TMI Blog2022 (10) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... y collecting documents and evidence and to present its recommendations to the Commission based on their analysis. While conducting the investigation, it is neither requirement of the law nor any obligation of the investigator to consult each and every affected or interested participant. On careful perusal of the Investigation Report, the Commission is satisfied that the DG has contacted a cross-section of stakeholders including third parties and in this view of the matter, the allegations, and suggestions of bias in investigation as attributed by Google to the DG lack merit and are rejected. Having perused the investigation report, the Commission is satisfied that while analyzing the allegations and reaching its recommendations, the DG has not relied upon such orders and the same are based upon the documents and evidence gathered during the course of investigation. The reference to the prima facie order as made by the DG in the Investigation Report is only to understand the scope of investigation and such reference, by no stretch of arguments, be construed as swaying the independence of the recommendations made by the DG. In fact, if the argument of Google is taken to its logica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OS for smart mobile devices in India and market for app store for Android smart mobile OS in India. Further, Google is also found to have abused its dominant position in contravention of the provisions of Section 4(2)(a)(i), Section 4(2)(a)(ii), Section 4(2)(b)(ii), Section 4(2)(c) and Section 4(2)(e) of the Act, as already discussed in the earlier part of this order. In terms of the provisions of Section 27 of the Act, the Commission hereby directs Google to cease and desist from indulging in anti-competitive practices that have been found to be in contravention of the provisions of Section 4 of the Act - 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. Levy of penalty - HELD THAT:- The Commission takes a serious note of such glaring inconsistencies and wide disclaimers in presenting various data points by Google. The Commission is constrained to observe that despite commanding enormous resources, Google has failed to provide the data in the manner sought by the Commission despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Inc. (Match Group) Mr. Jayant Mehta, Senior Advocate with Ms. Sonam Mathur, Ms. Dinoo Muthappa, Mr. Abir Roy, Mr. Dhruv Dikshit, Advocates 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 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 22.01.2019. 6. Google India Private Limited ( Google India ) is a company incorporated in the year 2003 under the Companies Act. It has been submitted by the 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 (fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rences in functionalities mean that the development of a smart mobile OS requires significant time and resources, regardless of whether the OS developer in question has already developed a basic and feature phone OS. The Informant 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced reliance on Google Android Order of the Commission for the same. The Informant also stated that even if the worldwide markets for licensable OS for smart mobile devices and app stores for Android are considered as the relevant geographic markets, there would be an insignificant to no change in the assessment of dominance of Google and therefore, detailed analysis of market definition is not necessary. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DG submitted confidential as well as non-confidential versions of its consolidated Investigation Report on 16.03.2022. Investigation by the DG 22. The investigation involved detailed information collection from the Informants, OPs 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment processor. As per the DG, the same tantamount to limiting technical development in the market for in-app payment processing services in violation of the provisions of Section 4(2)(b)(ii) of the Act. 29. Further, as per the DG, Google's Payments Policy requiring 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formant in Case No. 07 of 2020. Vide the said application, the learned counsel intimated about the demise of the said Informant, which was stated to have taken place on 23.04.2021 on account of complications arising from COVID-19. It was further averred in the application that the spouse 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 versi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s refiled on 02.09.2022 after complying with the requirements laid down in the Competition Commission of India (General) Regulations, 2009 and Practice Direction issued in this regard. Google in its reply has contested the findings of the DG. The averments made by Google as well as the Informant(s) would 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 physic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of abovementioned statutory scheme, the DG in its investigation Report has delineated three relevant markets i.e., a.) Market for licensable mobile OS for smart mobile devices in India, b.) Market for app stores for android OS in India, and c.) Market for apps facilitating payments through UPI in India. 48. The DG has also found 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Amazon), the relevant extract of which is reproduced below: The OSs for feature phones, smart phones and tablets depend upon the utility of the phones and the technology including the internet capabilities. Feature phones generally refer to earlier-generation phones that were developed in the era of 2G mobile services. Their appearance and interface were different from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PIs, cloud capabilities, advanced video and graphics processing, and more powerful and integrated third-party apps. Other than this, smart mobile devices have powerful hardware in terms of RAM, screen size and power requirements compared to basic feature phone devices. This further implies development of OS for smart mobile devices requires greater amount of time and resources compared to its counterpart 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- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portable characteristics of mobile phones, the corresponding hardware volume of mobile phone systems is relatively limited, and the hardware resources are not as good as computers, which may result in relatively low system computing power ...Based on the hardware characteristics of mobile phones, there are differences in the interaction methods supported by mobile phone systems. Mobile phone systems use more screen clicks, presses, 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 touch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OSs belong to the same product market, but non-licensable OS do not belong to the same relevant market. 66. In this regard, the DG has noted that out of the two prominent non-licensable operating systems for smart mobile devices i.e., Apple and BlackBerry, the latter has negligible market share of 0.01%. Therefore, iOS is the only significant non-licensable OS for smart mobile devices which is used by vertically integrated Apple, for captive 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopers. Additionally, developers can use Kotlin, a programming language managed by the Kotlin Foundation (a group created by JetBrains and Google). It is an open-source, statically-typed programming language which supports object-oriented and functional programming. On the other hand, iOS app developers use Objective - C and Swift as the official programming languages. - Development tools: To create an app for Android, the developers use Android Studio. For iOS, the developers 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer, etc. The DG has concluded that Google enjoys a dominant position in the relevant market of licensable mobile OS for smart mobile devices in India. The observations of the Commission in this respect are as follows: a.) Market Share 74. The Investigation has revealed that Android enjoys high market share in the market for licensable mobile OS for smart mobile devices in India. As per the data of statcounter.com, as of January 2022, in the broader segment for smart mobile OS in India (which includes 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 2020 2 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market of licensable smart mobile device OS, is heavily concentrated in favour of Google s Android due to its dominant, persistent, and increasing share in the domestic market. In other words, Android which is controlled by Google has the largest installed user base of smart mobile devices. Microsoft s Windows phone OS which entered the market in 2010 could not compete and had to exit the business of smartphone OS (and smartphones) in 2016. Even otherwise, Windows Phone OS had a negligible market share, and it could never pose any serious competitive threat to Google s Android OS. b.) Google s control over Android OS 78. The Investigation has revealed that even though the source code for the Android mobile OS is released by Google for free under an open-source license, the Android based device manufacturers (OEMs) are highly dependent on Google. Google as the sponsor of the Android platform enforces platform rules through a combination of compatibility provisions, contracts, and trademark licenses. While device manufacturers can freely use the code under the AOSP, they need a certificate from an authorized testing facility and, arguably, Google s final written approval if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndroid. Thus, the Commission notes that though Android OS is an open-source project, it is actually controlled by Google. c.) Availability of Applications 82. The Commission notes that one of the parameters for user s preference for a mobile OS is the ability of the OS to run applications as well as the number of applications available for that OS. Smart mobile device OS markets exhibits network effects i.e., on one hand, the OS which can run/ perform maximum number of applications would be most popular among the users and thus would attract the greatest number of users. On the other hand, the app developers would prefer to develop apps for the OS which has the maximum number of users because access to the large user base as would result in substantial economies of scale, given the heavy fixed costs and very low marginal cost associated with development of such apps. Thus, there is an indirect network effect between users of an OS and app developers for such OS. 83. It is also relevant to mention here that the apps are written for specific platforms, and app makers naturally focus on the most popular mobile platforms in order to reach as many users as possible. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below: Several factors determine the utility and success of an OS, including (a) the presence of a significant number of active apps (which is important for competing with other OS providing popular apps to the consumers); (b) the willingness of Original Equipment Manufacturers ( OEMs ) and original design manufacturers ( ODMs )/ contract manufacturers ( CMs ) to manufacture devices running on the new OS; (c) user preference for the new OS. Further, the success of a new OS depends on users having access to a robust app and technology ecosystem. This refers to the network of developers who create apps compatible with a particular OS, thereby making it attractive for users. Such an ecosystem often displays indirect network effects. For example, OEMs/ODMs/CMs would be more incentivized to manufacture devices that run a particular OS if there are more users of such OS. Similarly, more users would be attracted to a particular OS if more developers create apps for such OS and vice versa. Therefore, developing an attractive app and technology ecosystem requires a sufficient number of app developers, OEMs/ODMs/CMs, technology providers and users. Accordingly, developers of new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intensive and the app developer may not have incentive to do so without presence of adequate user base on the new OS. Likewise, the end users would not prefer to use the smart mobile OS which is having a limited number of apps available on its platform. Similarly, OEMs would also prefer a licensable OS which not only has sufficient user base but also sufficient app developer base. 89. Based on the above, it is noted that commercial success of an operating system is dependent on the willingness of mobile app developers to develop apps for the OS, willingness of OEMs to sell devices based on new OS and user preference for the new OS. The network effects operating in the relevant market operate as an entry barrier and makes it difficult for a new OS to enter the market and achieve a commercial and viable scale. 90. Accordingly, the Commission notes that the application barrier of entry associated with development of alternate OS, further consolidates Google s dominant position in the relevant market. d.) Switching Costs 91. The DG has also examined the switching costs associated with shifting onto a competing OS such as consumer inertia, satisfaction with the characteris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the already established current players especially where any current player(s) enjoys high customer loyalty. 94.3. Vivo stated that, If new players need to build a new operating system that can benchmarking the market, they need to recruit a large number of professionals to carry out code development, platform, application functions and experience design If new players use the Android open source system for secondary development and launch to the market, they need to obtain Google s core authorization, including but not limited to application pre-installation authorization, GMS authorization, capability authentication authorization, etc. 94.4. Xiaomi indicated that, Developing a new OS for smartphones requires significant investment in research and development, in terms of time, effort, resources and capital. The extent of the time, effort, resources and capital required in the necessary engineering work would broadly depend on (a) the complexity of the smartphone for which the OS is being developed; and (b) the targeted user base. For example, Kai OS is a simpler and lighter OS than the Android OS, and hence requires lesser investment in resear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to choose system with more function and more third-party applications. There are less users, and third-party developers are unwilling to develop applications, resulting in users not having enough third- party applications to use. Moreover, main obstacle to the late comers of the system is the shortage of the third-party applications and new features. 95. Based on the above submissions, it is noted that development of a new operating system requires enormous amount of investment in terms of physical, financial and human capital along with overcoming the problem of ensuring wider acceptability of the new OS among the OEMs, app developers and specially users. 96. In the context of entry barriers in the relevant market, it is important to appreciate the impact of the restrictions imposed by Google on use of Android through its agreements with OEMs (i.e., MADA and Anti-fragmentation Agreement (AFA)/ Android Compatibility Commitment (ACC)). In this regard, following submissions made by Amazon s Fire OS (which is based on Android source code AOSP) are important: Developers using the AOSP to develop a fork faced significant difficulties in entering the market because of Goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are reproduced below: As Google makes its advanced APIs available only through the GMS suite, and refuses to make them available to Fire OS devices, Amazon has had to create alternative APIs for Fire OS devices. And while Amazon has sought to develop its APIs in a way that reduces switching costs for developers, Google has architected its APIs in a way that prevents interoperability and has made it impossible for Amazon to provide a solution that enables switching between Google APIs and Amazon APIs without additional work by app developers. As a result, it could take weeks or months, depending on the number of APIs used and the complexity of the app, to modify an app if created for Fire OS (that uses APIs that are not part of the base Android OS), to work with Google s APIs 99. Thus, it is noted that there are significantly high entry barriers in the market for licensable smart mobile operating system in India. Further, Google s practices restrict interoperability of apps between Android OS and forked version of Android OS, and even between the versions of Android OS. Such conduct does enhance inability of new players to enter and sustain their presence in the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of Google. This has left the OEMs much more dependent on Google. 104. From the perspective of smart mobile device users, it is noted that the only alternative available with them is iOS-based devices which is significantly high as compared to starting price at which Android based devices are available in the market. The users of smart mobile devices in India face considerable switching cost to shift to iOS primarily due to huge price difference between Android and iOS (and the need to download and purchase existing apps for the new smart mobile OS). As such iOS, which otherwise also is not a part of the relevant market of licensable smart mobile device OS, do not exercise sufficient competitive constraints on Android. 105. Google has argued that instead of focusing on substitutability from the point of view of app developers and users (i.e., the relevant consumers), the DG improperly defined a market by focusing on OEMs. Thereafter, the alleged anticompetitive effects of Google s conduct were examined on completely different parties, i.e., app developers and users. Google further avers that from the point of view of developers, licensable and non-licensable OS are substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstanding the extent of competition between Google s Android ecosystem and Apple s iOS ecosystem, it is also important to note the difference in the two business models which affect the underlying incentives of business decisions. Apple s business is primarily based on a vertically integrated smart device ecosystem which focuses on sale of high-end smart devices with state of the art software components. Whereas Google s business is found to be driven by the ultimate intent of increasing users on its platforms so that they interact with its various free services which is monetized through online advertising services by Google. The Commission further notes that competition between devices based on iOS and Android, from end users perspective, is primarily a competition between OEMs, i.e., Apple for iOS based devices and numerous OEMs (viz. Samsung, Oppo, Xiaomi, Vivo, OnePlus, Google through pixel series, etc.) offering Android based devices. In the decision tree of the users, device OS is not the sole criteria but a multitude of other parameters also viz. hardware configuration, price of the device, after sales services, etc. and OS is one of such criteria. Therefore, the competi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirect network effects that characterize the market of operating systems, which essentially are multi-sided platforms. With its large user base, Android OS is the most preferred licensable OS for app developers and with a large universe of apps developed for the platform, it is the most valued licensable operating system for any new OEM. All relevant factors that define competition landscape, in unison, indicate that the relevant market of licensable mobile operating systems in India has tipped in favour of Google Android OS. 113. Thus, the Commission has no hesitation in concluding that Android OS and thereby, Google, enjoys a dominant position in the relevant market of licensable operating systems for smart mobile devices in India. B. Market for app stores for Android OS in India 114. Mobile app stores are digital marketplaces and are multisided platforms that connect app developers with device owners who are interested in those apps. Like any other marketplace, the viability of an app store is characterized by its capacity to attract enough app developers and app users while maintaining the platform's trust and integrity. A digital marketplace grows more desirab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than a billion active users in 190+ countries around the world. Users can find and install, through a single interface, from amongst millions of applications offered by hundreds of thousands of independent developers, which range in size and sophistication from individual developers to global corporations. Relevant Market 119. The DG has examined various aspects for the purpose of delineating relevant market related to app stores. Based on the its analysis and examination of the submissions of different third parties, the DG has concluded that app stores for Android OS in India should be assessed as a distinct relevant market because there is no substitutability between (a) app stores of other non-licensable smart mobile OS and app stores for Android OS; (b) sideloading and app stores for Android OS; (c) web apps and apps downloadable from app stores for Android OS; and (d) pre-installation of apps and downloading apps from app stores for Android OS. Further, the DG has found Google to be dominant in this relevant market. 120. Google on the other hand has contested both the market delineation as well as determination of Google s dominance in the said market. Goog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the DG, the competition in the app store market is essentially confined to the alternative app stores for Android OS. 125. These assertions have been further corroborated from the submissions of the app developers, as extracted below: 125.1. Amazon in its reply stated that: App stores for licensable smart mobile OS, such as Android, are available on all devices by OEMs who are licensing the relevant OS. This enables them to access a wide user base. With regard to Android, manufacturers find it commercially important to preinstall the Play Store on their devices. It is preinstalled on the large majority of Android devices and is not available for download by end users. Also, end users cannot download other app stores from the Play Store. App stores developed for non-licensable smart mobile OS, on the other hand, tend to be part of closed/proprietary ecosystems. Apple, for example, operates a closed proprietary ecosystem on iOS devices, which includes the App Store - the only app store and the sole channel for app distribution on iOS. The App Store has greatly contributed to the success of iPhones, by attracting thousands of app developers whose apps add signifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, from the perspective of the end users, the CMA Interim Report further notes that: users generally do not have both iOS devices and Android devices. This means that an iOS user would need to purchase a new device in order to access the Play Store, and an Android user would need to purchase a new device in order to access the App Store ... such switching is limited in practice . Thus, app store made for non-licensable OS are available within that ecosystem only and the same are not available for licensable OS. 128. Based on the above examination and analysis, the Commission concurs with the finding of the DG that there is no substitutability between app stores of non-licensable smart mobile OS (e.g., iOS) and app stores for Android OS. ii. Substitutability of sideloading of an app with downloading an app on Android OS app stores 129. Side-loading is the installation of apps on a smartphone without using the app's official distribution channel (i.e., an app store). However, the Investigation has revealed that it is an onerous process with several drawbacks. Sideloading from other sources requires several additional steps to be followed by users than is requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e warnings which are displayed when users try to side load. It has also been explained during the oral hearing as well as through written submissions that sideloading in some cases, requires 16 or 17 steps or more, including requiring the user to make changes to the device s default settings and manually granting various permissions while being warned that doing so is dangerous. Google also admits that side-loading requires additional steps, though not 16-17, as claimed by the Informants. Google also states that devices that install apps from sources other than Google Play are more likely to be affected by Potentially Harmful Applications (PHAs), a risk that is recognised by industry commentators. In view of the above, the Commission has no doubt in holding that Google deters the users from side-loading the apps and thus, side-loading is not an effective constraint on Google. 132. The Commission notes that apps downloaded from the app stores (including Google Play Store) gets automatically updated and the users/ app developers are not required to undertake any significant efforts to achieve the same. Such automatic updates are important from both the users as well as the app dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PK file (and are not able to update through Google Play Services). 136. Google has also argued in favour of file sharing through apps like Dropbox, SHAREit, etc. is another alternative for users to download apps. However, the Commission do not find any merit in this argument. As submitted by Match Group, file sharing applications like SHAREit, are not intended to be used for app distribution and therefore are not substitutable with app stores by reason of consumer preference, intended use and characteristics. Such platforms necessarily require multiple devices i.e., they are mainly for cross-platform sharing across devices and do not allow direct downloads like the Play Store. They are peer-topeer software distribution / file share platforms. It requires a user to first download the app from the app store, and only then can such apps be shared / uploaded / distributed through such fora. Further, the same security, malware, issues as in the case of sideloaded apps, would be faced by users from apps obtained from such fora. The Commission is of the view that developers cannot rely on these technical alternatives to distribute their apps. 137. Based on the above analysis, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41. Further, in its Market Study into Mobile App Stores, the Netherlands Authority for Consumers Market found that several news apps, which tested browsers and web-apps as alternatives to their native apps (i.e., the apps they offered on app stores), lost users when they switched to web apps, and as a result, reverted to offering their services through native apps. 142. Google claims that the DG was wrong to exclude web apps, particularly modern progressive web apps (PWAs), from the relevant market. Google avers that the Investigation Report disregarded evidence of substitutability between web apps and native apps from a user s perspective. Google also provided examples of such substitutability in its submissions. The Informants on the other hand supported the findings of the DG. 143. The Commission is of the view that compared to web apps, native apps i.e., the ones downloaded from app stores are better in performance and user experience, since such apps are more integrated with OS and hardware functionalities. This is also evident from the fact that very limited app developers have offered their apps through web apps and continue to be make their content available to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through pre-installation agreements and developers do not need to contract with a large number of OEMs to reach a significant audience. Together, Xiaomi (26.4%), Samsung (17.5%) and Vivo (15.1%) account for nearly 60% of mobile devices sold in India. Entering into just three agreements could therefore provide a developer with distribution across a significant majority of devices. 149. The Commission is of the view that given the limited space on the devices, OEMs generally prefer to pre-install only popular apps or its own apps or apps with which it has revenue sharing arrangements. Moreover, to reach a significant scale, the app developers have to sign agreements with all or majority of OEMs for preinstallation of their apps. The app developers with access to sufficient resources can attempt to take that route but, it is a not a commercially viable alternative for relatively smaller app developers. Moreover, given the presence of 3 million apps, how many apps can secure pre-installation on the devices. The Commission is of the view that pre-installation as an alternative cannot be generalised and thus, cannot be considered as a substitute of access through app store. 150. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the perspective of end users. Various other distribution channels, which are claimed to be a substitute with Google Play Store i.e., side-loading, web apps, file sharing, etc., have already been found to be only theoretical possibilities and without any significant usage for the app developers. Further, Apple s App Store is also found to be non-substitutable with Google Play Store. 155. When the market is defined from the perspective of OEMs, the nomenclature is the market for app stores for Android OS with all Android based app stores constituting the relevant market. When the market is defined from the perspective of app developers, a possible nomenclature would be the market for distribution for apps through app stores for Android OS, again with all Android based app stores constituting the relevant market. Thus, even arguendo, Google s plea is accepted, the competitive constraints would remain same and resultantly, dominance assessment would not be different. 156. The Commission further notes that Google in its written as well as oral submissions has claimed that Google Play Store provides a host of services to app developers. Some of the extracts from Google s response a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stores for Android OS are both homogeneous and different. Accordingly, the Commission determines 'India' as the relevant geographic market for market for app store for Android OS. 159. Accordingly, the Commission delineates market for app stores for Android OS in India as the second relevant market for the instant matter. Assessment of Dominance of Google 160. The DG has concluded that the market for app stores for Android OS devices is characterized by a position of strength for Google given the fact the Google Play Store is largest app store in terms of users, availability of apps and developers compared to other app stores. Further, the DG noted that there are significant entry barriers in the market. Moreover, the DG found that the cumbersome process of side-loading of apps and pre-installation not being a viable alternative also works in favour of Google Play Store. Thus, as per the DG, Google Play Store is dominant in the relevant market for App Store for Android OS in India. 161. The observations of the Commission in this respect are as follows: a. Market Share Analysis 162. As already stated, there are various app stores store which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y significant contest to the monopoly of Google Play Store. Thus, by listing its apps on the Play Store, an app developer can reach virtually the entire market as against the other app stores which have limited reach. 166. Based on the total number of Android devices, the Commission further notes that pre-installation of Google Play Store on various smart mobile handset continues to see upward growth trajectory since year 2011. In other words, in year 2011, Google Play Store was pre-installed on ********** number of devices, but this figure in year 2020 zoomed to **********. 167. Google Play Store s dominant position is further manifested when a comparison is drawn between volume of smartphone shipments across India from the year 2011 to 2020 8 with that of number of pre-installation of Google Play Store during 2011 to 2020 as submitted by Google. Graph: Volume of smartphone shipments across India from the year 2011 to 2020 168. Based on the above datasets, it becomes axiomatic that Google Play Store was pre-installed on approximately ********* smartphones in the year 2020 out of the total 149 million smartphone shipped in India i.e., around ****of the sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... **** 2017 ********* **** ********* ********* **** 2018 ********* **** ********* ********* **** 2019 ********* **** ********* ********* **** 2020 ********* **** ********* ********* **** Source: Respective submissions of the parties 172. This data can also be represented graphically, as follows: ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ ************************************ 173. It can be observed from the above Table that as of 2020, highest number of apps were available on Google Play followed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ***** 179. Google has submitted that it invests heavily 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it much more difficult to achieve a commercially viable scale. Further, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Google Maps, Google Search, Google Play Store, etc. Google Play Store is the biggest mobile application 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 Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps, which deters the users as well as app developers, in general from relying on sideloading a viable option. 193. The Commission 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 sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The app developers, in order to expand their reach to maximum 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. 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 degre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of characteristics of the products or services, their prices and intended use. In the present matter, none of the constituents of the demand side of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho consider this as a must have app. The app developers perceive Play Store to be indispensable for reaching out to the entire spectrum of Android device users and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Service Provider: UPI ecosystem is run through Payment Service Provider 11 ( PSP ) banks. This ecosystem also includes non-banking entities i.e., TPAPs, who may partner with up to Five (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d seamless experience, as it does not require sharing of any payment details by the user. This is unlike card payments wherein the user is required to divulge details, such as card numbers/ Card Verification Value (CVV), and card expiry date which increases the 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 globall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk accounts whereas IMPS is restricted to a single bank account only. 220.5. Some banks, also have a mandatory waiting period for adding a new beneficiary, after which, users are allowed to make a fund transfer (for example HDFC Bank allows transfers to new beneficiaries only 30 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant extracts from the submission are reproduced below: The Indian payments market is pre-dominantly cash driven. Digital payment is a developing segment. Digital payments can be made using various payment systems, such as debit cards, credit cards, mobile wallets, mobile apps, net banking, electronic 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et out below: (25) UPI v. Card Payments (Debit Credit Cards) UPI does not involve sharing of sensitive data such as card number, card verification value ( CVV ), etc. which increases security issues; Unlike debit / credit cards, UPI payments do not require a physical card for making a payment at the merchant store. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only with VPAs; Net Banking IMPS transactions have a wait time of 30 minutes for payments to new payees, unlike UPI transfers which are instantaneous; and Transaction fees / transfer charges for Net Banking IMPS transactions are higher than for UPI payments. (29) Therefore, as can be noted from above, UPI is distinct from other modes of digital payments from the perspective of 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 ) ✓ Requirement to store / access sensitive information ✓ ✓ Interlink multiple bank accounts to one digital identity ✓ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the submission are reproduced here under: Benefits for banks: i. Single click two factor authentication. ii. Universal Application for transactions. iii. Ability to leverage existing infrastructure. iv. Safe and secure transactions. v. Payments on the basis of unique Identifications. vi. Enable seamless merchant transactions. Benefits for end consumers: i. Round the clock availability. ii. Single Application for accessing different bank accounts. iii. Use of Virtual ID without credential sharing, such as card number, account number; IFSC etc. iv. Single click authentication. v. Raise complaint from mobile app directly. Benefits for merchants: i. Seamless fund collection from customers through single identifiers. ii. No risk of storing customer s virtual address like in Cards. iii. Ability to tap customers who do not have credit / debit cards. iv. Suitable for e-commerce m-commerce transactions. v. Resolves the cash-on-delivery: collection problem. vi. In-app payments. 228. The Commission notes that Section 19(7) of the Act provides an indicative list of factors to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions in the country. The next fiscal year saw UPI s share rising to more than 27% as it processed 12.5 billion transactions of the total 46 billion digital transactions. In FY 2020-21, UPI accounted for 40% of the total 55 billion digital transactions 14 . As of August 2021, UPI has 22+ crore users who did 3.5 billion financial transactions in August, aggregating to a settlement value of 6.39 lakh crore . The same is represented graphically as under: 231. Based on the foregoing analysis, the Commission is of the view that relevant product market in the instant matter can be defined as market for apps facilitating payments through UPI , which is a unique relevant product market. 232. In relation to relevant geographic market, it is noted that conditions of competition for supply of UPI apps in homogenous across India including the regulatory framework. As a result, the Commission deems it appropriate to consider 'India' as the relevant geographic market for apps facilitating payments through UPI. 233. Therefore, in view of the above analysis it can be stated that the relevant market in the instant case may be defined as market for apps facilitating p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access in any manner; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. 238. Based on the allegations against Google, the DG has identified 3 different issues for determination i.e., whether Google has abused its dominant position or not in respect of each of such alleged conduct. Issue 1: Whether making the use of Google Play s billing system (GPBS), exclusive and mandatory by Google for App developers/owners for processing of payments for App and in-app purchases and charging 15-30% commission is violative of Section 4(2) of the Act? 239. The Informant in Case No. 07 of 2020 averred that Google s Payment Policy specifically provides that developers charging for apps and downloads from Google Play must use Google Play s payment system. The Pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n succeeding paragraphs. 244. At the outset, the Commission notes that for distributing an app through the Google Pay Store, an app developer is required to agree to the terms set out in the Developer Distribution Agreement (the DDA) and, under the DDA, the Developer Program Policies (the DPP). Further, if the app developers want to distribute paid apps or enable in-app purchases, they also need to agree with the Google Payments Terms of Service-Seller (IN). Therefore, following three main documents contain the terms and conditions which govern relationship between Google and App developers who want to distribute their paid Apps through Google Play Store or enable in-App purchases are: 1. Developer Distribution Agreement (DDA) 2. Developer Program Policies (Payments within the heading Monetization and Ads) 3. Google Payments Terms of Service-Seller (IN) (GPTS) 245. The DDA is the principal agreement between the App developer and Google regarding distribution of Apps. Section 2.1 of the DDA reads as under: 2.1 This agreement ( Agreement ) forms a legally binding contract between You and Google in relation to Your use of Google Play to distribute Products. Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functionality or content (such as an ad-free version of an app or new features not available in the free version); and cloud software and services (such as data storage services, business productivity software, and financial management software). (Emphasis Supplied) 249. Google Play s Payments Policy is a part of Google s mandatory Developer Program Policies and Developer Distribution Agreement which have to be agreed to by all app developers who want to list their app on the Play Store, without any scope for changes / negotiations. The DDA states that the agreement forms a legally binding contract between App developer and Google in relation to App developers to use of Google Play Store to distribute their Apps. The Google Play s Payment Policy sets out specific rules in relation to apps that are proposed to be distributed through the Play Store. As reproduced above, Google s Payment Policy specifically provides that, developers charging for apps and downloads from Google Play must use Google Play s billing system , (emphasis supplied). Thus, payments for all paid downloads and IAPs must be routed through GPBS, and alternative payment systems / processors cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the app developers cannot not lead users to an alternative payment method other than GPBS within an app distributed on Google Play. 21 In particular, (W)ithin an app, developers may not lead users to a payment method other than Google Play s billing system unless permitted by the Payments policy. This includes directly linking to a webpage that could lead to an alternate payment method or using language that encourages a user to purchase the digital item outside of the app. 22 Relevant extracts of the Section 4 of Google Play s Payment Policy is reproduced hereunder: apps may not lead users to a payment method other than Google Play's billing system. This prohibition includes, but is not limited to, leading users to other payment methods via: An app s listing in Google Play; In-app promotions related to purchasable content; In-app webviews, buttons, links, messaging, advertisements or other calls to action; and In-app user interface flows, including account creation or signup flows, that lead users from an app to a payment method other than Google Play's billing system as part of those flows. (Emphasis Supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. However, w.e.f. 01.01.2022 Google announced that from this date the service fee for all subscription products will be 15%. 258. Further, the policy update (announced on 16.03.2021 and applicable from 01.07.2021), require App owners/developers to enroll in the 15% service fee tier in order to avail this discount of 15% on the 1st million dollars (USD) that they earn in a year. 24 Also, the App developers are required to have an Account Group whereby all the Associated Developer Accounts will be notified to Google. 25 Thus, if an App developer has more than one paid App or Apps containing in-app purchases, they will be considered to be part of one Account Group and accordingly the 1 million dollars (USD) will be calculated on the basis of the cumulative income of all the apps. 259. Google further reduced the service fee for apps with e-books and on demand music streaming services from 15% to 10%. However, in order to avail this discounted fee, the app owner has to fulfil the eligibility requirements as per Play Media Experience Program 26 . 260. Therefore, the following points emerge with regards to service fee: 260.1. The general service fee applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till 31.10.2022 for Indian developers 262. Relevant excerpts from the announcement made on 10.12.2021 are as follows: In 2020, we clarified the language in our Payments policy to be more explicit that all developers selling digital goods and services in their apps are required to use Google Play s billing system. Apps using an alternative in-app billing system will need to remove it in order to comply with the Payments policy. We always strive to work with our developer community to help keep their apps on Play while they make any needed changes. While most developers have already complied with this long-standing policy, we gave a one year grace period for any that needed to make changes to their apps. Based on developer feedback, we gave eligible developers the option to request an additional six months, giving them more than 18 months to bring their apps into compliance. We continue to work with developer partners to meet the evolving needs of our ecosystem. Starting June 1, 2022, any app that is still not compliant will be removed from Google Play. Developers in India have until October 31, 2022 to comply due to unique circumstances with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Google s mandatory Developer Program Policies, have to be agreed to by all App developers who want to list their app on the Play Store, without any scope for changes / negotiations. Google s Payment Policy specifically provides that developers charging for apps and downloads from Google Play must use Google Play s payment system, i.e., GPBS for both paid app downloads as well as IAPs. If App developers do not comply with Google s demand of using GPBS, they are not permitted to list their apps on the Play Store. 267. On account of the mandatory applicability of the GPBS, the App developers would not be able to use the payment processing system of their choice for facilitating app purchases and in-apps purchases of digital products. 268. As already noted, Google s Android is the most widely used smart device ecosystem in the country (with more than 90% coverage in terms of smart devices sold in a year) and Google s Play Store acts as the gatekeeper between app store and the smart device user. As a result of its financial might and its control over the entire ecosystem, Google undoubtedly has a much stronger bargaining position vis- -vis App developers. App developers and users ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od until March 31, 2022 to comply ******** ************************* ************************* 11. As explained above, Google s own apps generally already use Google Play s billing system. Google will require those Google apps that do not already use Google Play s billing system to make the necessary updates. *********** 271. In this regard, it is also relevant to note the submissions of ShareChat, the relevant extract of which is reproduced below: An even more egregious distortion of the market is in the context of our Moj App, which is a short-video platform where users are able to create, share and view videos. One of the major competitors of Moj is YouTube, the video sharing platform owned by Google. It is industry practice for video sharing platforms to institute some form of monetization programmes by which users/creators who create a high number of popular videos get remunerated by the platforms for the quality content they create. Such users form an extremely important part of the content supply side and as a result Moj and YouTube compete for the same creators in the supply side market. In a manner similar to ShareChat (outlined above) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs and is exploitative for the App developers and App users in India. The App developers have two choices, either to absorb this increased cost or to pass on the increased cost on to the end users of their apps. If app developer absorbs the increased cost, it affects their margins and leaves lesser amount to be spent on research and development activity for improvement of the quality of their apps. Decrease in the quality of apps directly harms the consumers as they will get lower quality at same price. Moreover, lesser investment in innovation also affects the ability of App developers to effectively compete in the downstream markets. If the app developer chooses to pass-on the increased cost of apps to the app users that will directly harm the consumers as they have to pay higher price for the same services, consequently consumers will either reduce or stop using the apps. This may lead to exit of the apps from the market and thereby reduce competition in the Indian app economy. Access to Data 274. The Commission while directing the Investigation in the matter observed that it also needs to be seen whether Google would have access to data collected from the users of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : a. Device information and when the device has accessed Google s systems; b. In-store user activities (such as searches, listing impressions, and preregistration requests); c. User information (such as registered country and language preference) and user-triggered events (such as installs, updates, uninstalls, and purchases); d. Subscription initiation and state (such as total, new and cancelled subscriptions, along with revenue details); e. User-generated ratings and reviews; f. App usage information (such as app opens, game achievements, scores, and other developer-nominated events); g. App technical performance data (such as crashes, ANRs, stack-traces, Apps size, and security vulnerabilities); h. Depending on a user s privacy settings, Google also may collect Android usage and diagnostic data (for example, battery level, how often a user uses their Apps and which Apps may cause their device to crash or freeze). 19. On the Play Console Policy Centre, Google publishes guidance for developers on the type of data they can access. As explained in this guidance, to protect users privacy, the data made available to third party developers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetitor 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 making such users download similar Google apps For e.g. Since Google owns the Play store also makes Google Play Billing as the default option to collect payments for subscription, now it has information of all Freemium Premium users, Google could use this data to target the premium users with their own product with a pricing aimed at attracting these users. 279.2. Jio Saavn has stated that, ******************* ******************* ******************* ******************* ******************* ******************* 279.3. Gamma Gaana has stated that, ******************* ******************* ******************* ******************* 279.4. Airtel Digital Limited has stated that, ******************* ******************* ******************* 280. Some other relevant extracts of submissions made by third parties are as follows: 280.1. MapMyIndia in its submission has referred to Clause 9 of the Google Play Developer Distribution Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 is not in a position to have access to the data generated by its own app. However, 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. The Commission is of the view that access to this user level transaction data would be useful for the app developers as they would be able to provide targeted offers and promotions based on this data. The Investigation has revealed that this data is not shared with the app developers in a transparent and equitable manner. The app developers can use this data to improve their offerings for the users. Whereas collection of transaction related data of another and competing apps, through GPBS, would enable Google to target users specifically for its own paid apps. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of internal communication including emails, presentations, minutes of meetings related to the decision to use this timing for payment to app developers. Reply : 8. Invoices are paid on the 15th of each month as Google uses a monthly payment system for the payment of invoices and accounting. A number of businesses and employers globally choose the 15th of each month as the date for payment as it is around the middle of each calendar month. 9. By paying invoices at the middle of each month,*****************This also allows any payments to account for refunds, returns or other charges. 10. Google is not aware of any internal documents explaining the rationale behind the timing for payment to app developers. Google does however inform developers of the timing of the payments to developers on its Payments Center website 285. During investigation, various app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 comes to making payment to app developers wherein the payments are released after a gap of 15 to 46 days from the day of the transaction. If the app developers would have freedom to choose a payment processor of their choice, they would be able to receive payments (after deducting payment processing charges) in much shorter time limit as prescribed by RBI. Notwithstanding, the Commission observes that Google has not offered any objective justification for its present practise of making payments to app developers on 15th of each month when Google itself get paid within 2-3 days of the transaction. This unjust enrichment on the part of Google is found to be unfair for the app developers especially small app developers for whom regular and prompt cash flows from their users is critical. Google through its conduct is found to have unfairly benefitted at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 their app related business, as in any event in the case of paid app downloads, the engagement is between the app store and the user wherein the app developer is not involved. While doing so, Google is benefitting from the hefty commissions that it earns from paid app downloads and IAPs (discussed in greater detail below). (Emphasis Supplied) 294.2. Razorpay has submitted that, Google s policy change for Play Store, mandating that certain app categories would need to migrate to the Google Play billing system, would impact payment aggregators as online payment gateway aggregators would not be able to support such app developers, and transactions undertaken by them, affecting our revenue . (Emphasis Supplied) 294.3. Mobikwik has stated that, Payments are collected from users of software applications (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 distribution channel to reach app users in India, giving Google the ability to impose restrictions and indulge in anti-competitive conduct such as requiring the exclusive use of GPBS. If the app developers do not agree to the policies of Google, they cannot list their apps on the Play Store and thus, denied access to the market. 297. The Investigation has further revealed that by virtue of various policy announcements by Google, various additional categories of apps will be required to only use the GPBS for IAPs (such as fitness, dating and education apps). This will further compound the harms caused to payment processing service providers because it further narrows the scope of the business that is available to them. In this regard, the DG based on publicly available data has noted that fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 contesting the findings of the DG are summarized below: 300.1. Users and developers benefit from a safe and uniform billing system. As a safe billing system, GPBS helps Google to protect users. A secure billing system increases user trust and willingness to buy online, which helps increase revenues for app developers. Further, GPBS allows Google to efficiently collect its service fee without incurring additional costs to monitor and enforce recovery of service fees or impose an additional administrative burden on developers. 300.2. There is no violation of Section 4(2)(a)(i) of the Act because Google s Payments Policy is fair, and the use of standard terms reduces the potential for discrimination. Further, Google Play s developer policies - including the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 Google Play. 300.8. Google s link-out provisions contained in the Payments Policy do not operate as described in the Investigation Report. Google s link-out provisions contained in the Payments Policy, restrict apps ability to linkout to payment systems other than GPBS, including by leading users from the app to other payment methods which serve several legitimate business purposes. However, the Investigation Report mischaracterizes these linkout provisions to suggest they prevent app developers from informing consumers of the ability to purchase in-app content elsewhere. 301. The Commission has perused various averments made by Google and its observations are elaborated in succeeding paragraphs. 302. The DG investigation brings out that Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sers, 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 framework prescribed by Reserve Bank of India, are providing safe and secured channel for processing digital payments. Secondly, Google itself employs few of these payment processors at the backend to process payments in the Play Store and Google has not presented any evidence as to what additional security features are added by Google to make the systems more secure vis- -vis that provided by the other payment processors. Thirdly, many app developers of physical goods/services are allowed by Google to use their own system for IAPs through these third-party payment processors. and in-fact prohibited from using GPBS. It clearly reflects the contradiction in the averments made by Google. 305. Besides, service fee imposed on apps that compete with G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 systems. With mandatory usage of GPBS, Google will get details of all transactions- amounts, frequency etc, across all apps, thus enhancing Google's ability to track, profile and target users and giving them an unfair advantage over all other companies. 309. Google claims that app developers have access to the necessary data to innovate and compete effectively. However, Google itself admitted that it collects information regarding users subscription cancellations, and developers are able to view summaries of this information (emphasis added). Google further states that to protect users privacy, individual payment information of users is not shared with developers. This includes information about the user s payment instruments, the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility 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 to the regulatory developments in various jurisdictions. Be that as it may, if the commission/service fee is to be paid by the apps is indeed for the services that they avail from Google Play for in-app transactions, it was incumbent on Google to first provide a clear description of such services and the basis of determination of the fee amount to its users, i.e., the app developers. In the absence of the same, the sudden imposition of a commission which the users find exorbitant, appears to be an unfair imposition on them. Any deviation from a longstanding policy by a dominant platform which has attendant significant financial implication for its users and also the potential to distort competition in the downstream market ought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. These practices distort competition and disturb innovation incentives as well as ability of the app developers to undertake technical development and innovate in their respective sphere of business activities. Thus, the Commission is of the view that the practices followed by Google tantamount to limiting technical development in the market for in-app payment processing services in violation of the provisions of Section 4(2)(b)(ii) of the Act. 314. The Commission notes that Google s Payments Policy requiring 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 purchases and subscriptions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 claims that app 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 Google Play. The Commission is of the view that these theoretical possibilities of alternative distribution channels for the app developers are not substitutable with app stores for various reasons, as discussed supra. Therefore, the app developers are dependent to Google to access the users on its platform. Accordingly, there is no merit in the assertions made by Google in this regard. Accordingly, the Commission is of the view that the practices followed by Google results in leveraging its dominance in market for licensable mobil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of their apps to Android users in India. 319.9. Accordingly, the DG found that charging of 15%-30% fee by Google is excessive and therefore unfair in terms of Section 4(2)(a)(ii) of the Act. 320. Google on the other hand has contested the findings of the DG. The arguments advanced by Google are summarized below: 320.1. Google is not a payment processor and Google Play s service fee cannot be compared to a payment processing fee. Rather, the service fee supports the hundreds of services provided by Google Play to developers and users. Payment processors facilitate financial transactions between users and businesses through a variety of forms of payment. By contrast, Google Play offers payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay. 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 developers trying to build a user base) can access Google Play s app development tools, the distribution channel and the broader ecosystem for free. 320.8. Only 3% of developers on Google Play are subject to a service fee. Moreover, out of those 3%, 99% are eligible for a service fee of 15% or less. Even where it arises, the service fee represents a small percentage (between 10 and 30%) of the price the developer decides to charge. The only developers required to pay a fee of 30% earn more than USD 1 million per year, which based on Google s estimates, would be relevant for ********. 321. Both the Informants have supported the abovementioned findings of the DG and have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, 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 services is arbitrary. Ride sharing apps such as Uber and Ola, offer a digital platform connecting two sets of users i.e., a rider and a driver. Google considers these as physical goods / services and permits them to use alternative payment solutions, although Uber or Ola themselves are not providing the cab service. Google however classifies dating services, such as those provided by the Match s portfolio brands, as digital goods / services. Both dating and ridesharing apps, however, share the same fundamental purpose, i.e., matching two people online to meet in the real world for an offline interaction. The distinction between the two is therefore inherently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are also contributing towards recoupment of the costs associated with Play Store and Android ecosystem, in addition to the service fee. The determination of issues at hand requires examination of all these aspects. 326. Be that as it may, the Commission is of the view that in general any conditions (including price related conditions) imposed on business users, by the gatekeepers or platform operators, should be fair, reasonable and non-discriminatory. The pricing and other general conditions should not grant any benefit on the gatekeeper which is disproportionate to the service provided by the gatekeeper to business users. 327. Based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant). 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 be integrated using intent flow. (Emphasis added) 330. Thus, during the course of making a prima facie finding, it was revealed that Google Pay has been integrated with intent flow methodology whereas other UPI apps can be used through collect flow methodology. In this context, the DG formulated following issues for examination: a.) Discrimination with other UPI apps on the Play Store by integrating Google Pay UPI app with intent-flow methodology and other UPI apps through collect-flow methodology. b.) Whether Google has favoured its own UPI app to the disadvantage of other competing UPI apps. 331. The DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ******************* ********************** ********************** ********************** 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 far superior and user friendly than collect flow technology, with intent flow offering significant ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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, PhonePe has the largest market share with a market share of 46.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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) is directly undermined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 player in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase 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 objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter experience to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetitive disadvantage in the 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Google of the anticompetitive practices adopted 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to corroborate denial by OEMs for pre-installation of their Apps. 365. Based on the foregoing, the Investigation has concluded that: 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 alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties that ostensibly confirm the Informants allegations and, at the same time, ignores the responses of other objective third parties whose evidence demonstrates 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Investigation Report, the Commission is satisfied that the DG has contacted a cross-section of stakeholders including third parties and in this view of the matter, 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 pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Google is taken to its logical conclusion, there can be no independent adjudication by the authority also (in this case, the Commission) after making a prima facie opinion 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 Investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply with the processes established under the Act. The DG did not grant Google the right to cross-examine witness testimony in the investigation process. The DG s denial of cross-examination on the ground 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dient. Thus, the only issue which needs to be examined is when it would be necessary and expedient to grant an opportunity to the other party or parties to cross-examine the person giving evidence by way of oral submissions. It is not the 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 certifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(2)(a)(ii) of the Act. 392.3. mandatory imposition of GPBS disturbs innovation incentives and the ability of both the payment processors as well as app developers to undertake technical development and innovate and thus, tantamount to limiting technical 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 vis -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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not impose any condition (including price related condition) on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to the app developers. 395.7. Google shall ensure complete transparency in communicating to app developers, 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- -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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis and the same has been extended to India w.e.f. 01.09.2022 i.e., after the receipt of the Investigation Report and oral hearing in the matter. 401. Further, the Commission notes that the objective behind imposition of penalties is: (a) to reflect the seriousness of the contravention; and (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 ensur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court s as mentioned supra, the Commission now proceeds to determine relevant turnover and thereafter, would calculate appropriate percentage of penalty based on facts and circumstances of case. 405. Google filed written submissions dated 12.09.2022 on quantum of penalty which may be levied 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We generate our advertising revenues increasingly from different channels, including mobile, and newer advertising formats As online advertising evolves, we continue to expand our product offerings which may affect our monetization. Google advertising revenues consist primarily of the following: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iest, the Commission decides to proceed to quantify the provisional monetary penalties on the basis of the data presented by Google. Accordingly, the Commission decides to take the revenue data of Google s business operations in India, as submitted by it vide submission dated 06.10.2022, as relevant turnover for computation of quantum of penalty. 415. Now, coming to determination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iality to such documents / data / information in terms of Regulation 35 of the General Regulations, 2009, subject to Section 57 of the Act, for a period of three years from the passing of this order. It is, however, made clear that nothing disclosed in the public version of this order shall be deemed to be confidential or deemed to have been granted confidentiality, as the same have been used and disclosed for purposes of the Act in terms of the provisions contained in Section 57 thereof. Accordingly, the Commission directs that two versions of the present order may be issued i.e., 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ://www.statista.com/statistics/1171872/india-value-of-digital-payments/ 13. https://static.pib.gov.in/WriteReadData/specificdocs/documents/2021/oct/doc2021101211.pdf 14. Ibid 15. Ibid 16. https://play.google.com/about/developer-distribution-agreement.html . The App developer is referred as You and Products is defined as: Software, content, digital materials, and other items and services as made available by Developers via the Play Console. 17. https://support.google.com/googleplay/android-developer/answer/9858738 18. The only occasions when the policy is not applicable are: (i) for the purchase or rental of physical goods (such as groceries, clothing, 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/a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay -- for all apps that are yet to launch, or that currently use an alternative payment system, we set a timeline of 31st March 2022 29. Sameer Samat (Vice President, Android and Google Play), Boosting developer success on Google Play : https://blog.google/intl/en-in/products/platforms/boosting-developer-success-on-google/ . Few relevant extracts are as follows: Starting on 1st July, 2021 we are reducing the service fee Google Play receives to 15% for the first $1M (USD) of revenue every developer earns each year 30. Purnima Kochikar (VP, Play Partnerships), Allowing developers to apply for more time to comply with Play Payments Policy : https://android- developers.googleblog.com/2021/07/apply-more-time-play-payments-policy.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/evo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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