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Competition Commission orders investigation in Google’s App Store and GPay

The Competition Commission of India (CCI) has ordered a detailed investigation into Google’s payment policies and alleged manipulation into its practice within Play Store. The apex body for anti-trust matters said that there was prima facie evidence that Google may be abusing its dominant position in India, with regards to Play Store’s exclusivity and Google Pay (GPay) services.

In an  order on November 9, the CCI has ordered an investigation into four aspects of Google’s practices:

  • Exclusivity regarding mode of payments for app purchases
  • Google Play store is imposing Google’s payment gateway on apps and a high commission
  • Google encourages pre-installs of Google Pay and OEMs have no choice but to agree to terms imposed by Google
  • Search manipulation and bias by Google in favour of Google Pay.

However, it has not ordered an investigation into allegations of search and ad manipulation as well as exclusive access to data through GPay.

The CCI says that Google and its subsidiary Google India Digital Services are entities that operate in the smartphone operating systems (OS) market and the Android app store market. The commission noted that when it comes to the market for operating systems, Googles’ position is not constrained as most smartphone manufacturers cannot substitute the Android OS. And since Android smartphones are the most prevalent OS in India, by extension Google’s Play Store is a “dominant source of downloading apps on an Android smartphone.” The commission also examined Google Pay’s UPI app (Google Pay) role as it operates within the market of apps facilitating UPI payments.

At the end of September, Google announced that it enforce its billing system on all apps downloaded from the Play Store, in a bid to collect a 30% commission on all in-app purchases. Indian startup founders pushed back against this move stating that “Google’s dominance on the discovery and billing of apps, and their arbitrary implementation of policies” would challenge startups. In response to Google’s move Ajay Sawhney and other officials from the Ministry of Electronics and Information Technology held a virtual meeting with startup founders across the country, giving them around two weeks to compile a document with issues with Google’s dominance in India, and other concerns around the dominance of large platforms in India. On October 5, Google deferred the enforcement of its 30% cut on in-app purchases only for India to March 2022.

A group of 15 startup founders had also met with the CCI regarging Google’s decision to impose Play Store billing system and the 30% commission, Mint reported on October 15.

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1) Play Store’s exclusivity

The informant told the CCI said that Google’s payment policy pushes app developers on the Google Play Store to use its payment system and that developers offering products must use “Google Play In-app” billing as a method of payment. Further, since app providers do not have the option of using an alternative payment aggregator, such conditions restrict the choice of app developers and users in terms of the mode of payment they can choose, the informant said.

The CCI said that there is prima facie evidence to investigate Play Store’s payment system for paid-apps and in-app purchases as there could be restrictions on the choices available to developer.

“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 CCI said.

2) Proposed 30% commission on Play Store

The CCI has termed the proposed move by Google to introduce 30% additional commission over and above the one time listing fee of US$25 on the Play Store for developers as “one-sided, arbitrary and onerous.”

“….it appears that such ‘allegedly’ high fee would increase the cost of Google’s competitors and thus might affect their competitiveness vis-à-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/ audiobooks etc,” the CCI said.

Such conditions imposed by the app stores limit the ability of the app developers to offer payment processing solutions of their choice to the users, the CCI said, adding that the “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,” like the European Commission.

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The commission also said that if Google had access to data collected from the users of its downstream competitors, which others did not, it would result in a competitive advantage to Google over its competitors. “It also needs to be seen whether Google would have access to data collected from the users of its downstream competitors which would enable it to improve its own services,” it said.

3) Advantage for GPay?

The commission noted that since “one of the support pages of Google Play Store that Pay is the only UPI based app allowed to be used as a valid payment method method,” it warranted to evidence that Google practices imposed an unfair and discriminatory condition and denial of market access for competing apps of GPay. only UPI based app allowed to be used as a valid payment method method.

Since Google Pay is built on the ‘intent-flow’ methodology with the Play Store, as opposed to ‘collect-flow’ for other UPI apps, which allows for certain automated steps to take place between the Play Store and the UPI app, the CCI said that “it appears that user experience while using Google Pay would be different / better as compared to using other UPI based apps.” Therefore, it is critical to examine that whether theses differences in the process, gave Google Pay an advantage of other competing apps

4) Pre-installation of GPay

Another allegation raised by the informant was that Google has encouraged OEMs to pre-install Google Pay on android smartphones. This will encourage the users to use Google Pay over other apps facilitating payment through UPI. 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”, the informant submitted to the CCI.

The CCI observed that pre-installing of Google Pay “may create a sense of exclusivity and default as users may not opt for downloading competing apps”. Given Google’s “significant market presence” in UPI, the company entering contractual agreements with OEMs to install Google Pay may disturb the level playing field, it said.  Therefore, the CCI has ordered an investigation “to understand the nature of such contractual arrangements and whether they harm the process of competition in the market for UPI based payment apps.”

5) Searches and ad manipulation

While allegations were also raised that Google was manipulating search results within the Play Store for GPay, that it was advertising adds on the Play Store and that Google was prominently featuring GPay over other UPI apps, the CCI said there was no conclusive information placed on record to merit an investigation into these aspects..

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“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 Pay Z app (which start with the word ‘pay’) or Paytm (another app that starts with the word ‘pay’) or PhonePe (which phonetic ally includes the word ‘pay’). As per the Informant, t his has resulted in Google Pay gaining undue advantage over other competing apps,” the order says.

However, while the commission held that Search plays an important role in how users discover apps, as Google displaying Google Pay over other apps can divert traffic away from other competing apps, it cannot arrive at a conclusion based on a one or two screenshots. Since the Informant did not provided any proof, neither a prima facia opinion be formed nor an investigation can be ordered on this count, the CCI said.

The Commission also rejected any investigation on allegations that Google manipulates ad results on Search, for instance, by displaying Google Pay as the first ad when a user search for another UPI app.

“The Informant has also alleged that Google has rigged its featured app lists in favour of Google Pay by including it in the nominations for “User Choice App for 2018”, ultimately declaring it the winner in this contest; “Editors’ Choice Apps”; and “Top-Free Apps”. The Informant has also alleged that since the launch of Google Pay, the “Editors’ Choice” apps in the finance category on the Play Store have been manipulated to include Google Pay,” it said.

Google denied this, arguing that its ad services functions broadly as it does on Search, ranking ads based on relevance, quality, bid amount, etc. Google claimed that its ad service is non-discriminatory and that its services that advertise on Play Store compete for advertising slots with third parties and are treated as functionally separate third parties.

Further, “The Informant has averred that Google further privileges Google Pay by displaying it as the first ad when a user searches for another app facilitating payment through UPI. For example, when a user searches for “PhonePe” or “Paytm”, Google Pay is displayed (albeit as an ad) prominently with organic search results and deceptively labelled as results “Related to your Search” or “Related to this app,” the CCI said.

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Google told the commission that its Google’s ad services on Play functions similarly as it does on Search and on the basis of the same principles like bid amount, relevance, and quality.

The CCI said that manipulation of search advertisements will give an “undue advantage to a specific app relative to other competing apps,” nothing concrete was placed before it which may warrant an investigation.

6) Exclusive access to data

While the information said that since “users do not have the option to make an alternative choice for apps facilitating payment through UPI” for in-app purpaches and app-store purchases, GPay could collect person data. The informant alleged that according to Google Pay’s terms, GPay can share UPI transaction data with its group companies, in violation of regulatory guidelines. Further, they alleged that GPay was not in compliance with data localisation norms.

However, the CCI rejected an investigation on these grounds since the National Payments Corporation of India has said that GPay was launched in compliance with relevant regulations. “The Commission observes that compliance with the sectoral regulations/ guidelines by any regulated entity has to be examined by the concerned regulator,” it said.


Watch Nikhil Pahwa, founder and editor-in-chief, MediaNama in conversation with Mitali Mukherjee, consulting business editor, TheWire.in, on the tussle between Google and Indian startup founders:

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Written By

Reports on banking, payments, fintech and crypto-curencies. Additional reporting on media regulations, data protection and other areas.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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