a statutory authority or a formal information by someone for exercising power under Section 19(1) read with Section 26(1) of the Act. In a given case, the Commission may not act upon an information filed under Section 19(1)(a) but may suo moto take cognizance of the facts constituting violation of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in Case No. 39 of 2018 had occasion to consider the first two markets as delineated by the Informant and formed a prima facie view that "market for licensable smart mobile device operating systems in India" and the "market for app stores for android mobile operating systems" are appropriate and necessary markets for assessment of impugned conduct in the said case. The Commission also formed a prima facie determination that Google is dominant in both of these markets. Specifically, the Commission observed as follows: "14. In this regard, the Commission observed that the operating system designed for mobile devices are different from operating system designed for desktop computers in terms of use. Mobile operating systems combine features of a personal computer operating system with other features useful for mobile or handheld use. Each mobile manufacturer designs the device as per the operating system it is going to use on it. Thus, the mobile operating system differs in terms of characteristics and use from the computer operating systems. From the Original Equipment Manufacturers (OEMs)' perspective, only such operating systems are accessible to them which are licensed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Due to considerable size and network effects of the Android ecosystem, OEMs do not have an effective choice but to offer the same to the consumers. Therefore, such non-licensable OS does not appear to be constraining the behaviour of Google. In relation to the results of survey mentioned by the Opposite Party in its written response, the Commission notes that the survey conducted by Google cannot be relied upon at this stage without empirical validation. 34. Google has also contended that Play is not a 'must have' app and it is not a dominant player in the relevant market as it faces significant competitive constraints from other Android app stores, side loading, file sharing services and web apps. The Commission notes that all other app stores (e.g. Samsung's Galaxy store) apart from Google's Play Store which are available for installation on Android OS are part of the same market i.e. market for app stores for android mobile operating systems. However, based on available data, it appears that Play Store is the dominant source of downloading apps on an Android smartphone. Prima facie it also appears that due to lack of technical knowledge on the part of users a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round the clock 24 x 7 and 365 days a year with single click 2 factor authentication. Moreover, different bank accounts can be accessed using a single UPI application and payment can be made using Virtual Payment Address, wherein the customer is not required to share sensitive financial information. 37. The Commission also had the occasion to examine the said market in its order dated 18.08.2020 passed under Section 26(2) of the Act in Re: Harshita Chawla AND WhatsApp Inc. and others bearing case No. 15 of 2020 and formed a view that 'market for UPI enabled Digital Payments Apps in India' is a separate relevant market. Specifically, the Commission noted: "78. The UPI enabled Digital Payment Apps also work as third-party apps (not the banking entities) enabling instant transfer of funds (in the form of IMPS) between users having subscribed to the Apps on their smartphones and having access to internet. This is a new technology infrastructure that existing bank apps can integrate with, in order to facilitate easy transfer of funds and other monetary transactions between two people in a secure and convenient manner. Further, these UPI enabled Digital Payment Apps, e.g. PayT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding Mode of Payment for Purchase of Apps and In-App Purchases (IAPS) 41. The Informant has averred that Google's Payment Policy specifically provides that developers charging for apps and downloads from Google Play must use Google Play's payment system. The Payment Policy further provides that developers offering products within another category of app downloaded on Google Play must use Google Play In-app Billing as the method of payment. By making listing of an app on Play Store conditional on the app using Play Store's payment system and Google Play In-App Billing for charging their users, the Informant alleges that Google is imposing a "take it or leave it" condition on all app providers. If apps do not comply with Google's demand of using Play Store's payment system and Google Play's In-App billing, they will not be able to access more than 90% of the target users in India, which is not a feasible option for any app provider. 42. The Informant has further averred that this condition has been "imposed" can be further demonstrated by the fact that the Play Store charges a 30% commission from app providers for allowing them to use the Play Store' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle Play gift cards; and Google Pay. Thus, Play Store's payment system does not allow any mobile wallet or other apps facilitating payment through UPI as an alternative to Google Pay which is alleged to restrict the choice for app providers as well as users. 46. It has also been averred by the Informant that UPI as a system allows interoperability between different apps which means that a person with a HDFC, Paytm or PhonePe UPI ID will also be able to pay through Google Pay for a transaction in the Play Store, but the transaction will be inconvenient as compared to transacting with a Google Pay UPI ID. Therefore, Google is alleged to be imposing unfair condition on app providers & users as well as discriminating between providers of similarly placed apps. The Informant has further averred that due to the "status quo bias", competitors of Google Pay will not be able to offset the significant competitive advantage that Google Pay will gain with respect to new users. The Informant further alleges that such conduct of Google results in denial of market access to competing mobile wallets and apps facilitating payment through UPI, tying (Google has tied Google Pay with the Play St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by regulatory restrictions and is based on objective reasons and intelligible differentia. 49. As per the Opposite Parties, NPCI mandates interoperability among UPI apps so that a user can rely on one UPI ID wherever UPI is enabled as a form of payment. To achieve this, NPCI guidelines give merchants/developers two options i.e. integrate with the UPI framework via the "collect flow" or "intent flow". NPCI guidelines do not require merchants/developers to integrate with each UPI app. Instead, they simply require that merchants/developers enable interoperability through either the collect flow or the intent flow. There is no bar on the merchant/developer enabling the intent flow for some apps, and the collect flow for others. Google integrated Google Payments Platform with the UPI framework, enabling the so-called "collect flow", because doing so enabled all UPI apps as a form of payment on Google Payments. 50. Based on the above, the Commission notes that allegations of the Informant are primarily two fold i.e. (a) mandatory use of Google Play's payment system for purchasing the apps & IAPs in the Play Store and (b) excluding other mobile wallets/UPI apps as one of the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The various pleas of Google like offering a secured system, necessity of Play's billing system, etc. can be appropriately examined during investigation. 53. The Commission also notes that mandatory use of application store's payment system for paid apps & in-app purchases along with the associated issue of alleged 'high' service fee/commission have been a matter of concern in other parts of the world. As pointed out by the Informant, European Commission also had a concern with the mandatory use of app store's payment system for paid apps & in app purchases coupled with allegation of excessive pricing in the form of service fee/commission, in the context of Apple's app store. As per the press release, EC had concerns that Apple's restrictions may distort competition for music streaming services on Apple's devices. The IAP obligation appears to give Apple full control over the relationship with customers of its competitors subscribing in the app, thus dis-intermediating its competitors from important customer data while Apple may obtain valuable data about the activities and offers of its competitors. 54. In relation to the second allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for alternatives due to a "status quo bias". As per the Informant, given the dominance of Android and Play Store, the OEMs have no choice but to agree to the terms and conditions imposed by Google. As per the Informant, pre-installation and prominence of Google Pay amounts to the imposition of an unfair and discriminatory condition in contravention of Section 4(2)(a)(i), limits technical and scientific development in contravention of Section 4(2)(b), can result in the exclusion of competing apps from the market in contravention of Section 4(2)(c) and amounts to leveraging of Google's position in the markets for the licensing of smart mobile OS and app stores for Android OS to protect its position in the market for facilitating payment through UPI, in contravention of Section 4(2)(e) of the Act. 56. In this regard, Google has inter alia submitted that the GPay app (Tez) is not preinstalled on all Android devices and is not the default payment app. Google licenses Play to OEMs as part of a suite of apps under its Mobile Application Distribution Agreement ("MADA"). The MADA does not require OEMs to preinstall the GPay app (Tez) and the GPay app (Tez) is not part of the suite of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esults on the Play Store in favour of Google Pay even when Google Pay is not the most relevant (or even ranked) response to users' queries. For example, the Informant has provided screenshots to show that when a user searches for the word "pay" (a generic term) on the Play Store, the first result that appears is Google Pay and not PayZapp (which start with the word 'pay') or Paytm (another app that starts with the word 'pay') or PhonePe (which phonetically includes the word 'pay'). As per the Informant, this has resulted in Google Pay gaining undue advantage over other competing apps. As per the Informant, such search manipulation amounts to violation of various provisions of Section 4 of the Act. The Informant alleges that considering that Play Store is a "must have" app, the manipulation of the search result on the Play Store, results in imposition of unfair and discriminatory condition on both sides of the platform i.e. apps facilitating payment through UPI as well as users in terms of Section 4(2)(a) of the Act. The said conduct is unfair for apps facilitating payment through UPI prominent positioning drives traffic to Google's app, which would r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed search queries on Google Play Store may potentially lead to diversion of traffic away from competing payment apps to Google's own app. Further, if a search algorithm is found to have a systemic bias in favour of a product/app which in terms of competitive parameters such as technical features, brand recognition, quality/value to user etc. is inferior compared to competing products/apps, may potentially be misleading for the users and thus be construed to be an unfair imposition on users. 62. However, the Commission observed that search result screenshots of the Informant and the Opposite Parties show different results suggesting that the search ranking on Play Store may be dynamic in nature. The Commission is of the view that a conclusion on preferential placement by Google, cannot rest on only one/two screenshots at a given point in time. The Informant has not placed any other information on record, corroborating the allegation, to suggest search manipulation by Google in favour of Google Pay. In such a scenario, neither any prima facie opinion can be formed on the basis of few solitary instances nor investigation be ordered on this count. Prominent placement of Google Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial policies, may amount to imposition of unfair condition on both user groups (apps and app users), imposition of discriminatory condition on apps, an act of leveraging its dominance in the application stores market to enter/protect the relevant market for UPI based payments market and may thus contravene the provisions of Section 4 of the Act as alleged by the informant. 66. However, having considered the allegations holistically, the Commission notes that except the bald assertions made by the Informant, there is nothing on record to evidence such manipulation as alleged by the Informant and the Commission is of the view that no investigation can be ordered on the basis of assertions made by the Informant which are neither corroborated or otherwise substantiated in any manner. The Commission has also taken on record the submissions of Google in this regard where it has claimed that it does not rig nominations, lists and awards and that these are based on merits and user preference. Search advertisement manipulation on the Play Store 67. The Informant has averred that Google further privileges Google Pay by displaying it as the first ad when a user searches for another app faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... screenshots which are not supported/corroborated by any other material, cannot be the basis for launching an anti-trust inquiry. Moreover, the screenshots shared by the Opposite Parties show different results indicating highly dynamic nature of search advertisement algorithm. Accordingly, in the absence of any concrete information/evidence, the Commission is not inclined to order investigation against the Opposite Parties on this count. Exclusivity Requirement Imposed by Google Resulted in Unfair Terms Being Imposed on Users 71. The Informant has averred that in order to use Google Pay as a service, the user is required to agree to the Google Pay Terms. The Informant has averred that Google already collects enormous amount of data on consumer behaviour, and device use data from smart mobile devices using Android OS for strengthening its position generally, and for monetization through ads. In addition, Google Pay Terms allows Google to collect, store, and use personal data and any communications made through Google Pay. Although, the Google Pay Terms mention that the above data is only being collected after taking consent from the user, in the present situation, the consent is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... methods. 75. The Commission observed that Google citing RBI's counter affidavit in Abhijit Mishra v. Reserve Bank of India, W.P. (C) 3693 of 2019 before Delhi High Court has stated that Google is a Third Party App Provider (TPAP) and is not a system provider i.e. authorized payment system operator under the provision of the Payment and Settlement Systems Act, 2007. It has been mentioned that the onus is on system providers, which in case of UPI is NPCI, to ensure that the entire data related to payment systems operated by them is stored in a system only in India. Further, as per the said affidavit, NPCI vide letter dated 31.01.2020 has informed RBI that Google is fully compliant with the requirements of relevant RBI circular dated 06.04.2018. In relation to data sharing requirements of NPCI, Google has submitted that GPay app (Tez) was launched in compliance with the relevant circular of NPCI, and that formed the basis of NPCI's approval for the app to be launched which inter alia include permission of NPCI to share UPI transaction data with Google's group companies subject to certain conditions. The Commission observes that compliance with the sectoral regulations/gu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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