Google Under CCI Lens Yet Again. This Time For Its Payment App
The competition regulator has called Google’s conduct in the UPI payments market to be prima facie abusive.
Two months ago, when Google removed Paytm from its app store for a few hours, legal experts had anticipated this could snowball into an anti-trust battle. Though not prompted by this specific incident, India’s competition regulator has found prima facie merit in allegations made earlier this year that Google is abusing its dominant position in the UPI payments market.
The Competition Commission of India has also expressed concern over the pre-installation and prominence of Google Pay on Android smartphones. It has directed its investigation wing to examine Google’s conduct in both these markets within 60 days.
This is the second anti-trust investigation against the internet giant in India. In 2018, the CCI had found Google guilty of abusing its dominant position in the online general web search and web search advertising services in India.
Payments & App Stores Market: ‘Take It Or Leave It’ Condition
The informant complained to CCI that Google mandatorily asks developers to use its payment system while charging users for apps and downloads from the Google Play Store. Further, if users buy goods or services via an app on Play Store, developers have to facilitate the transaction via Google Play In-App Billing. For both—the payment system and in-app billing—developers have to pay Google a 30% commission. This is over and above the one-time listing fees that app developers have to pay to be listed on Play.
“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.” - Informant
This, the informant said, means app developers cannot use other payment aggregators such as BHIM, Paytm, PhonePe, etc., which charge a much lower commission.
Google, in its response, refuted these allegations. It argued that there is no principle of law that would require Google Play to vertically disintermediate and use a third-party payment and billing system. The 30% fee is not arbitrary but is market based, proportionate, and allows developers to retain the vast majority 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.” - Google
As for in-app billings, Google said, users are given a variety of options—credit or debit cards, net banking, direct carrier billing, codes or vouchers, and UPI. Even when they choose UPI as the method of payment, they are not compelled to use GPay app but can use rival UPI apps, it said.
The CCI noted that Google Play accounts for 90% of app downloads on Android smartphones that dominate the Indian phone market. The market power enjoyed by Google due to its grip over the Android ecosystem apparently resulted in the ‘allegedly’ high commission fee of 30%, the regulator pointed out. This would impact the competitiveness of other players vis-à-vis Google’s own verticals—the fee in respect of which, in any case would be internalized, the CCI order noted
Such a policy of the application store may disadvantage its competitors in the downstream markets, such as music streaming, e-books/ audiobooks, etc. If the application developers, in response, raise their subscription fees to offset these costs or remove/reduce premium/paid subscription offers for users, it may affect user experience, cost and choice.CCI Order
Such conditions imposed by app stores limit the ability of app developers to offer payment processing solutions of their choice to the users for app purchases as well as in-app billings, the CCI said, while directing a detailed investigation.
Google Play: ‘Preferential Placement’
At the time of initial set-up of a new Android phone, Google encourages pre-installation and Google Pay (GPay) as the default payment option, the informant alleged. This, according to the complainant, will encourage users to prefer Google Pay over other UPI payment apps.
“Such preferential placement of Google Pay on Play Store will drive the users to exclusively use Google Pay instead of looking for alternatives due to a “status quo bias”. This is unfair and discriminatory.” - Informant
Google said the allegation wasuntrue -- GPay is neither pre-installed nor it is a default option. However, Google does provide smartphone manufacturers incentives to pre-install its payments app, it stated.
“Google gives its OEM partners the option to enter into additional agreements i.e. Revenue Sharing Agreements, concerning the pre-installation of the GPay app on their devices. These agreements typically offer OEMs financial incentives to pre-install the GPay app.” - Google
The regulator noted that Google’s market position in different streams of the smartphone 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.CCI Order
And so, the regulator has directed its investigation wing to examine Google’s contractual agreements with OEMs and whether they are anti-competitive.