9911796707
TMI Blog2020 (11) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... irects the DG to complete the investigation and submit the investigation report within a period of 60 days from the date of receipt of this order. The Commission notes the submissions dated 31.07.2020 moved by the Informant wherein it is inter alia claimed that the role of the Informant in the proceedings before the Commission is limited and therefore Google does not have any right to cross-examine the Informant or to challenge the locus of the Informant. In this regard, the Commission finds the claim of the Informant that Google cannot cross-examine the Informant, as thoroughly misconceived. The issue of cross-examination of the Informant will be decided by the DG at the appropriate stage and the Informant will have no immunity from cross-examination in the event it is considered appropriate by the DG. Needless to add, any refusal by the Informant to subject itself to cross-examination would forfeit the 'limited' rights of the Informant to participate in the proceedings before the DG and the Commission. The Secretary is directed to send a copy of this order along with the Information and other material available on record to the Office of the DG forthwith. - Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement and convenience. The Information also states that with UPI, everyone with a bank account in India can create a Virtual Payment Address (VPA or UPI ID) and start transacting using a mobile phone. This VPA, for example abc@xyzbank, becomes a person's unique payment identity and removes the need to share bank details while transacting. 4. Alphabet Inc. (OP-1) is stated to be the holding company of OP-2. The Informant has averred that Alphabet's revenue as of September 2019 was USD 116 billion out of which almost 84% came from advertising, demonstrating Google's importance in leading the vision of Alphabet Group. Google Ireland (OP-3) is stated to have been set up in 2003 and is a subsidiary of Google LLC and is responsible for providing services to the company's users in the European Economic Area and Switzerland. Google India (OP-4) is stated to be a subsidiary of Google LLC and it assists and represents Google in its operations in India. Google Digital Services (OP-5) is stated to be a subsidiary of Google LLC incorporated in January 2017 and it is the nodal entity for Google Pay in India and as per Google Pay Terms, when a user agrees to the terms and conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle LLC Others bearing Case No. 39 of 2018 (Google Android Order) for this market. 8. In relation to market for app stores for Android OS, the Informant submits that app stores are digital distribution platforms that are dedicated to enabling smart mobile device users to download, install and manage a wide range of diverse apps from a single point in the interface of the smartphone. The Informant has inter alia averred that side loading and web apps (offered through browser) are not a substitute for apps offered through app stores and app stores form a separate platform for smart mobile device users to access apps as well as for app providers to reach an audience with their content or services. Further, there is no substitutability between app stores of other licensable and non-licensable mobile OS for smart mobile devices and Android App Stores. The Informant has also placed reliance on EC Android Decision as well as Google Android Order of the Commission, for the same. Accordingly, the Informant has averred that another relevant market in the present case should be the market for app stores for the Android mobile OS. 9. In relation to market for apps facilitating payment through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh barriers to entry in the form of network effects, high sunk costs and Google's access to a large installed user base; high level of vertical integration of Google's business operations as it integrates Google's Android with other must have proprietary apps, such as the Play Store and Google Play Services; and high level of dependence of smart phone mobile users, OEMs and app store developers on Google's Android which also lack any countervailing power against Google. For the above reasons, Google has been stated to establish itself as a critical platform for all the stakeholders. Other players in market for licensable mobile OS for smart mobile devices have not been able to effectively enter, let alone constrain Google. Due to Google's dominance in the markets for the licensing of mobile OS and app stores for Android OS, Google has become the de facto gateway to Android smartphones. 12. The Informant has also averred that being the dominant player, Google has a special responsibility to ensure fairness not just in these markets but also in related markets including the market for apps facilitating payment through UPI. The Informant has alleged that Google is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d further like Apple, Google charges app developers a 30% commission for allowing them to use the Play Store's payment system and Google Play In-App Billing. 14. The Commission considered the Information in the ordinary meeting held on 06.05.2020 and decided to seek the response of Opposite Parties thereon. Accordingly, the Opposite Parties were directed to file their response to the Information. A copy of the Information was also shared with the Opposite Parties for the said purpose. The Opposite Parties filed their common response (confidential as well as non-confidential versions) on 01.07.2020 through e-mail. Submissions of Google Procedural submissions 15. Besides responding to the allegations made in the Information, the Opposite Parties in their common response stated that the Hon'ble National Company Law Appellate Tribunal (NCLAT) in its recent order passed in the case of Samir Agarwal v. Competition Commission of India, Competition Appeal (AT) No. 11 of 2019 has held that Information under the Competition Act, 2002 may only be filed by a person who has suffered invasion of his legal rights either, as a consumer or beneficiary of healthy competitive practices. The O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Opposite Parties 17. The Opposite Parties have contested the allegations in the Information and for the said purpose they inter alia relied on a survey conducted by Google. In relation to dominance of Google (i.e. Android OS), it has been stated that Android is not dominant in India and it faces significant competition from feature phones OSs as feature phones sold in India today boast the functions and performance that the Informant attributes to smartphones. Moreover, Android is claimed to be facing significant competition from licensable and non-licensable OSs. As per the OPs, if hypothetically the quality of Android OS is deteriorated, users and app developers could and would switch platforms (e.g., to non-licensable OSs). The Opposite Parties have also contested the dominance of Play Store in the market for app stores for Android OS and had inter alia submitted that it is not a 'must have' app as over 40% of app downloads in India take place outside of Play; OEMs preinstall a rival app store on many popular devices in India; the consumers in Google survey confirmed that they have downloaded an Android app directly from a website or a source other than an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire users or developers to use the GPay app (Tez) to make and receive payments on Play. Google does not disadvantage rival UPI apps on Play. On the contrary, 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 and complies with NPCI guidelines. The very purpose of the integration was to enable interoperability, and it is compliant with applicable NPCI guidelines. vi. The Informant's allegations on the use of Play's billing system are similarly misconceived. It ignores the inherent need for a billing system and payment infrastructure for any app stores, and the legitimate, pro-competitive reasons for using Google's own systems and applying a service fee. Play's billing system also ensures that Google provides users and developers with a secure, stable, and uniform experience across hundreds of countries, with dedicated customer support and high user confidence. vii. Google's 30% (and in certain circumstances, 15%) service fee is not arbitrary. It is market based, legitimate, and pro-competitive as the service fee allows Google to cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory scheme. 24. The Competition Act was enacted, keeping in view the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. Clearly, the Act has been conceived to follow an inquisitorial system wherein the Commission is expected to inquire cases involving competition issues in rem, rather than acting as a mere arbiter to ascertain facts and determine rights in personam arising out of rival claims between parties. 25. The role of the Commission as an overarching market regulator also finds its foundational footing in the amendments introduced in the Act, vide the Competition (Amendment) Act, 2007, whereby and whereunder the provisions of Section 19(1)(a) were amended substituting the words receipt of a complaint with receipt of any information . This amendment clearly reflected the legislative intention of emphasizing the inquisitorial nature of the proceedings of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat power is that the Commission should feel prima facie satisfied that there exist a prima facie case for ordering into the allegation of violation of Sections 3(1) or 4(1) of the Act. 27. The aforesaid leads to an inevitable conclusion that the Informant need not necessarily be an aggrieved party to file a case before the Commission. Neither the Act specifies any such requirement explicitly, nor the same can be implicitly read into the provisions which clearly point towards the inquisitorial system envisaged by the Parliament. Further, it is because of the inquisitorial scheme of the Act, that the Commission in appropriate cases, defends its orders in higher forums, regardless of the fact as to who brought such case before it, which is not a normal feature in adversarial proceedings. 28. Accordingly, the Commission rejects the contention of the Opposite Parties, based on the observations in Samir Agarwal case ignoring the larger statutory scheme and other ruling, as regards the locus of the Informant. Any interpretation contrary to the expressive legislative mandate and judicial pronouncements, as elucidated in the aforesaid paras, may not be appropriate. 29. Having dealt with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aphic market will be considered as the whole of India as conditions of competition are homogeneous. Thus, the primary relevant market for this prima facie assessment will be market for licensable smart mobile device operating systems in India . In this relevant market, Google prima facie appears to be dominant on the basis of the material brought on record by the Informants wherein inter alia they have stated that as per statista.com, in 2017, Android accounted for 80% of India's mobile OS market. 15. Further, apart from the above delineated primary relevant market, it would be necessary to determine some associated relevant markets to examine the impugned conduct. In this regard, the Commission notes that prima facie, the relevant market for app stores for android mobile operating systems, proposed by the Informants, also appears to be appropriate and necessary for the assessment of the impugned conduct. As the European Commission, in its Press Release, notes, Google is dominant in the worldwide market (excluding China) for app stores for the Android mobile operating system. Google's app store, the Play Store, accounts for more than 90% of apps downloaded on Android device ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetitive constraints exercised by such options on the Google's Play Store needs to be empirically verified through detailed examination. 35. In view of the above, the Commission does not find any reasons for deviation from the above said prima facie delineation of relevant market(s) and the dominance of Google in these two markets, for the purpose of prima facie assessment of allegations in the present matter. 36. In relation to the market for apps facilitating payment through UPI, the Opposite Parties have inter alia contested that this market definition ignores competitive reality, as it excludes other forms of payment that users consider to be substitutes (such as net banking, mobile wallets, and credit and debit cards), as well as the considerable supply side substitutability as digital payment providers often offer more than one form of payment and some even combine multiple forms of payment within a single app, such as Paytm provides UPI, net banking, mobile wallet services, etc. The Commission has considered the submission of the Informant as well as Opposite Parties and notes that payment apps based on UPI do appear to be offering unique features as against other digit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commission agrees with the Informant that the second relevant market for assessing the allegations of the Informant would be 'market for UPI enabled Digital Payments Apps in India'. 38. Further, the Informant has claimed that the total volume of UPI transactions in the second quarter of 2019 was 2.2 billion, a 263% increase from second quarter of the previous year. In terms of value, UPI clocked INR 4.4 trillion, which was a 336% increase from second quarter of the previous year. In this regard, the Commission has noted that as per Payment System Indicators published by the Reserve Bank of India in its Annual Report for the year 2019-20 Available at: https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?Id=1293 Last accessed on 09.11.2020 , the growth rate of transactions being undertaken through UPI during the financial years 2017-18 to 2019-20 is substantially higher than growth rate of other digital payment options like IMPS, NEFT, credit debit cards, etc. This kind of traction received by UPI from users is indicative of the fact that UPI offers unique advantages (both technical as well as in terms of user interface) over other digital payment methods. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pp Billing, Google has imposed an unfair condition on both sides of the platform, i.e., app providers as well as users. The condition imposed by Google is unfair to the app providers as it restricts their choice in terms of preferred payment partners and preferred modes of payment. The condition being imposed by Google is unfair to users as their choice regarding mode of payment is being restricted. 43. It has been further stated that the 30% commission is not being charged by Google for the purpose of listing these apps on Play Store, as the app providers separately pay a one-time fee of 25 USD for getting listed on the platform. Therefore, the Play Store is being adequately compensated by the app providers for acting as a distributor, without the need for paying any commission. Accordingly, the 30% additional commission is alleged to be one-sided, arbitrary and onerous. 44. The imposition of this condition is stated to adversely affect app providers by increasing their costs. Increased costs can either be borne by the app providers or passed on to users. Where the app provider decides to bear the increased costs, it will result in them diverting a substantial chunk of their reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of Section 4(2) of the Act. 47. In relation to mandatory use of Play's Billing System, Google has inter alia stated that payment and billing systems constitute an inherent and necessary part of any app store's business model. There is no principle of law that would require Play to vertically dis-intermediate and use a third-party payment and billing system. Play's billing system also ensures that Google provides users and developers with a secure, stable, and uniform experience across hundreds of countries, with dedicated customer support and high user confidence. Further, Google's 30% (and in certain circumstances, 15%) service fee is stated to be not arbitrary. It is claimed to be market based, proportionate, legitimate, and pro-competitive and it enables developers to retain the vast majority (either 70% or 85%) of the amount that users spend on their apps. It enables Google to settle third party fees associated with the purchase (e.g., carrier fees for direct carrier billing, credit card fees, etc.), and sustain its significant investments in Play. 48. In relation to Google Pay, Google in its response has inter alia submitted that users in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when Google charges a commission of 30% (15% in certain cases) for all app purchases and IAPs. Further, considering that Play is the dominant source of downloading apps in the Android OS (90% of the downloads) and its condition requiring use of application store's payment system for paid apps in-app purchases, it appears that Google controls the significant volume of payments processed in this market. The resultant market power being enjoyed by Google due to its grip over Android ecosystem apparently resulted in 'allegedly' high commission fee of 30%. As per the Informant, other payment processing solutions charge significantly lower fee for processing payments. 52. Further, it appears that such 'allegedly' high fee would increase the cost of Google's competitors and thus might affect their competitiveness vis- -vis Google's own verticals (the fee in respect of which, in any case would be internalized). Such a policy of the application store may disadvantage its competitors in the downstream markets, such as music streaming, e-books/audio books etc. If the application developers, in response, raise their subscription fees to offset these costs or remove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titively significant). Google has stated that both flows involve the user transitioning from Play, to the UPI payment app, and back again. This transition is automated in the intent flow, whereas the same is required to be manually undertaken by users in the collect flow. Based on the above, prima facie it appears that user experience while using Google Pay would be different/better as compared to using other UPI based apps. This difference has the potential to shift users towards adopting Google Pay over other UPI based payment apps. Therefore, it becomes critical to examine whether such difference in the process, favoured Google Pay to the disadvantage of other competing apps. Further, given the apparent better user experience for intent flow, it also needs to be examined whether Google allows other UPI based payment apps to be integrated using intent flow. Further, it is noted from one of the support pages of Google Play Store that Google Pay is the only UPI based app allowed to be used as a valid payment method As available at: https://support.google.com/googleplay/answer/2651410?co=GEN IE.CountryCode%3DIndia hl=en Last accessed on 09.11.2020 . In view of the above, the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of its survey, has further claimed that there is no evidence of status quo bias in India. 57. It is observed that pre-installation of GPay may create a sense of exclusivity and default as users may not opt for downloading competing apps. Based on the available data, it appears that Google already has a significant market presence in UPI based digital payment applications market and it may affect the evolving and transitory market in its favour. In such a stage of evolution, Google using its market position in applications relating to licensable mobile OS, search engine, app store, browser, etc. to enter into contractual arrangements with OEMs for pre-installation of GPay, may disturb the level playing field. Although, Google has contended that such arrangements are optional, its market position in different streams of smart mobile device ecosystem cannot be discounted in the relationship with OEMs. It is apparent that the market position of Google in several gateway products for web based services makes it, an indispensable partner in the smart mobile device ecosystem and such position also appears to place Google in a unique advantage compared to other UPI app developers. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give prominence to Google Pay, Google is misleading users to believe that it is the most relevant app facilitating payment through UPI. 59. The Informant further alleges that search manipulation in favour of Google Pay also reduces the ability and incentives of competing app developers from improving quality, innovating or otherwise competing viably in the market, thus limiting technical and scientific development in violation of Section 4(2)(b) of the Act. It also amounts to denial of market access for competing apps in violation of Section 4(2)(c) and Google leveraging its position in the markets for the licensing of mobile OS and app stores for Android mobile to protect its position in the market for apps facilitating payment through UPI, and contravenes Section 4(2)(e) of the Act. As per the Informant, Google Pay has a market share of 61.33% in the market for apps facilitating payment through UPI followed by PhonePe with a market share of 24.2%. 60. In this regard, Google has inter alia submitted that Play does not rank search results as the Informant proposes, because this would harm users and developers. Instead, Google ranks search results on Play using multiple signals to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include Google Pay. The Informant has also alleged that Google is also promoting its payment system on the Google Search as it comes as an option for recharges, bill payments, etc. Based on the above, the Informant has alleged that the prominent placement of Google Pay in the manner discussed above amounts to violation of Section 4 of the Act as it results in: (i) imposition of unfair condition on users and the broader payments ecosystem including other apps facilitating payments through UPI; (ii) imposition of discriminatory condition on mobile wallets and other apps facilitating payment through UPI; (iii) limitation of technical and scientific development; (iv) denial of market access; and (v) leveraging. 64. Google has branded these allegations as baseless and wrong and has inter alia submitted that Google and non-Google services, including Google's rivals, can and do feature in these lists and win these awards. Where the GPay app (Tez) appeared in these lists or won these awards in the past, it did so on merit. Both Google and non-Google apps have been voted as the Users' Choice in the past, including rivals to Google's services. Google has also submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparately advertise on these other properties which would further enrich Google. As per the Informant, such search advertisement manipulation by Google violates Section 4 of the Act as it results in the imposition of an unfair and discriminatory condition on apps facilitating payment through UPI. 68. In this regard, Google has inter alia submitted that Google's ad service functions on Play broadly as it does on Search. 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. Google's services that advertise on Play compete for advertising slots with third parties and are treated as functionally separate third parties (with firewalls). 69. In relation to this allegation, the Commission observes that search advertisements are paid search results that allow any app to pay Google and appear on the most valued real estate of the app store. Advertisements offer an opportunity to feature on top by making payments to the platform. Self-preferencing in search adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making UPI payments for IAPs as well as on the Play Store, Google is forcing them to use a service which has not localised the enormous amount of user information collected by it. 72. The Informant has further stated that according to NPCI guidelines, an app facilitating payment through UPI is not allowed to share data with a third-party under the NPCI guidelines. The said requirements also require specific permission from NPCI for sharing individual UPI transaction data with any other third party. However, it is alleged that according to Google Pay Terms, Google can share UPI transaction data with all its group companies. The imposition of the requirement to use Google Pay means that the users are being forced to use an app which is not compliant with the NPCI guidelines and is openly sharing payment related user data with its group companies and third-parties. 73. The Informant has averred that if the users had an option, they may have preferred using the other apps facilitating payment through UPI, such as, PhonePe, Paytm, etc. who are not sharing their data. However, by taking away this choice and by requiring the users to use an app which is not compliant with the RBI and NPCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 26(1) of the Act. The Commission also directs the DG to complete the investigation and submit the investigation report within a period of 60 days from the date of receipt of this order. 78. Before parting, the Commission notes the submissions dated 31.07.2020 moved by the Informant wherein it is inter alia claimed that the role of the Informant in the proceedings before the Commission is limited and therefore Google does not have any right to cross-examine the Informant or to challenge the locus of the Informant. In this regard, the Commission finds the claim of the Informant that Google cannot cross-examine the Informant, as thoroughly misconceived. The issue of cross-examination of the Informant will be decided by the DG at the appropriate stage and the Informant will have no immunity from cross-examination in the event it is considered appropriate by the DG. Needless to add, any refusal by the Informant to subject itself to cross-examination would forfeit the 'limited' rights of the Informant to participate in the proceedings before the DG and the Commission. 79. The Opposite Parties have also sought an opportunity to make oral submissions on its response in a hear ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
