9911796707
TMI Blog2022 (10) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... cates along with Mr. Mark Buse, Representative of Match Group For Alliance of Digital India Foundation (ADIF) Mr. Abir Roy and Mr. Vivek Pandey, Advocates along with Mr. Tom Thomas, Representative of ADIF Order under Section 27 of the Competition Act, 2002 1. The Information in Case No. 07 of 2020 was filed on 21.02.2020, under Section 19(1)(a) of the Competition Act, 2002 (the 'Act') by XYZ (the 'Informant') against Alphabet Inc., Google LLC, Google Ireland Limited ('Google Ireland'), Google India Private Limited ('Google India') and Google India Digital Services Private Limited ('Google Digital Services') alleging contravention of various provisions of Section 4 of the Act. The opposite parties are hereinafter collectively referred to as 'Google/ Opposite Parties'. 2. The Information in Case No. 14 of 2021 was filed by Match Group, Inc. ('Match Group') under Section 19(1)(a) of the Act against the Opposite Parties alleging contravention of the provisions of Section 4 of the Act. It was stated in the Information that Match Group, through a portfolio of companies it owns, is engaged in the provision of dating / companionship products, available in over 40 languages to users in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Opposite Parties that since 01.04.2016, Google India has been appointed by Google Asia Pacific Pte Ltd, Singapore ("Google Singapore") as a non-exclusive authorised reseller of online advertisement space in India provided by Google Asia Pacific Pte Ltd through Google Ads program to advertisers in India (prior to that time it was the non-exclusive reseller of online advertising space appointed by Google Ireland Limited). Google India also acts as a non-exclusive reseller of standardized Google enterprise products (currently known as Google Workspace), to customers in India. In addition, it also provides a limited set of Information Technology Services ("IT services"), and Information Technology Enabled Services ("ITES") to other overseas group companies. 7. Google India Digital Services Private Limited ("Google Digital") is incorporated as a private limited company under the Companies Act. It has been submitted by the Opposite Parties Google Digital undertakes the commercial operation of the "Google Pay" (formerly known as "Tez") application in India. Facts as stated in the Information in Case No. 07 of 2020 8. The Informant averred that Google's business model is based on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature phone OS. The Informant 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 also placed reliance on decision of the European Commission (EC) European Commission (EC) decision in Case AT 40099 - Google Android (EC Android Decision) wherein the EC recognised that the markets for smart mobile OS and basic and feature phone OS, are separate markets. The Informant has also placed reliance on the order of the Commission dated 16.04.2019 passed under Section 26(1) of the Act in Re: Umar Javeed & Othrs AND Google LLC & Othrs bearing Case No. 39 of 2018 (Google Android Order) for this market. 13. In relation to market for app stores for Android OS, the Informant submitted that app stores are digital distribution platforms that are dedicated to enabling smart mobile device users to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 16. The Informant 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 was also averred 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 as these markets in its favour. 17. The Informant inter alia alleged that Google is abusing its dominant position in the markets for licensable mobile OS for smart mobile devices and app stores for Android OS by (a) mandating 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 (which privileges Google Pay over other apps facilitating payment through UPI and mobile wallets), if they want to be listed on the Play Store; (b) unfairly privileging Google Pay inter-alia by pre-installing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ps and the third parties. Further, the Investigation also collected information/ data/ market reports, which were available online, the same are referred/ annexed in the Investigation Report at appropriate places. 23. It is also noted that apart from the Opposite Parties, during the investigation the DG identified certain other parties which were concerned with the products of Google (like Google Play Store and Google Play Billing System) within the scope of the present investigation. These other parties related to Google are (a) Google Asia Pacific Pte Ltd., Singapore ("Google Singapore") which is responsible for *********** ; and (b) Google Payments India Private Ltd ("GPIN") which is incorporated in India and responsible for *************. 24. Based on the analysis of various factors mentioned in the Act, following relevant markets were delineated by the DG: i. Market for licensable mobile OS for smart mobile devices in India; ii. Market for App Stores for Android OS in India; and iii. Market for apps facilitating payments through UPI. 25. On analysis of various factors, the DG found that Google is dominant, in terms of explanation (a) to the provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring mandatory and exclusive use of GPBS denies the payment aggregators/ payment gateways access to the market for processing of payments and allied services availed by App developers who sell in-app contents. Thus, Google was found to be following the practices that results in denial of market access for payment aggregators in violation of the provisions of Section 4(2)(c) of the Act. Further, by forcing app developers to exclusively use GPBS, Google was found to be leveraging its dominance in market for licensable mobile OS and app stores for Android OS, to protect its position in the market for Android in-app payment processing in violation of the provisions of Section 4(2)(e) of the Act. 30. The DG further concluded that Google has excluded other UPI apps as effective payment option on the Google play Store. As per the DG, Google follows a discriminatory approach towards other UPI apps, while making payment on Google play Store. Google Payments Platform enabled the intent flow with the Google Pay UPI App, whereas other UPIs were integrated with more cumbersome collect flow method for payment on Google Play. Therefore, Google was found to be imposing unfair and discriminatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Informant wishes to pursue the captioned case as legal representative. Accordingly, it was requested that the spouse of the Informant be taken as the Confidential Informant on record in the captioned matter on account of the demise of the Informant. The Commission considered the said application in its meeting held on 04.04.2022 and for the reasons detailed therein, rejected the same. The Commission also ordered that no further communication shall be made with the Informant in Case No. 07 of 2020. 35. Further, the Commission, vide its order dated 18.04.2022, directed setting up of a Confidentiality Ring to grant access to the confidential case records, as prayed for by Google, subject to the stipulations made therein. Pursuant to setting up of the Confidentiality Ring, the Commission, vide its order dated 14.06.2022, inter alia directed to forward electronic copy of the confidential version of the Investigation Report to Google through one of its Confidentiality Ring Member (CRM), with the stipulation that the access thereto shall be limited only to the CRMs of Google, subject to the observations and directions of the Commission as contained in the order setting up Confid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be referred to in this order and dealt with while analysing the matter on merit. Analysis and findings of the Commission Relevant Market and Assessment of Dominance 42. In terms of Section 2(r) of the Act, relevant market is defined as "the market which may be determined by the commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets." 43. Further, Section 2(t) of the Act defines 'relevant product market' as "a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use." Moreover, Section l9(7) of the Act provides a list of factors to be considered by the Commission for determination of the relevant product market, which includes physical characteristics or end use of the goods, price of goods or services, consumer preferences, etc. 44. A relevant geographic market has been defined under Section 2(s) of the Act as "a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Google to be dominant in the first two relevant markets i.e., market for licensable mobile OS for smart mobile devices in India and market for app stores for android OS in India. 49. The reasoning and findings of the DG, the submissions of the parties and the analysis of the Commission, in this regard, is given in succeeding paragraphs. A. Market for licensable OS for smart mobile devices in India 50. The Commission notes that Operating Systems (OSs) are complex software products that control the basic functions of the device on which it is installed and enable the users to make use of such device. Accordingly, smart mobile OS are designed to support the functioning of smart mobile devices and other compatible software applications (apps). It enables the user to make use of such mobile device and run application software on it. Mobile OS is a crucial part of any smart mobile device. Moreover, smart mobile OSs typically provide a graphical user interface ('GUI'), application programming interfaces ('APIs'), and other ancillary functions. These are required for the operation of a smart mobile device and enable new combinations of functions to offer richer usability and innovat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m modern smartphones. They usually had a small screen with a keypad and limited internet access options. Smartphones and tablets are more versatile, combining the functions of feature phones (call and text), cameras, and computers (work, entertainment, internet access). They typically come without a keypad and enable the user to interact via touchscreen (there are exceptions to this, e.g., certain BlackBerry devices) ... " 54.2. Vivo Mobile India Private Limited (Vivo), an OEM has stated that, '... The user interface is different from the basic/feature mobile phone. The user can perform touch screen processing with fingers and gestures to issue various instructions... Users can access & install various applications through the smartphone OS, and the system provide users with unified management like process management, memory management, and authority management ... With higher-performance processor, the smartphone OS can help users meet entertainment needs through audio, video, and image frame rate analysis capabilities on the basis of functional machines meeting communication requirements... ' 54.3. Xiaomi Technology India Private Limited (Xiaomi) another OEM has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpart for basic feature phones. Moreover, the smart mobile devices are expensive compared to basic feature phone due to these functionalities. 57. The Commission is of the view that due to these significant differences in the capability of the smart mobile devices vis-à-vis feature phones, an OEM cannot use feature phone OS on a smart mobile device and vice versa. 58. Further, from supply side perspective also, the suppliers of feature phone OS are different from smart phone OS suppliers as the development of a smart mobile OS requires significant time and resources. Even if the developer in question has already developed a basic and feature phone OS, it will take significant investment both monetary and non-monetary to develop a smart phone OS. Thus, there are substantial barriers of entry associated with development of smart mobile OS. The Investigation has also not revealed any instance where a feature phone OS developer has launched a smart phone OS, on the other hand, some smart phone OS developers viz. Microsoft Windows Phone OS, have exited the market. 59. Based on the foregoing analysis, the Commission finds that basic or feature phone OSs are different from smart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses, and slides to complete command triggers, while PCs/Laptops rely more on mouse and touch versions... Based on the user's usage scenario, the system needs to support such as communication wireless radio frequency management and control capabilities (including SIM card), health detection related sensor data interpretation capabilities, etc. ...' 62. It is also noted that Google itself, has developed Chrome OS, for licensing to computer manufacturers to produce PCs/ laptops whereas, Android OS is licensed for smart mobile devices. Google does not license Chrome OS for smartphones. Further, smart mobile OSs, also require functionalities that are specific to smart mobile devices and are different from those of PC/ laptop OSs viz. in terms of touchscreen, processing capabilities, smaller screen sizes, memory, display, and power management, wireless functions, and apps that are better suited for simpler mobile devices rather than PC OSs which are designed for higher performance CPUs, larger screens and greater hard disc storage capabilities. 63. Based on the above, the Commission concurs with the finding of the DG that owing to technological differences and differences in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use in their own smart mobile devices. In other words, Apple does not license its iOS to third party smart mobile device OEMs and uses the same in manufacturing its own smart mobile devices i.e., iPhone and iPad. In this relation, the Commission observes that from a demand side perspective, third party smart device OEMs viz. Xiaomi, Vivo, Oppo, Samsung, etc. can only install those smart mobile device OSs in their respective devices, which are available for license by the OS owner/ developer (viz. Google's Android, etc.). Such OEMs cannot obtain non-licensable OSs (viz. Apple's iOS and BlackBerry OS) as the same is not granted by the OS owner. Thus, from the perspective of the OEMs, switching to such non-licensable OSs is not an option and thus, cannot be considered as a potential substitute to licensable OSs. 67. In this context, it is important to note the following submissions of few third parties: 67.1. Xiaomi has stated that: "Further, certain Mobile OSs are licensable, and others are non-licensable. To illustrate, Google's Android OS is freely licensable and can be used by different mobile manufacturers. Apple, however, does not license its operating system, iOS, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opers use XCode.' 68. Based on the above submissions, it is noted that non-licensable OS such as iOS can only be used in Apple mobile devices, thus the same is not substitutable with licensable OS. Further, even from the app developer perspective also, there are multiple technical differences between Android and iOS viz. programming languages, development tool kits, testing and interface requirements, etc. The app developer cannot simply port the app developed for one OS onto another OS due to these technical differences. In view of the above submissions, highlighting the factors differentiating operating systems such as programming language, platform specific capabilities and development tools, it is concluded that there are significant switching costs both for app developers (discussed in more detail subsequently) and users in shifting from one OS to another. 69. The DG has further noted that since the apps, in-app content and many other products are designed and compatible only with a particular mobile OS, switching may result in denial of access to the same. Even if the app content is available on different OS ecosystem, switching from one OS to another may result in loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludes even iOS which is not part of the relevant market), Android OS' market share was approximately 95.06%.1 Similar inference can be made from the data available on statista.com (tabulated below). Market share of mobile operating systems in India from 2012 to 20202 Year 2015 2016 2017 2018 2019 2020 Android 61.6 70.73 79.04 88.57 92.06 95.23 iOS 1.61 2.37 2.8 2.95 2.67 3.21 KaiOS 0 0 0 1.29 3.68 1.1 Samsung 4.4 2.31 0.99 0.64 0.42 0.16 Tizen 0.19 0.53 0.87 0.5 0.28 0.1 Windows 2.04 1.77 0.94 0.45 0.17 0.04 Series 40 10.23 3.91 1.18 0.56 0.19 0.03 Symbian OS 2.54 1.02 0.37 0.19 0.06 0.01 Linux 0.41 0.41 0.08 0.02 0.01 0.01 BlackBerry OS 0.25 0.17 0.08 0.03 0.01 0.01 Sony Ericsson 0.32 0.21 0.07 0.03 0.01 0 75. The Commission further notes that Android has enjoyed such high market shares consistently over a long period of time. The exponential growth of Android OS in India, as against other licensable smart mobile OS, can be demonstrated from the chart below: Source: statcounter.com 76. Thus, Google's Android occupies an un-assailable position in the relevant ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y new version of Android mobile OS. Similar scrutiny of Android Compatibility Program4 revealed that each version of Android requires the compliance with a separate Compatibility Definition Document ('CDD') and Compatibility Test Suite ('CTS'). It is only after complying with the CDD and passing the CTS that the device of an OEM is Android compatible. 80. Google has contended before the DG that OEMs can customize and modify Android OS to build differentiated versions, thereby offer competition to Android OS. However, this is irrelevant to determine Google's dominant position in the market for licensable mobile operating system for smart mobile devices in India. Customized versions of OEMs also need to comply with Android Compatibility program, released by Google from time to time if they need to pre-install GMS provided under MADA and use the IPR related to Android. Therefore, the customized Operating System of the OEMs cannot be considered to pose any competitive constraint on Google's market power in the market for licensable mobile operating system for smart mobile devices. 81. Thus, the Commission notes that Google holds a significant, unparalleled and incontrovertible in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed Google apps including Google Maps, Gmail and YouTube) suite for Android devices, which mainly includes the application store Google Play, working with Google Play Services (GPS), which is a software component that ensures that apps using Google APIs are properly communicating with Google online services. In order to have access to these Google's proprietary apps, OEMs need to sign MADA which involve a number of restrictions on the applications that can be preinstalled on their mobile devices. 85. In this connection, it would be apposite to refer to the experience of competitors in mobile OS market, who have exited the market, to better understand the significance of applications in promoting greater usage of an OS. Microsoft's experience with its Windows Phone OS, has demonstrated that Windows phone devices potentially suffered because of the 'app gap'. The relevant reply of Microsoft is reproduced herein under: "... During the time it was operational, Windows Phone devices (having the in-built Microsoft App Store), potentially suffered because of the so-called "app gap." App developers did not find it economical to port and support their most popular apps for Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready been written; and (2) most developers prefer to create applications for an OS that already has a substantial user base. This "chicken-and-egg" situation arising out of the applications barrier to entry means that applications will continue to be written for existing OS, which in turn ensures that consumers will continue to prefer it over new entrant OSs...." 87. Apart from design, functionality and features of Android OS, the main reason for its demand among the mobile users is rich app as compared to any other competing OS. Likewise, the significant numbers of the users of Android OS incentivises the app developers to write/ develop apps for Android OS as they can target a large audience by writing a single app. The large bouquet of apps thus reinforces demand for Android OS, augmenting Google's dominant position and thereby perpetuating app developers' incentives to write apps mainly for Android OS. This self - reinforcing cycle can also be referred to a 'positive feedback loop'. 88. Further, as depicted by the example of Amazon and Microsoft, the developer of a new OS would not only require the technology related capability to develop the OS from scratch but would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functionalities. 93. Google has stated that*********** has been spent in developing Android, and even more in the Android ecosystem as a whole (including the open-source OS and Google's proprietary Android apps). Further, it continues to incur significant costs annually in maintaining and updating the Android platform. 94. In this regard, it is also apposite to refer to submissions of following third parties: 94.1. According to Microsoft, R&D, upkeep, and maintenance activities necessary to create and run a smart mobile device OS are comparable to those necessary for R&D on any other type of OS. Necessary R&D and maintenance activities include maintaining a large corpus of software developers, engineers, user experience designers, marketers, business people, and others to write code, design user interfaces, create a store, work with app developers, and perform tasks related to the design, testing, maintenance, debugging, patching, and updating of the OS and associated apps, along with the necessary infrastructure to deliver and update the OS. As a rough estimate, it was submitted that approximately ***********was spent on R&D activities related to Windows Phone OS while it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained the various entry barriers faced by a new entrant in market for mobile OS. The relevant extracts of his submission are reproduced below: "The investment of capital and technology, sunk cost, gestation period, recurring expenses, cost on new innovation etc. are really not the entry barrier rather these are important aspects and new entrant would plan for wile entering in to this space. Kindly note that smart mobiles are smart because of the Applications support it has, for the Operating System. It may further be noted that for any new player to enter this segment of Smart Mobile operating system, there is an immediate competition from players like Google and Apple who has invested more than 15 years to build this Application ecosystem. The challenges start from convincing the developers to make their Application available on newly developed platform. One of the other barrier is "Balancing the Experience", which can be well understood with a small example of Facebook Application. Facebook's experience on both Android and iOS is balanced/similar. Developer need to work extra on this new platform to ensure their App Experience is further balanced for this newly developed pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MADA makes the GMS license contingent on devices being Android Compatible Devices... Google alone administers the CTS and CDD, and retains broad discretion to veto or block distribution of devices. Amazon understands that Google requires GMS licensees to submit all Android devices to Google for approval (described above), regardless of whether the devices include GMS or are based on the open source version of Android. The MADA means that licensees relinquish the 'freedom' under the open source Android license by having to comply with the Google-controlled CTS and CDD..." 97. Therefore, the restrictions imposed on OEMs make it difficult for developers of Android forks in finding OEMs that are willing to install their operating system. This significantly reduces the viability of Android forks and therefore restricts what would otherwise be an alternative platform on which rivals provide apps and services that compete with Google's own apps and services. Thus, despite the free availability of AOSP license, requirement of complying with MADA and AFA for OEMs indicate that these Agreements foreclose the entry of new entrants thus, works as significant barriers to entry in the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he OEMs much more dependent on Google. This further evidence the existence of entry barriers in the relevant market. f.) Indirect Network effect 102. As already stated, Operating Systems exhibit indirect network effects i.e., the benefit to users of an operating system increases with the volume and quality of native apps they can access on that operating system, and similarly the benefit to app developers increases with the number of users they can access on an operating system. The presence of indirect network effects is likely to act as a barrier to new entry and expansion as it creates a 'chicken and egg' problem i.e., an operating system needs a critical mass of users to attract app developers, but also need a critical mass of app developers to attract users. g.) Lack of Countervailing buyer power 103. It is noted that OEMs are the direct customers for operating systems. The large established user base of Android devices, contributing to strong network effects, makes the ecosystem attractive to OEMs and App developers. Given the fact that Android OS enjoys significant consumer demand in India, OEMs are not able to develop/ identify alternatives to compete with Android OS. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmer being non-licensable and closed source whereas latter being licensable and open source. Some consumers may have preference for closed ecosystem like Apple and others may have a preference for open ecosystems like that of Google. Thus, in some limited sense, the end consumer may have the choice of a smart device based on an alternate OS (i.e., whether to buy iOS-based device or Android based device) and that too at the time of buying a smart device. Thereafter, the end consumer is locked-in to the OS and faces substantial switching costs, primarily in terms of cost of new smart device. 108. In this regard, the Commission notes that price of the alternate device is an important parameter for switching decision by the users. There is no denial of the fact that users preferring low-priced devices would not switch to Apple devices due to considerable price differences. Users of high-priced devices may be in a position to switch to Apple devices, however, in that case user would need to learn the new interface, transfer the existing data on devices, the need to download and purchase existing apps for the new smart mobile OS, etc. In this regard, the Commission also notes that Apple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable across both iOS and Android OS (i.e., multi-homing) is completely misdirected and reflect incorrect understanding of the market. Multi-homing by app developers should not be confused with demand side substitution. Even if app developers' multi-home across licensable and non-licensable mobile operating systems, such multi-homing does not tantamount to substitutability as they cannot substitute one operating system for the other. The Android users and iOS users are two different and distinct set of customers. The app developers, in order to maximise their reach to these set of consumers, would not like to confine their offerings exclusively to one of the ecosystems as it would imply losing a sizable portion of the potential consumers' revenue who are available on the other platform. Consequently, Google's claim that Apple iOS competes with Android to attract users and app developers cannot be accepted. Thus, the contentions raised by Google are rejected. This aspect from app developers' perspective is discussed in more detail while analysing the market for app stores and assessing Google's dominance. 111. As stated above, the app stores are important channels for distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... install an OS the more users run their smartphones on this mobile OS, and the larger the potential audience is for apps that are available for that OS. This virtuous cycle of scale can be demonstrated, by way of following image: 116. App stores can also be characterised as multisided platforms, consisting of different interdependent groups i.e., OEMs, users of smartphones and app developers. Referring to a report published by UK's Competition and Markets Authority (UK CMA)6, the DG has further observed that the benefit to users of an app store increases with the volume and quality of apps they can access through that app store and similarly the benefit to app developers increases with the number of users they can access through an app store. In other words, app stores are only attractive to users if they have enough developers and vice versa. 117. It is also noted that app stores also offer tools and services to support developers to build apps for the app store. Further, app stores have rules that govern the types of apps permitted in the app store, conduct of app developers, how users pay for apps, the distribution of revenue between the app and the app store, and other detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Blackberry cannot be run on Android as they have been specifically developed for these OSs. The OEMs who have installed Android OS on their respective smart mobile devices cannot provide an app store which is technically incompatible with Android OS. In other words, availability of app store on a device is restricted to its compatibility to the OS. 123. Due to these technical differences between the different OSs and then resultant un-availability of the incompatible app store, the user's choice of the app store is also restricted to the alternative app store which is compatible with a specific OS. This implies users can only use an app store specifically developed for the OS for downloading the apps. Similarly, the app developer can only use app store specifically developed for the OS for distributing their apps to the users. 124. Further, from a supply side perspective also, the developers of app stores for other licensable or non-licensable smart mobile OSs are unlikely to switch to Android as the development of an app store for a particular OS requires considerable time and resources. Therefore, Microsoft which offered Windows Phone Store or Apple which offers App Store ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit apps made for one OS to another OS..." 125.3. Zomato, in its submission has stated that: '... Across OSs, there ore differences like the choice of programming language used to develop applications, the APIs that the OS allows app developers to access device and user information e.g. geolocation, device identification, etc. In general, porting apps from one platform to another is only marginally easier than developing it from scratch as mostly the platforms use different technologies, libraries and at times offer different APIs for similar things like Camera, GPS etc. The only advantage when porting is to have a reference app. Apart from this, the developer has to do everything else themselves... ' 126. Based on the submissions by App Store and App developers, it is noted that applications developed for one OS cannot be run on another OS because various platform differentiating factors, such as programming languages and APIs offered by OS to app developers. In this regard, Zomato has stated that porting applications across OS is tiresome task and requires significant efforts. 127. In this regard, the DG has also referred to the CMA Interim Report and noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of app developers, which are enumerated below. 130.1. ************************************ ************************************ ************************************ ************************************ *********************************** 130.2. Oslabs Technology India Pvt Ltd (App Bazaar), in its submission, has stated that: "...App Bazaar cannot reach users directly through a sideloading (which allows the user to add APK file of App Bazaar on his/her device), and can reach the consumers either through Google Play Store or through preloading by OEMs....Google Play Store does not allow publishing App Bazaar (as per it's Google Play Developers Distribution Agreement ...........clause 4.5 reads "You may not use Google Play to distribute or make available any Product that has a purpose that facilitates the distribution of software applications and games for use on Android devices outside of Google Play..." 131. Google on the other hand vehemently opposed the findings of the DG and argued that objective data contradict the Investigation Report's conclusion that sideloading is not a viable substitute to Android app stores. Google has referred to few examples in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ex-post basis i.e., where it was difficult to sideload the apps and users were not opting for side-loading. Secondly, Android 12 which has apparently allowed automatic update of sideloaded apps, was released only in October 2021. The impact of such change, if any, on the user behaviour and the app developers' option for distribution channels would manifest in future. There is no evidence as of now whether such change, as well as the manner in which such change would be implemented, will result in favour of the users and the app developers. 134. In this regard, the DG has also noted that the above finding is also confirmed from the Market study into Mobile App Stores by Netherlands Authority for Consumers & Market wherein it noted that only users who are already familiar with an app and are willing to look for it outside an app store (here it specifically considered the Play Store) will sideload it. In other words, whilst well known apps may still be actively searched for by users (such as apps for banks, etc.), this will not hold true for smaller, lesser well-known apps. 135. The app developers - especially smaller ones - do not have the resources and strategy to offer their ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any need to be modified, created and processed, thereby limiting user experience. 139. In this regard, the DG has referred to the findings of Interim Report of Australian Competition and Consumer Commission (ACCC) on Digital Platform Services Enquiry7, which infers that: "... Ultimately, native apps appear to benefit in performance from tighter integration with the OS and hardware. They provide a richer user experience and provide better access to the mobile device's OS and hardware features such as camera, microphone, GPS, sensors and swipe based controls. Web sites and web apps do not have the same level of centralised distribution and discoverability as native apps. Users are overwhelmingly choosing to spend time with native apps over websites and web apps..." 140. Further, performance of native apps (apps available on app stores) is better than the apps downloaded from the apps downloaded from web as former are better integrated with OS and device. Referring to the CMA Interim Report, the DG also noted that "...web apps, which in principle allow developers to offer their apps directly to users circumventing the app stores, are not currently a suitable alternative to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , referring to the ACCC Interim Report, the DG has found that pre installation of apps is not considered any commercially viable option by app developers because the app developer would have to get into arrangements with a large number of OEMs in order to reach the same audience through pre-loading (as through an app store). This would be prohibitively expensive, since pre-loading often necessitates a commercial agreement between the app developer and the OEM, as well as a hefty price. 146. The Investigation has also revealed that once an app (including an app store) is loaded on an Android device, third-party app developers need a way to distribute updates to their apps, whether to add new features, fix bugs, or maintain compatibility with operating system changes. App updates are critical for the app's continuous operation and commercial sustainability, as well as for making continual enhancements. This renders option of pre installation of third-party apps less desirable to both users and app developers. 147. Similar inferences are drawn by the DG from the CMA Interim Report which stated that, "...pre-installation of third-party native apps on Android devices does not appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled by other OEMs. Thus, these other Android app stores though are substitutable with Google's Play Store individually, but in a limited manner only. This aspect is further elaborated while examining the dominance of Google in this market. 152. The Commission is of the opinion that all these app stores belong to the same relevant market as an OEM, in principle, can choose to pre-install its own app store along with Google Play Store, on its Android devices. 153. Thus, based on the above analysis, the Commission is of the view that second relevant product market in this case can be defined as 'the market for app store for Android OS'. 154. Google argues that in defining the market as app stores for Android OS, the Investigation Report errs by focusing on substitutability from the perspective of OEMs and ignoring demand-side substitutability from users' and developers' points of view. Google avers that Google Play is one of numerous distribution channels where app developers can distribute their apps and digital content and where users can access and/or purchase such content. Google Play faces fierce competition from these different channels. The Commission is of the view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of times an update to their app has been installed, or the number of times their app has been uninstalled. Developers can see these metrics at a glance on their "Dashboard" page, and in more depth on their "Statistics" page within the Google Play Console..." 157. Going by Google's own submissions, Google offers variety of services to app developers which would not be available if the apps are distributed through sideloading, web apps, file sharing, etc. In view of the unique services provided by the app stores, these options are not viable substitutes to Play Store. Accordingly, Google's arguments are rejected. 158. In respect of relevant geographic market, the DG has observed that from the standpoint of handset manufacturers, the terms and licence conditions of the OS for smart mobile devices are uniform across the country. Further, the number of applications that Google include in the GMS suite differs by country. Similarly, Google follow different criteria for licencing the Play store according on the legal demands of each location. It is also noted that consumer preferences, availability of mobile apps in local languages, and location-based applications and services, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or the choice available to users of Android devices. Thus, using both these methods will help in holistic understanding as to dominant position of OPs in the market for App store for Android OS in India. 164. Google has stated that it does not make Google Play available to end users outside of its arrangements with device manufacturers under the MADA since allowing users to download Google Play would undermine the value of this licence and the efficiencies they derive from it. It means Play store comes pre-installed on all the devices which have pre-installed GMS under MADA. Subsequently, Google has provided the details of the smart mobile devices (brands) sold in India in which Google Play Store comes preinstalled. Google has stated that the submitted data pertains to the************ **************************** **************************** **************************** 165. Based on above submissions, the Commission notes that Google Play Store is preinstalled on 100% Android OS devices. Whereas the other app stores such as Samsung Galaxy App Store, OPPO App market, VIVO App Store, etc. are preinstalled only on the devices that are sold under their brand name (e.g., Sams ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ********* 16,692,601,078 2019 ********* 18,495,168,044 2020 ********* 23,677,353,329 171. The comparative analysis of the data regarding number of apps available on Google Play Store vis-à-vis other app stores on Android devices in India, is as follows: Number of Apps available on different App Stores for Android OS Year Google Play Vivo Oppo Amazon App Bazaar 2014 ********* **** ********* ********* * 2015 ********* **** ********* ********* **** 2016 ********* **** ********* ********* **** 2017 ********* **** ********* ********* **** 2018 ********* **** ********* ********* **** 2019 ********* **** ********* ********* **** 2020 ********* **** ********* ********* **** Source: Respective submissions of the parties 172. This data can also be represented graphically, as follows: ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ 173. It can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avily in Google Play to keep it competitive with other Android and non-Android app stores. In 2020 alone, for example, Google invested more than USD 1.56 billion in Play. 180. Thus, the Commission notes that the relevant market requires significant investment and thus act as a major entry barrier. 181. The Investigation has further revealed that the app store is a two-sided market in which Google has been able to attract a large number of Android users on one side (due to presence of large number of apps) and large number of app developers on the other side (due to potential to reach a large audience). Google thus enjoys a strong 'network effect' of large user base and apps developers in the market of app store for Android OS, which makes Google's position unassailable. This is further apparent from the submissions of parties who have developed/ involved in creation of App Stores. 181.1. Amazon stated that, "... In United States v. Microsoft, the US Court of Appeals upheld the District Court's observation that this "applications barrier to entry" stems from two characteristics of software markets: (1) most consumers prefer an OS for which a large number of applications have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, a significant investment is also required in development, maintenance, functioning and updating of app store platform. It is further observed that other factors affecting desirability of an app store are its content available on the app store and regular version updates. 183. The above discussion regarding entry barriers also requires a look into the technical issues involved in establishing app store as claimed by Amazon, which arises from exclusion of forked versions of Android by Google from all critical aspects of Android Ecosystem. The relevant extracts from Amazon's submission pertaining to market for mobile operating system are reproduced below: ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ 184. Google Play Service APIs is a software layer working in the background of Android that is used to update Google apps and other apps from Google Play. Most of the Android apps use Google Play Services API for their functioning and without access to same, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion store in the world and accounts for more than 90% of the total mobile applications downloaded on smartphones having an Android OS. It is important to note that till date, no Android app store developer has been able to replace Google Play Store as it requires the developer to not only develop an app store but also its own APIs and functionality similar to Google, i.e. in essence, to replicate the entire Google ecosystem. Since this requires substantial and indefinite investment, Google continues to remain dominant in the "app store" market as well. Due to this dominance, it can impose unilateral terms on competitive apps or suspend/ban them as per its own discretion. This is the biggest challenge for developers like MMI whose app are available on the Play Store and continue to compete with Google's own product, i.e. Google maps....' 188. The Investigation has also revealed that Google is sharing significant quantum of money with the OEMs (HTC, Huawei, Lenovo, Motorola, OnePlus, Oppo, Samsung, Vivo, and Xiaomi etc.) under the RSAs in relation to devices used by users in India. *******. As per the provisions of RSAs, OEMs are provided with the financial incentive for pre-install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes that Google' Play Store is significant from the point of view of smart mobile device users as well as app developers. Given the fact that Google's Play Store offers highest number of apps and also offers a greater quality of apps, the Android device user seems to have a preference for Google Play Store and consider it as a 'must have' app. The preference of the user/ app developers also reinforces the dominant position of Google in the relevant market for app stores for Android OS in India. 194. As already stated, Google in its submission has contested delineation of the market definition as well as determination of its dominance in the same. Many of the arguments of Google have already been considered and examined above. Google has further averred that the delineation of the relevant market fails to meet the requirements of the Act. To establish a "relevant product market", the substitutability of the products for consumers must be assessed by reference to the prices, characteristics, and intended use of the products. It has been further submitted that the Investigation Report relies on the reports of international competition authorities that have no relevance to app dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ecosystems as it would imply losing a sizable portion of the potential consumers' revenue who are available on the other platform. Therefore, they multi-home and offer apps on both the platforms. Further, recognising cross side network effects, app developers have to develop and innovate for each of the ecosystem to be able to maximise their revenue and provide a wider consumer choice. 199. Now, examining the substitutability between Google's Play Store and Apple's App Store from an end user perspective, the Commission notes that the natural corollary of the above-mentioned reasoning is that an Android user cannot use Apple App store for downloading apps on her device. Similarly, an Apple user cannot use an app store meant for Android OS to download apps. The end user does not multi-home across app stores on different operating systems/platforms for their requirements. Thus, from an end user perspective also, Google's Play Store and Apple's App Store are not substitutable. The Commission further notes that there might be some degree of competition between the two mobile ecosystems i.e., Android and Apple, however, that too is also limited at the time of deciding as to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... app stores considers Google's Play Store and Apple's App Store as interchangeable or substitutable, as discussed supra. 203. The claim of Google that it competes with Apple's App Store is also demolished from a bare perusal of the fact that Google, as an app developer, offers its proprietary apps viz. Google Search, Google Chrome, Google YouTube, Google Maps, etc. on Apple's App Store (or erstwhile Windows Store) but not on the other app stores for Android OS. Google realises that app stores are an important gateway to reach the users in each of such ecosystems. Google has secured access to 100% of the users on the Android platform by way of imposing pre-installation through MADA on all Android devices. However, in order to reach users on iOS platform, Google need to provide its apps available for download on Apple App Store. In pursuit of this objective, Google has also entered into an agreement with Apple for being the default search engine on Safari Browser. The Commission is of the view that like any other app developer, Google in order to maximise its consumer base, cannot afford to lose a sizable portion of the potential consumers available on iOS platform. This in itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the OEMs too perceive Play Store to be indispensable for the commercial success of their handsets. The dominance of Play Store inter alia stems from the strong indirect network effects that work in its favour, with its large user base on one side and a large number of app developers on the other side, who depend on Play Store to access these users and maximise their reach and revenue potential. These factors, in conjunction with Play Store's automatic update functionalities, its close integration with Google Play Services, lack of substitutability between android app store and other OS app stores, and high entry barriers lead to a reasonable conclusion that Google Play Store occupies a dominant position in the relevant market of app stores for Android OS in India. Even if the market definition nomenclature is considered from the app developer as well as user perspective i.e., as a distribution channel for apps, the Commission notes that listing apps on Google Play Store is indispensable for the app developers and they cannot afford to rely on any other mode of distribution to reach the entire spectrum of Android device users. C. Market for apps facilitating payments through UPI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) PSP banks to provide UPI services. The end user can avail UPI Service, either through any PSP bank's app or the TPAP's app, by linking their bank accounts to their respective UPI IDs. * TPAP - A Third Party App Provider is a service provider and participates in the UPI ecosystem through PSP banks. It offers a user friendly interface to make UPI payments. Examples include Google Pay, PhonePe, Amazon Pay UPI etc. * Technology Service Provider (TSP): PSP banks have been permitted to engage with outsourced technology service providers ("TSPs") for the backend technology integration with UPI. * PSP - Payment Service Provider means entities (banks) which are allowed to issue virtual addresses to the users and provide payment (credit/debit) services to individuals or entities and regulated by the RBI. A PSP is a bank that has various TPAPs integrated into its system. * Remitter Bank - the account holding bank of the Payer. * Beneficiary Bank - the account holding Bank of the receiver. 209. In relation to UPI, it is also noted that UPI transactions can be primarily done either in the push or pull form. In the push form, money is sent by the app user to a recipient and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e potential security concerns. 216.2. Unlike card payments, UPI does not charge the merchant convenience fees that is charged to the merchant outlets for card payments made at a POS terminal 216.3. UPI is more widely accepted as it facilitates payments through mobile numbers (linked to a user's bank account) and QR codes. A merchant does not need to install a POS machine (which typically costs between INR 5,000 - INR 12,000) at the store to process UPI payments, rather, a printout of the QR code is sufficient. This has resulted in the rapid adoption of UPI as a favoured mode of payments by even smaller merchants. 216.4. UPI permits the linking of multiple bank accounts into a single mobile app (of any participating bank or third party). In contrast, one credit and/or debit card is only linked to one bank account 216.5. UPI payments are limited to India only, whereas card based payments can be used for payments globally. 217. In addition, the Commission notes that its relatively easier and almost instantaneous to register on UPI apps as compared to securing a credit card from bank. Further, it is very convenient for the users, to use UPI facility as compared to cards. Based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minutes after addition), and there may be a cap to the amount that can be transferred to new beneficiaries within the first 24/48 hours. These restrictions do not apply to UPI. 220.6. There are no transaction fees levied on users for UPI payments whilst IMPS services through net banking are chargeable. 221. Based on the above, the Commission concurs with the DG that UPI enabled digital payments apps provide several convenient and value-added features which make it a distinct payment system. Thus, there is no substitutability between payments through UPI enabled digital payments apps and transfers through net banking (NEFT, RTGS and IMPS). UPI versus Mobile wallets: 222. A mobile wallet is a prepaid payment instrument (PPI) to facilitate purchase of goods and services, remittance facilities, etc., against the value stored in / on such instruments. Users can link their credit card or debit card information in mobile device to mobile wallet application or they can transfer money online to mobile wallet. Instead of using their physical plastic card to make purchases, they can pay with your smartphone, tablet, or smart watch. An individual's account is required to be linked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectronic clearing services, National Electronics Funds Transfer System ("NEFT") Real Time Gross Settlement ("RTGS"), Immediate Payment Service ("IMPS") and UPI. All digital modes of payment (such as wallets, UPIs, credit and debit cards, etc.) are substitutable, inter from the consumers' perspective. However, the following features of UPI may be considered as an additional advantage as compared to other modes of digital payments in India: (i) The unique feature of VPA based transaction is the secure aspect of UPI architecture as it obviates the need for sharing account or bank details to the remitter. It powers multiple bank accounts into a single mobile application of any entity providing UPI services. (ii) UPI can integrate and bring under its umbrella the multiple PSPs by adding a layer of interoperability within their platforms. iii) The UPI ID acts as a uniform digital identity for the customer, and the customer can authenticate payment transactions on this UPI ID through the UPI App, which is downloaded on the customer's mobile device. (iv) UPI enables push (pay) and pull (collect) transactions by the payer and payee using their UPI ID and without the need for sharing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, no special equipment is needed at the merchant store for accepting UPI payments either. Payments through UPI can be made simply through mobile numbers or scanning a Quick Response ("QR") code at the merchant store, and there is no need to install any point of sale ("POS") terminal machinery, which can be fairly costly; * UPI Payments are cheaper and more widely accessible by a larger demographic; and * UPI can be linked to multiple bank accounts whereas credit / debit cards can only be linked to one bank account each. (26) UPI v. mobile wallets * A 'mobile wallet' is a prepaid payment instrument which facilitates the purchase of goods and services from entities that accept that wallet. Mobile wallets require users to transfer money from their bank account into the wallet to be able to use it. UPI transfers happen directly between the banks; * UPI uses a VPA as an identifier and is a comparatively open and interoperable payment platform compared to mobile wallets; * The UPI transaction limit is INR 1 lakh per transaction whereas wallet transactions are capped to (i) INR 10,000 per month for non-KYC customers and (ii) INR 1 lakh per month for full KYC cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... users as well as other key stakeholders..." 225.4. Xiaomi differentiated UPI with other forms of digital payment in following table: Comparison of Features of UPI Across Other Payment Modes Features UPI Credit/debit cards Net Banking Digital Wallets Virtual Payment Address ("VPA") ✓ x x x Requirement to store / access sensitive information x ✓ ✓ x Interlink multiple bank accounts to one digital identity ✓ x x x Instrument-less mode of transaction ✓ x ✓ ✓ Real-time fund settlement ✓ ✓ x ✓ Daily transaction limit ✓ ✓ x ✓ Bank account requirement ✓ ✓ ✓ x Convenience of money transfer ✓ x ✓ ✓ Single click authentication ✓ x x x Option to raise complaints directly ✓ ✓ ✓ ✓ P2P transactions ✓ x ✓ ✓ Requirement of banking detail of beneficiary x x ✓ x Transfer costs x ✓ x x 226. The Commission notes that UPI offers unique feature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payment through UPI Apps is not substitutable with other modes of digital payment because of following characteristics: 228.1. UPI users can initiate push transactions by using UPI ID, this feature is not available in any other modes of digital payment. 228.2. UPI permits the linking of multiple bank accounts into a single mobile App. In other words, if a customer has 2 bank accounts with 2 different banks, customer can register for UPI with any PSP bank and link all his bank accounts into one single UPI ID. In contrast, one credit/ debit card is only linked with one bank account. 228.3. Another important characteristic of UPI is presence of network effects. UPI is a multisided platform consisting of multiple stakeholders including end users, banks, merchants, UPI App developers etc. The user base of a UPI app determines the number of merchants which adopt it and offer payments through such an app, which conversely increases the number of users of the UPI app. This means that the activity and scale of one user group on the platform can influence the activity and scale of other user groups on the platform. 229. In relation to delineation of the relevant market and to understan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d market for app store for Android smart mobile OS in India. 236. After delineation of the relevant market as well as determination of dominance of Google in these markets, the Commission now proceeds to examine the alleged conduct as to whether the same amounts to abuse of its dominant position by Google, in violation of Section 4 of the Act. Assessment of alleged abuse of dominant position by Google 237. The Commission notes that the instant case relates to the alleged abuse of dominant position by Google in its Play Store policies as well as its UPI app, in contravention of the provisions of Section 4 of the Act. In terms of Section 4 of the Act, an enterprise or a group, enjoying a dominant position in a market, is prohibited from abusing its dominant position in the relevant market. Section 4(2) of the Act lists out various conducts which are stated to tantamount to abuse of dominant position. At this stage, it would be prudent to reiterate the provisions of Section 4(2), which reads as follows: (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group, -- (a) directly or indirectly, imposes unfair or discriminatory- (i) con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey 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. 240. The Informant 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's payment system and Google Play In-App Billing. If the app providers had an option, they could have preferred using alternative payment aggregators which charge a much lower commission and are established and trusted names in the online payment universe. The Informant alleges that by making listing on Play Store conditional on the apps using Play Store's payment system and Google Play In-App 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. 241. The Informants in Case Nos. 14 of 2021 and 35 of 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andatory use of Google Play Billing System (GPBS) for distributing paid apps as well as in-app paid content by the app developers to the users. Google defines and describes the Google Play Billing System as: "Google Play's billing system is a service that enables you to sell digital products and content in your Android app." 247. GPBS is the proprietary billing system of Google. It is an App developer facing system whereby the App developers create account with Google. Further, Google remits App developers the payments collected from users of these Apps who (i) purchase the App from the Google Play Store; or (ii) make purchases of digital goods/services and/or subscriptions within the App. In the process, Google deducts its "service fee" or commission for facilitating this process of collecting payments from users and remitting to App developers. 248. The relevant extract of Google payment policy (DPP)17 for Google Play is as under: "Payments 1. Developers charging for app downloads from Google Play must use Google Play's billing system as the method of payment for those transactions. 2. Play-distributed apps requiring or accepting payment for access to in-app feat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led with a physical edition; and social networking services; and (iv) cloud software products, including data storage services, business productivity software and financial management software18. 251. The Investigation has also revealed that Google strictly monitors compliance with the Developer Program Policies through a review process. At the time of submitting an app for review itself, app developers have to specify to Google whether they offer IAPs. 252. Thus, Google requires the App developers to exclusively and mandatorily use the Google Play's Billing System (GPBS) not only for receiving payments for Apps (and other digital products like audio, video, games) distributed/sold through the Google Play Store but also for certain in-app purchases i.e. purchases made by users of Apps after they have downloaded/purchased the App from the Play Store. Further, the mandatory and exclusive use of Google Play's Billing system has been clearly stated by Google in the page titled "Understanding Google Play's Payments Policy"19. The relevant part reads as under: "...all developers selling digital goods and services in their apps are required to use Google Play's billing system. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it impede the ability of app developers to increase their usage/ membership. 256. After examining the various relevant clauses of the contractual arrangements between Google and app developers, the Investigation has thereafter examined the service fee charged by Google. The DG has noted that Google Play Store is working as an online marketplace platform for sale/distribution of Apps for end users of Android smartphones in India. In doing so, Google levies charges a onetime fee of $25 for onboarding/hosting Apps on its platform. It also charges the App developers fee on purchase of apps and in-app purchases ("Service Fee"). Thus, hosting fee and Service Fee can essentially be seen as the price charged by Google Play Store for facilitating the sale/distribution on the platform. This Service Fee has been alleged to be unfair and discriminatory in the present case. 257. Service Fee is charged by Google from App developers who distribute either (a) paid Apps on the Google Play Store; and/or (b) charge for in-app purchases of digital goods or subscriptions. The Investigation has revealed that as on 06.01.202223, this service fee is as under: 257.1. From 01.07.2021, service fee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms. 261. It is also noted that through various blog posts and otherwise, Google has been announcing/clarifying the scope, applicable fee and date of implementation of its payment policy. These enforcements of Google's policy of mandatory use of GPBS announced via different blog posts starting 28.09.2020 have been summarily tabulated hereunder: Changes (post-September 2020) to Google Play Store payments policy and its enforcement S.No. Date of Announcement Relevant Issue and Remarks 1. 28.09.202027 Enforcement of (i) mandatory use of GPBS after 30.09.2021 and (ii) 30% service fee 2. 05.10.202028 Enforcement of mandatory use of GPBS extended till 31.03.2022 for developers based in India 3. 16.03.202129 Starting 01.07.2021, service fee reduced from 30% to 15% for the first $1M (USD) revenue each developer earns every year. 4. 16.07.202130 (Overseas) Developers given an option to request a 6-month extension, which will give them until 31.03.2022 to comply with the Payments policy. 5. 21.10.202131 Service Fee on subscriptions reduced from 30% to 15%, further reduction of service fee on audio, video streaming services from 15% to 10% 6. 10.12.202132 Enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission charged by Google on the GPB..." Google has also mentioned in its submissions that "...it had always been clear that gaming developers are required to use GPB for transactions on their Google Play-distributed games..." Google has also stated that "...*********...". Based on these statements, the Commission notes that though Google has extended the date for app developers to comply with its policy related to GPBS but gaming apps which represent significant portion of transactions on Play Store, were already required to mandatorily use GPBS. 265. The DG during its investigation has also examined changes introduced in the scope of its payment policy by Google over the years. For this purpose, the Investigation has examined all DDAs submitted by Google along with the Developer Program Policies (DPP) and transaction/Service Fee charged by Google prevalent at different points of time when Google revised the DDA. The Investigation has concluded that Google has gradually increased the scope of the mandatory requirement of use of its own payment/billing system (currently GPBS) by explicit additions in the policy. 266. The Commission notes that Google Play's Payments Policy which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... features to the app users. Further, the app developers are also restrained from using language that encourages a user to purchase the digital item outside of the app by virtue of Anti-steering Provisions. The DG has also noted that the practices followed by Google, also results in restricting app users from benefiting from the discounts and cashbacks offered by banks and other financial institutions that could have been availed by users by using alternative payment processing systems. Thus, app developers which otherwise had option to use payment processor of their choice would have to use GPBS. Discriminatory Practices 270. The DG has also examined whether Google is also following discriminatory practices by not using GPBS and thus, the resultant service fee for its own applications. In this regard, relevant extracts form the submissions of Google are as follows: "..All apps, including Google apps, are subject to the same set of rules and policies. In December 2020, Google announced a clarification of its billing policy to make clear that apps that sell access to digital content or services must use Google Play's billing system. Developers not already in compliance were gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... *****. These agreements have been entered into between Google and the respective ********Thus, instead of using GPBS, YouTube has directly engaged with third-party payment processors for processing the payments. It is further noted that YouTube is paying a fee of *******for processing payments as well as IAPs in respect of its own Apps, whereas by imposing a service fee of ************onto other apps, Google is putting its rivals at a disadvantage. Google in its submission has also admitted that "...**********" Based on the same, it is noted that while YouTube has been given the liberty to use third party billing system and thereby, bypassing GPBS and the resulting applicable service fee of Google, the rivals are being continuously forced to use GPBS and pay a service fee of 15-30%. Thus, it is noted that Google has not subjected its own app to the conditions and service fee, as being forced upon the other apps. These discriminatory practices result in competitive disadvantage to the competitors of Google in the downstream market, by increasing their cost. 273. The discriminatory practices directly harms the app developers as it increases their costs and is exploitative for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treaming; (iv) online games; (v) dating apps; (vi) maps; (vii) email services; (viii) cloud services. 17. Developers that distribute their apps on Play have access to the Play Console. This allows developers to easily upload their apps on Google Play (e.g., choosing distribution countries and distribution prices), and provides extensive analytics tools in real time around their app's performance, ratings, and how sales are developing. There is no restriction on the app analytics providers that developers can use to assess the performance of their apps. The majority of the data available to developers through the Play Console can be downloaded by the developer, and analysed using any third party analytics provider of their choice, such as App Annie, or by the developer themselves. In addition, app developers can collect within their app user data for their own purposes and analyse that data on their own and/or outsource the analysis to third party providers. 18. Google collects certain statistics and data that are also shared in part with developers through the Play Console: a. Device information and when the device has accessed Google's systems; b. In-store use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just 21 days. 17. Moreover, in some instances, *********** 278. Based on the above, it is noted that Google has access to a significant volume and category of granular data of the app users including complete personal as well as financial transaction information. The mandatory requirement to use GPBS by Google impact the developers' ability to improve their services and compete effectively in their respective domain as the financial transaction data pertaining to their own users is in the complete control of Google and not shared with them in full. Further, by having access to the financial transaction data along with other data, Google is in a position to distort competition in the downstream markets by setting rules for controlling the whole process of development and distributions of apps. 279. The Investigation has also approached certain app developers in the music streaming which compete with Google's YouTube music streaming services. The relevant replies are reproduced below: 279.1. Hungama has stated that, "A competitor having access to our customer data is not desirable as these users could be directly targeted by Google with their own product & services aimed at ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -app payments through the Google Play Store's inapp payments system as is envisioned from 31 March 2022, Google may have access to the following data: a. The payment instrument used by the user; b. Amount paid; c. Whether the payment is recurring or non-recurring; d. Whether the payment is tied to an advertising id; and e. The phone number of the user. 8. It may be noted that the Google in its privacy policy states that Google collects data about user's purchase activity and activity on third-party sites and Apps that use Google's services. Further, Google uses this data to provide personalised services, including content and advertisements. 9. It is unclear whether such data would be shared with Disney+ Hotstar. However, access to such data will likely allow Google to improve the offerings of YouTube, which is a competitor of Disney+ Hotstar, to provide customized products and services, and targeted advertisements..." 281. The Commission is of the view that by having control on the data, Google is in a position to put its competitors in a disadvantageous position in the downstream markets. An app developer who is selling its app through Google Play Store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vantage for Google's owned services. Google would be in a position to use this data to improve its services and better target the potential customers. On the other hand, the downstream competitors would not have access to the complete data set and thus, would suffer competitive harm. Settlement Period followed by Google 284. Another related issue examined by the DG is that of time taken by Google for settlement of payments to the App developers in India. The relevant extracts from the reply of Google, in this regard, are as follows: Q. 2(vi) What is the payment settlement time-period with app developers in India after Google receives a payment? Reply: "The payouts for Google Play developers are initiated on the 15th day of each month for the previous month's sales. However, payout schedules may vary depending on the developer's product and the payment threshold set by a developer in its payment profile." "...Q.2(xvi) In response to query 2(vi) sought vide notice dated 24.06.2021 you have stated that the payout for Google Play developers are initiated on the 15th day of each month for previous month's sales. Please explain the rationale for the same. Also, provide copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in it and pays the App developers as per its own terms. The exercise of such control is noted to be detrimental to the App developers. 289. It is also noted from the submissions of various payment aggregators that as per the RBI guidelines, the payment settlement time period is generally T+1 to T+3 days only. Thus, payment processing service providers take only 1 to 3 days for settlement of payments to App developers from the date of transaction the payment. The Investigation perused the RBI Guidelines dated 24.11.2009 for settlement of payments electronic payment transactions involving intermediaries. As per these guidelines, the payments to merchants which do not involve transfer of funds to nodal banks shall be effected within a maximum of T+2 settlement cycle (where T is defined as the day of intimation regarding the completion of transaction). Further, all payments to merchants involving nodal banks shall be effected within a maximum of T+3 settlement cycle. 290. On the basis of foregoing analysis, it is noted that Google receives the payments within a shorter and strict deadline from the payment aggregators. However, Google fails to observe such strict timeline when it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom developing its own in-app payment processor. In this regard, it is apt to note the submission made by Disney Hotstar, which is extracted below: "...This arrangement also may disincentivize developers from developing their own in-app payment processing functionalities..." 294. In this context, it is important to note the submissions made by few payment aggregators, which are mentioned below: 294.1. Paytm has submitted that, "Yes, Paytm does consider Google as its competitor in the collection of payments from users of apps on smart mobile devices in India. Google is building a closed wall payment ecosystem for apps which accept payments in the form of paid app downloads and inapp purchases (IAP/s) on the Play Store. This closed wall ecosystem, is particularly detrimental to competition in the PG space, since apps involve a direct engagement between the app developer/merchant and users (particularly with respect to IAPs where there is no involvement of app stores such as the Play Store). Therefore, if through this closed wall ecosystem wherein app developers are only allowed to process IAPs through the app store's own payments system and no other PGs, then PGs would lose all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of its policies, for app purchases and in-app purchases amounts to denial of market access to the third-party payment processing service providers as well as affect those apps which are using their own payment processing system. Further, these apps would also be deprived of commercial freedom to select payment processing partner of their choice. 296. Further, as already elaborated, Google's Play Store provides an un-parallel reach to the Android users, amongst all Android app store in India. The Play Store is thus a critical app distribution channel for app developers to reach to vast pool of Android users through a single window. It is the only viable distribution channel available to Android app developers in India. If a developer wants users to discover and download its app, that app must be on the Play Store. The Play Store's market share in combination with the network effects insulates it from competing Android app stores. In order to access this 'must have' distribution channel, the app developers would have to agree to the onerous conditions being imposed by Google viz. mandatory use of GPBS. Android app developers have no choice but to use this essential distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impact on the apps distributed by Indian developers on Google Play Store. It does not include apps distributed by developers based outside India but offering their apps to Android users based in India. Secondly, on the basis of data provided by Google, the Investigation has revealed that in the year 2020, there were more than********* apps for which users transacted with Google play billing system in India. By no stretch of imagination, these many apps can be considered to be insignificant. Millions of Indian users will be using these apps and transacting with them through GPBS. With the upcoming mandatory imposition of GPBS w.e.f. 01.11.2022, the said numbers are going to increase multi-fold. Thirdly, as already stated above, in the year 2020, the number of apps which were using GPBS was only *******of the total apps which are either paid or contain in-app purchases and thus, the remaining 80% of such apps, would be required to mandatorily use GPBS going forward. Averments of Google 300. Google has submitted that the requirement to use GPBS does not result in a denial of market access, limit technical development or amount to leveraging. The averments made by Google, while conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any other evidence to support the allegations that competition has been distorted or innovation has been prevented by Google's collection and use of data from third party developers. The Report relies merely on speculative theories of what Google may do with data collected. 300.6. On Google Play, developers have access to all the necessary data to innovate and compete effectively. Google Play provides access tools, programs, and insights that helps developers reach and engage users so they can grow their apps and games. Google also provides information in relation to user payment data. Google collects information regarding users' subscription cancellations, and developers are able to view summaries of this information - including their reasons for unsubscribing - through the Google Play Console. 300.7. There is no violation of Section 4(2)(e) of the Act because Google does not leverage its alleged dominance in the markets for licensable mobile OS and app stores for Android OS. As noted above, developers have several alternative options to distribute their apps on Android devices, if they do not agree with Google Play's policies and thus, do not wish to distribute through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go through Google's payment system, which processes the transactions. The imposed tying represents what the academic literature refers to as vertical integration in digital aftermarkets where monopolistic tech firms condition the use of their platform on the added use of other complementary software or services. Play Store constitutes the main distribution channel for apps on the Android mobile ecosystem, which allows its owners to capitalize on the apps brought to market. While there are other app stores that may be available on Android OS mobile devices, Play Store is by far the largest app marketplace connecting app developers with users on Android ecosystem. Google's control over Play Store, the critical gateway between app developers and users, gives it the power to dictate terms to app developers, and compel them to mandatorily use its own payment system. 304. Google claims that GPBS provides a safe billing system which helps Google to protect users. The Commission notes that these arguments of Google are completely devoid of merits primarily for two reasons. Firstly, various digital payment processing solution providers in the country, operating under the regulatory framew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itial years added value to the platform and provided it a competitive edge prior to network effects and other barriers to entry kicked in. 307. In addition to making its rival apps less competitive through its discriminatory service fee regime, the tying policy unfairly adds to the competitive advantage of Google's own apps as by having its payment system process all in-app transaction, Google gets access to critical and competitively relevant transaction/consumer data of all its rival apps. Google being in control of Android OS and Play Store is not only able to have control to the data which is primarily generated by a third-party app provider but also in a position to decide whether to share selectively or not to share the same with the app developers. 308. ADIF in its submission states that Google uses its control of the Android Appstore ecosystem inter alia to confiscate the entire user relationship. This confiscation results in Google having access to a vast amount of extremely valuable user data that Google is then able to exploit. While, Google does get data on app downloads, but it does not get any financial data on transactions within the app done using non GBPS payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Premium users, Google has the ability and incentive to use this data to target the premium users with their own product with a pricing aimed at attracting these users. The harm to competition can be two-fold, one disadvantaging rival apps with access to customer data that can allow it to outcompete them and second also further cement its position in the online target advertisement. 311. It is Google's argument that the fee charged is essentially the distribution fee/service fee for the services they provide to the apps for their in-app purchases and not as a transaction/bill processing fee. Therefore, the processing fee charged by the other payment gateways/ payment processing systems is not the right comparator to assess the reasonability of the fee charged by Google. It is observed that despite the service fee not being a bill payment processing fee, as claimed by Google, Google has started levying the fee simultaneously with the implementation of its policy of mandatory use of GPBS by the apps. It is only when the apps were asked to mandatorily use the GPBS is when the fee was also levied on them. The strategy to delink the two rather appears to be an afterthought in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 4(2)(a)(i) of the Act. This also amount to imposition of discriminatory pricing as Google's own apps i.e., YouTube is not paying the service fee as being imposed on other apps covered in the GPBS requirements. Thus, the Commission is of the view that Google has violated Section 4(2)(a)(ii) of the Act. 313. The Commission also concurs with the DG that Google's restrictions for mandatorily using GPBS also have significant negative effect on the improvements and innovative solutions that third party payment processors / aggregators would be able to bring to the market. It takes away the incentives and ability that such payment aggregators would have to innovate in payment solutions designed for IAPs, by restricting their entry into this market. Further, mandatory imposition of GPBS also discourages app developers from developing its own in-app payment processor especially the free download apps that contain in app purchases in India. Moreover, as already elaborated earlier, Google provides a truncated access to the app developers to the trove of data collected from the apps/ Play Store, while retaining full control over such data for monetization on commercial basis. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment processors in general. This is sufficient to give a finding under Section 4(2)(c) of the Act. Further, as already stated, access to Play Store is dependent on agreeing to use GPBS and thus, app developer would lose access to market, if it does not agree to mandatory use of his GPBS. Thus, the Commission finds that the practices followed by Google results in denial of market access for payment aggregators as well as app developers, in violation of the provisions of Section 4(2)(c) of the Act. 316. The Commission further notes that by charging high fee from the competing apps and not charging from its own apps Google is able to increase the cost of its competitors in the downstream markets. Further, by having control on the data, Google is in a position to put its competitors in a disadvantageous position in the downstream markets. Moreover, unlike the industry practice of making payment in 2-3 days, Google provide itself a leeway to make the payment to the App developers after a gap of 15 to 46 days from the date of the transaction. This conduct of Google also put the competing apps in the downstream market in disadvantageous position (as already discussed) 317. Google clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle (transaction processing costs) and the price actually charged (30% commission) is excessive. 319.4. As compared to Google, many payment service providers in India charge a fee within a range of 0-3% only which is levied on per transaction basis and the same varies as per the method/form of payment used. E.g., when the payment transaction is made through a credit card or debit card or net banking, the transaction fee charged by the Payment Service Providers differs in each case. In case of payments processed through UPI, the fee is 0%. 319.5. Therefore, the service fee charged by Google for providing the payment processing services is exorbitantly higher than the fee charged by other players for the competing services in Indian market. 319.6. Google doesn't provide any additional service to App developers which have in-app purchase option. Thus, Google is charging service fee without providing any additional services to the App developers. 319.7. Service fee imposed on App developers by Google is not negotiated. 319.8. Google is able to charge exorbitantly high fee from App developers because of unavoidable dependence of App developers on Play Store for distribution o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious decisions - if the Commission sought to override the service fee model determined by the market and substitute its own judgment as to what the Google Play service fee model ought to be. This would amount to the Commission acting as a price-setting regulator, which it has consistently found is not its role. 320.6. Google Play has adopted a fee structure that is fair, reasonable and competitive with other digital content distribution channels, and is intended to maximize the benefits to all stakeholders in the Google Play ecosystem. Under Google Play's fee structure, the overwhelming majority of developers (97%) pay only a nominal registration fee of USD 25 to access Google Play. 320.7. Google charges a service fee only when developers charge users a price for apps downloaded through Google Play or in-app purchases of digital content in apps downloaded through Google Play. This structure allows developers to avoid up-front costs when distributing their apps on Google Play, and aligns Google's success with the developers' success, in that Google only receives a fee when app developers generate revenue. Through this business model, the majority of developers (especially new d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reply that only a very small proportion of the service fee for Google Play is ascribable towards the costs of processing payments. The other services offered by Google Play and GPBS account for the majority of the service fee. This alone demonstrates that (i) the other services provided by Google are unrelated to payment processing and are thus used by all developers; and (ii) the fee of 30% is ex facie unreasonable and excessive given that the cost of payment processing comprises a minor proportion of the total fee. 321.5. By requiring only 3% of apps to subsidize all other apps on the Play Store as well as Google's costs for operating the entire Play Store, Google imposes an unfair, discriminatory, and unlawful fee structure on app developers offering digital goods/services. 322. Another connected issue highlighted by Match Group in its submission is that of selection of category of apps on which service fee is imposed by Google. As already stated, service fee of Google is applicable on apps offering digital content. Match Group in this regard has submitted that Google's distinction between apps offering digital content in comparison to those offering physical goods or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration fee of USD 25 to access Google Play, whereas only 3% of developers on Google Play are subject to a service fee. Even with-in this 3%, a limited number of apps are subjected to a service fee of 30% and others pay a service fee of 10% of 15% depending on various parameters. Going by these assertions of Google, it is noted that the monetization model of Google is based on cross-subsidization by Google where the 3% of the apps offering paid apps or IAPs are made to bear the entire cost of the Play Store, even though all the apps are using similar services of the Play Store. Therefore, the question to be determined is whether it is reasonable and fair for these 3% of the apps to bear the 100% cost of the Play Store. In the same vein, the Commission also notes that amongst these 97% are those apps also, which have significant business operations but are not contributing towards recoupment of Play Store costs, directly through service fee. The Commission also notes that Google has other revenue streams also from the 'free apps' listed on Play Store, in the form of advertisement related revenue earned by Google from the apps hosted on Play Store and otherwise. These revenue streams ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ps in the Play Store and (b) excluding other mobile wallets/UPI apps as one of the effective payment options in the Google Play's payment system. 54. In relation to the second allegation related to exclusivity given to Google Pay, it is noted from the Information provided by the Opposite Party that Google Pay has been integrated with intent flow methodology whereas other UPI apps can be used through collect flow methodology. In regard to difference between collect flow and intent flow, the Opposite Party has admitted that there are differences between these flows on Play (though claimed to be minor and not competitively 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. ........ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of the same by Google. The observations of the Commission are elaborated in succeeding paragraphs. 333. In order to assess the allegations in the matter, it is important to understand the differences between two methodologies used for integrating UPI apps in a payment platform. The DG has succinctly brought on record the differences between intent-flow and collect-flow methodology of payments on UPI. In this context, it would be useful to refer to reply filed by NPCI, wherein it has differentiated collect flow and intent flow technology. The relevant extracts of the reply of NPCI are reproduced below: ********************** ********************** ********************** ********************** 334. Further, the differences in the two methodologies can also be tabulated in the following manner (on the basis of Information provided by NPCI): Sr. No. Activity Intent Flow Collect Flow 1. ***** *********** *********** 2. ***** *********** *********** 3. ***** *********** *********** 4. ***** *********** *********** 5. ***** *********** *********** 6. ***** *********** *********** 335. The Investigation has revealed that intent flow technology is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 338. It is noted from the above screenshots that paying for an app on the Play Store's payment page with a non- Google Pay app is inconvenient, involves more steps, and the user also has to change forums/ apps (i.e., switch from Play Store to the other app (for instance Paytm app). Payment through a Google Pay UPI ID has deliberately been made much faster, simpler and does not require the user to switch between forums/apps. The Investigation has further revealed that this situation would be further aggravated in case of in-app purchases (IAPs) as the user will have to change three forums i.e., the app, the Play Store's payment page and the UPI app. 339. In this regard, it is noted that in the year 2019, *********of the UPI transactions in Play Store ware carried on through GPay UPI App, while *********and *********of such transaction were carried out using PhonePe and Paytm UPI Apps, respectively. Whereas, in year 2020, *********of the UPI transaction in Play Store in the year 2018 was carried on through GPay UPI App, while ********* and *********of such transaction were carried out using PhonePe and Paytm UPI Apps, respectively. Whereas, in the overall market of UPI apps, Pho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discriminated against third party UPI apps by actively refusing to support such apps on intent, or actively requiring such apps to use collect. 342.2. As per Google, in order to establish an infringement of the Act, the Investigation Report must have demonstrated that Google's alleged conduct had anticompetitive effects on rival UPI apps. The Report finds that GPay's share of UPI payments on Google Play was higher than its share of overall UPI payments, which the Report finds was "clearly arising from its [Google] giving preference to its own UPI App [in Google Play]". The Report is wrong to draw such a conclusion and the same is based on mere inference. There may have been many other reasons why GPay was more frequently used on Google Play than other UPI apps (e.g., users may have trusted that GPay would be as safe and secure as Google's other services in Google Play). The Report cannot assume that this was because of GPay's integration with the intent flow (without providing correlating evidence, which it does not). 342.3. The Investigation Report's conclusion (that GPay's integration with the intent flow in Google Play was driving more users to use GPay over rival UPI apps) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imply because, Google pay UPI app is an in-house app, does not grant Google any right to self-preference and offer dissimilar treatment to other competing UPI apps. The Commission is of the view that the justification advanced by Google and the classification criterion for discrimination is wholly arbitrary, artificial and evasive. It only seems to be an afterthought on the part of Google. 345. Instead of relying on any evidence, Google has simply assumed *********** Further reliance placed by Google on the fact that it was in compliance with NPCI guidelines by allowing integration to other competing UPI apps through collect flow is also misconceived. NPCI as the umbrella organization has prescribed certain norms for integration but it is not the case of Google that NPCI guidelines restricted Google from offering intent flow integration to the competing apps. Google could have very well provided integration following intent flow methodology in view of the better experience. However, Google followed differential treatment strategy to gain competitive edge over its rivals. Moreover, it is also futile to claim that **********The Commission is of the view that Google being a dominant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice in purchase or sale of goods or services. The moment there is any imposition of any unfair or discriminatory condition by a dominant player, the statutory prohibitions shall trigger. The same is true for other instances of abuse as enshrined in Section 4(2) of the Act as well and the same also have to be read in this manner, which is consistent with the avowed objectives of the Act, as highlighted above. 348. The Commission also observes that Section 32 of the Act which deals with "Acts taking place outside India but having an effect on competition in India", clearly inter alia provides that the Commission shall notwithstanding that any enterprise abusing the dominant position is outside India, have the power to inquire into abuse of dominant position by such player if such dominant position has or is likely to have an appreciable adverse effect on competition in India. That being the statutory scheme in respect of anti-competitive acts taking place outside India, there cannot be any higher threshold for examining the abusive conduct which has taken place within the municipal limits of India. 349. Furthermore, the statutory architecture is also in accord with the underlying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o users through intent follow integration for its own UPI app, Google is in a position to drive up its customer base. Given the interoperability offered by UPI ecosystem, generally the user does not multi-home and uses only one UPI app. Once the user starts using Google Pay UPI app for the Play Store, the natural tendency for the user is to stick to same app for other payments also. In this regard, it is pertinent to note that Google (with a market share of 34%) occupies the second position in the overall UPI market just behind PhonePe (with a market share of 46%) and Paytm is distant third at 11%. 353. To summarise, the Investigation has revealed that the intent flow technology is superior and user friendly than collect flow technology, with intent flow offering significant advantages to both customers and merchants and the success rate with the intent flow methodology being higher due to lower latency. Collect flow is a broken chain of steps, which requires that the customer actively engage with several, disconnected applications to manually complete a purchase. Payment through a Google Pay UPI is faster, simpler and does not require the user to switch between apps. This disince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long run. When the usage and downloads of other UPI apps reduce, not only will such apps lose the incentive to innovate, but they will also lose the capability to innovate as they would not be able to collect user data to understand consumer preference, which would in the long term make the app irrelevant. 357. Further, being the gateway to Android smartphones due to dominance in the markets for licensable mobile OS and app stores for Android OS, Google is uniquely placed to (and is) leveraging this dominance in favour of Google Pay. These markets are closely related to each other as UPI is used as a method of payment (both for paid apps as well as IAPs on the Play Store). Accordingly, Google's imposition of collect flow technology on other UPI apps, while only allowing Google Pay to use intent flow technology for payments on the Play Store, amounts to leveraging of its position in the markets for the licensable of mobile OS and app stores for Android mobile to protect and promote its position in the market for UPI enabled digital payment apps. The situation is worsened by the fact that Google forces users to only use the Google Payment System for processing paid downloads and IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it. The competition should be allowed to flourish on merits. Issue 3: Whether pre-installation and prominence of Google Pay UPI App (GPay) by Google is in violation of Section 4(2) of the Act? 362. As per the Informant, Google encourages pre-installation and opting of Google Pay as the default payment option on new smart mobile devices using the Android OS at the time of initial set up. 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 drive the users to exclusively use Google Pay instead of looking 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. The Informant alleged that the preinstallation 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 leveragin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 365.1. Google has made Agreements with OEMs for pre-installation of G-Pay App (UPI App) and provide financial incentives through RSAs and PBAs. These Agreements do not prohibit pre-installation of competing UPI Apps. 365.2. Google Pay UPI App was pre-installed on about *****of the total mobile devices sold in India, in the year 2020. 365.3. Other UPI Apps such as PhonePe, Paytm, Amazon Pay etc. also have Agreements with OEMs for pre-installation of their UPI Apps and the same are pre-installed on mobile devices. These UPI apps also provides financial incentives to the OEMs for pre-installation of their Apps. 366. Accordingly, the Investigation did not find sufficient evidence to indicate that Google has abused its dominant position so far as the issue pertaining to preinstallation of Google Pay UPI App is concerned. 367. The Commission has perused the evidence collected by the DG and its findings. Investigation has revealed that Google enters into Revenue Sharing Agreements with OEMs for preinstallation of GPay app, typically along with some other Google proprietary apps. It also offers financial incentive through Placement Bonus Agreement for pre-installation of G-Pay app o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that Google's conduct is not anticompetitive. 371. In this regard, the Commission notes that the assertions made by Google do not appear to be validated from perusal of the Investigation Report. Not only has DG incorporated the response of Google in the Investigation Report but has also forwarded the entire submissions made by Google before it to the Commission while forwarding the Investigation Report. It cannot be gainsaid that the role of the DG in the investigation process is that of fact-finding nature and at the stage of the investigation, the DG is not expected to embark upon any adjudicatory process. Be that as it may, the Commission has independently examined the entire material collected by the DG during the course of investigation, as detailed in the earlier part of this order while examining the merit of the case and in these circumstances, the Commission finds no merit in the submissions made by Google alleging procedural bias. 372. As already shown in this order, the Commission has also examined and dealt with such submissions of Google at appropriate places. In sum, findings of the Commission, as detailed in this order, are based on holistic assessment of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the allegations, and suggestions of bias in investigation as attributed by Google to the DG lack merit and are rejected. The Commission notes the submission of the Google that the DG has not consulted it "regarding the crucial and complex factual background surrounding the allegations", as thoroughly misconceived. It is on record that the DG has issued multiple probe letters to Google and the Commission is satisfied that Google was given sufficient and ample opportunities to present case during investigation. Even after investigation, Google has been provided with enough opportunities to present its objections and suggestions in the matter. 376. Google has further contended that the DG was unduly swayed by prior observations of the Commission, in breach of the order passed by the Commission under Section 26(1) the Act directing investigation. It was argued that an order passed under Section 26(1) of the Act, directing the DG to cause an investigation, is an "administrative direction" and no reliance can be placed upon it. Recognising this position, the Commission in each order passed under Section 26(1) of the Act notes that, "nothing stated in this order shall tantamount to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion while ordering investigation. 379. Google has also contended that that the DG posed leading questions to third parties in violation of various order of Courts which have held that a leading question to be one which "suggests the answer which the interrogator wishes or expects to receive, or which embodying a material fact admits of a conclusive answer by a simple negative or affirmative." Dobariya & others v. State of Gujarat, 2015 Cri LJ 3807, 17 April 2015 Reference was also made to the decision of the Hon'ble Supreme Court in Varkey Joseph v. State of Kerala, 1993 AIR 1892, April 27 1993 case and averred that leading questions violate the right to a fair trial enshrined under Article 21 of the Constitution of India. Google claimed that the DG disregarded the fundamental principle and asked leading questions that encouraged "acquiescence bias" in favour of finding Google guilty of violating the provisions of the Act. While the fact of the leading questions alone invalidates the Investigation Report, the conclusions therein are further undermined by the fact that the DG relied extensively on responses received to such leading questions. 380. The aforesaid plea is based on wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the findings are based on "analysis of written replies/submissions of various parties" is inconsistent with the accepted legal position. Google has been deprived of the right to test the veracity of the claims/ assertions made by the Informants and the third parties, including on such important issues as impact of Play's service fee. 384. Google has averred that Regulation 41(5) of the Competition Commission of India (General) Regulations, 2009 (General Regulations) provides that when a witness leads evidence, the other party (Google in the present case) should be afforded an opportunity to cross-examine the said witness giving such evidence. Further, right to cross-examination is not restricted to oral statements, but extends to the allegations, statements, and evidence contained in each of the Information(s) as well as responses provided by third parties. Unless such allegations, statements, or evidence are admitted or subject to cross-examination, they are unverified and cannot be relied upon. 385. 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 matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Google that it is seeking cross-examination of a witness whose oral testimony has been recorded by the Google. As such, the request of Google for seeking cross-examination is not maintainable as per the statutory scheme. Google has been given ample opportunities to controvert the findings of the DG and accordingly, the Commission finds no substance in the grievance made by Google on this count as well. 388. Google further contended that under Regulation 20(4) of the General Regulations, the DG is under a strict obligation to include in the report all documents it has collected during its investigation. However, when the non-confidential version of the Report was provided to the parties on 16.03.2022, it did not include the full information/ evidence/ documents collected by the DG. In order to obtain access to these documents, Google had to file multiple requests for file inspection. Thereafter, Google filed applications seeking certified copies of these documents, which were granted on 12.05.2022. 389. The plea is thoroughly misconceived. In the instant case, Google has been given full and complete access to the entire case records including confidential documents and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical development in the market for in-app payment processing services. Thus, Google is found to be in violation of the provisions of Section 4(2)(b)(ii) of the Act. 392.4. mandatory imposition of GPBS by Google, also results in denial of market access for payment aggregators as well as app developers, in violation of the provisions of Section 4(2)(c) of the Act. 392.5. practices followed by Google results in leveraging its dominance in market for licensable mobile OS and app stores for Android OS, to protect its position in the downstream markets, in violation of the provisions of Section 4(2)(e) of the Act. 392.6. different methodologies used by Google to integrate its own UPI app visà-vis other rival UPI apps with the Play Store results in violation of Sections 4(2)(a)(ii), 4(2)(c) and 4(2)(e) of the Act. ORDER 393. In view of the foregoing analysis, 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 394. The Commission holds Google to be dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided, and corresponding fee charged. Google shall also publish in an unambiguous manner the payment policy and criteria for applicability of the fee(s). 395.8. Google shall not discriminate against other apps facilitating payment through UPI in India vis-à-vis its own UPI app, in any manner. 396. The anti-competitive clauses of different policies of Google, as identified in this order, shall not be enforced by Google, with immediate effect. 397. 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. Imposition of Penalty 398. The Commission has also considered the issue of imposition of monetary penalty upon Google and has given it a thoughtful consideration thereon. It is evident that the legislature has conferred wide discretion upon the Commission in the matter of imposition of penalty. Under the provisions contained in Section 27(b) of the Act, the Commission may impose such penalty upon the contravening parties as it may deem fit which shall be not more than ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (b) to ensure that the threat of penalties will deter the parties concerned from violating the provisions of the Act. Therefore, the quantum of penalties imposed must correspond with the gravity of the offence and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case. Considering the totality of factors, the Commission does not find any reason to refrain from imposing penalty in the matter. 402. The plea related to lack of any anticompetitive intent as well as that of novelty of the issues is a clear misrepresentation and hence not acceptable. The present conduct of Google is a continuation of its vertical integration strategy based on data collection and monetization. Since, the enforcement of provisions of Section 4 of the Act in the year 2009, every dominant entity is required to adhere to the law of the land and ensure its conduct remains in compliance of the same. The prohibitions laid down in the Act are straight forward and any abuse of dominant position in terms of imposition of unfair conditions, denial of market access, leveraging, imposition of supplementary obligations etc., is prohibited. Google, after im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied by the Commission in the event it is held to be in contravention of the provisions of the Act. Having considered the submissions made by Google on the potential penalties, the Commission vide its order dated 14.09.2022, directed Google to submit details of its turnover and profit generated or arising/accruing from India (including any of its group entities), from various revenue streams associated with Play Store (including advertising whether delivered/displayed inapp or otherwise from apps hosted on Play Store, paid apps and in-app purchases, developer fees, etc.) along with break-up thereof, for three preceding financial years. Google was also directed to submit details of its turnover and profit generated or arising/accruing from its entire business operations in India (including any of its group entities), for three preceding financial years. It was also clarified that the details requisitioned should include revenue and profit generated or arising/accruing from India or attributable to services delivered in India irrespective of the global nature of the underlying agreements/transactions or jurisdiction where the turnover is booked. Google filed its reply to the said ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Google Search & other consists of revenues generated on Google search properties....and other Google owned and operated properties like Gmail, Google Maps, and Google Play.." "...We generate advertising revenues primarily by delivering advertising on Google properties, including Google.com, the Google Search app, YouTube, Google Play, Gmail and Google Maps; and Google Network Members' properties..." 409. Google also states that "...Google Services' core products and platforms include Android, Chrome, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube, each with broad and growing adoption by users around the world...". The Commission notes that most of these products are offered for free to users and primarily monetized through advertising revenue for Google. The foregoing analysis as well as financial details clearly reflect the singularity and focus of Google on advertising, in its business operations. Google Play is also an important cog in this wheel where it generates more revenues through advertising rather than through service fee (discussed below). In this complex web of various products which are mostly offered free to users in return f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an appropriate amount of penalty to be imposed, the Commission has given a thoughtful consideration to the same including the averments and submissions made by Google. The Commission has taken a note of measures announced/ adopted by Google related to issues under investigation. The Commission also notes that it can impose penalty on average of the turnover for the last three preceding financial years i.e., effectively restricted to one-year turnover of the infringing entity. However, the conduct of Google is going on for many years. In this regard, it is pertinent to note the submission of Google wherein it states that, "...The scope of the Payments Policy has largely remained consistent since 2011. Developers selling apps or distributing apps with in-app purchases have always been required to use GPB..." Also, that "...Developers have always been required to use GPB for in-app purchases and paid apps...". 416. On a holistic appreciation of the facts and circumstances of the case and the mitigating factors put forth by the OPs, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public version shall be served upon the parties and a confidential version shall be shared with Google through members of the confidentiality ring. The public version of the order shall be prepared keeping in mind the confidentiality requests and the provisions of Section 57 of the Act read with Regulation 35 of the CCI General Regulations, 2009 (as amended). For convenience, it is directed that the confidential version of this order may be provided to such ring members/ individuals through one of the ring members, who may then share the same with the other ring members nominated by Google. 420. The Secretary is directed to forward certified copies of the present order to the parties, in terms of the directions above. ------------------------- Notes : 1. https://gs.statcounter.com/os-market-share/mobile/india 2. https://www.statista.com/statistics/262157/market-share-held-by-mobile-operating-systems-in-india/ 3. https://developer.android.com/distribute/marketing-tools/brand-guidelines. 4. https://source.android.com/compatibility/overview 5. The Report titled "Market study into mobile app stores" by the Netherlands Authority for Consumers & Markets dated 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing, housewares, electronics); (ii) for the purchase of physical services (such as transportation services, cleaning services, airfare, gym memberships, food delivery, tickets for live events); (iii) for a remittance in respect of a credit card bill or utility bill (such as cable and telecommunications services); (iv) for when payments include peer-to-peer payments, online auctions, and tax exempt donations; etc. 19. https://support.google.com/googleplay/android-developer/answer/10281818?hl=en 20. https://support.google.com/googleplay/android-developer/answer/10281818#zippy 21. Section 4 of Google Play's Payments policy, available at https://support.google.com/googleplay/android-developer/answer/9858738 22. https://support.google.com/googleplay/android-developer/answer/10281818?hl=en. See Frequently asked questions and in particular 'Can I communicate with my users about alternative ways to pay?' 23. https://support.google.com/googleplay/android-developer/answer/112622?hl=en 24. https://support.google.com/googleplay/android-developer/answer/112622?hl=en 25. https://support.google.com/googleplay/android-developer/answer/10632485 26. Sameer Samat (VP of Product Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .html. Few relevant extracts are as follows: "...After carefully considering feedback from both large and small developers, we are giving developers an option to request a 6-month extension, which will give them until March 31, 2022 to comply with our Payments policy..." 31. Sameer Samat (VP of Product Management, Android & Google Play), "Evolving our business model to address developer needs": https://blog.google/intl/en-in/products/evolving-our-business-model-address-developer-needs/. Few relevant extracts are as follows: ".....we're decreasing the service fee for all subscriptions on Google Play from 30% to 15%, starting from day one............. Ebooks and on-demand music streaming services, where content costs account for the majority of sales, will now be eligible for a service fee as low as 10%...." 32. FAQs on payments policy page of Google,: https://support.google.com/googleplay/android-developer/answer/10281818#zippy=%2Cwhy-is-the-payments-policy-compliance-deadline-different-for-developers-in-india. 33. Latency is the delay between a user's action and an application's response to that action. Latency is extremely determinative of consumer behaviour in that hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
