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TMI Blog2025 (5) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the order dated 25.10.2022 passed by the Competition Commission of India (hereinafter referred to as "Commission") under Section 27 of the Competition Act, 2002 (hereinafter referred to as "Act") in Case No. 07 of 2020, Case No.14 of 2021 and Case No.35 of 2021. The Commission after receipt of the information in the above cases passed an order under Section 26 of the Act directing for investigation. Director General (DG) conducted the investigation as per the Act and submitted a report to the Commission. Thereafter, after hearing the parties the Commission passed the impugned order under Section 27 of the Act. By the impugned order, the Commission has issued various directions against the Appellant as envisaged in Section 27 and also imposed penalty under Section 27(b) of the Act. Aggrieved by the order passed by the Commission, this Appeal has been filed. 2. Brief background facts which are necessary to be noticed for deciding the Appeal are : - 2.1. This Appeal has been filed by Alphabet Inc. with three other Google entities who are referred hereinafter as "Google". Google LLC launched an app store for Android phones called Android Market which was subsequently named as Play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted their financial information as required by letter dated 14.09.2022. The Commission passed final order on 25.10.2022 against which this Appeal has been filed. 3. We have heard Shri Sajan Poovayya, Learned Senior Counsel and Shri Ritin Rai, Learned Senior Counsel for the Appellants, Shri Balbir Singh, Learned Senior Counsel and Shri Samar Bansal, Counsel for the Competition Commission of India and Shri Jayant Mehta, Sr. Counsel with Shri Abir Roy, Learned Counsel for the Respondent No.3. 4. Learned Counsel for the Appellants submits that the Commission's identification of the market is demonstrably wrong. The determination of the relevant market as "market for apps facilitating payment through UPI in India" is demonstrably flawed. There is no basis for such narrow market definition. All digital modes of payments i.e. Wallets, UPI, net banking, credit and debit cards are substitutable both from a customer and merchant perspective. Survey data presented by Google and the response of Amazon clarified that all modes of digital payments such as wallets, UPI, credit and debit cards etc. are substitutable from the consumer perspective. DG did a wrong inquiry i.e. "a write-up of UPI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y basis. The finding that the said is 'devoid of any legitimate business interests' is only bare conclusion without giving any reason and without considering the objective necessity to impose such a condition as explained by Google in its reply. The requirement of Google for requiring app developers to adopt GPBS did not harm competition. The Commission failed to apply the relevant test while examining abuse of dominance. The finding of the Commission that Google discriminated by not using GPBS for YouTube, thereby violating Section 4(2)(a)(i) & (ii) is also unsustainable. No finding has been returned that two requirements i.e. (i) dissimilar conditions applied to equivalent transactions with other trading partners and (ii) harm to competition due to trading partners suffering a competitive disadvantage that led to competitive injury in the downstream market has been established. The Commission also ignored Google defence to the discrimination claimed that after 2020 Google required those Google apps that did not use GPBS to make necessary changes. YouTube is subject to the same policies. The finding of the Commission that Google limited the technical development in the market for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coming to a finding that a dominant player has abused its dominance. The Commission has adopted the legally flawed premise that the Commission is not required to conduct an effect analysis stating that "once an entity is found to be dominant in the relevant market, the Act recognises its ability to adversely affect competition in the market". The Commission's submission that Act has been enacted to prevent "likely" effects whereas Section 4 of the Act does not support any such submission. The materials on the record clearly demonstrate that there has been no anticompetitive effect in the market considering the minimal share of UPI transactions on Google Play vis-à-vis transactions in UPI ecosystem. The transactions on Google Play are a mere 0.1% of the total payments processed through UPI in India. The Commission has issued various directions on premise that Google is a gatekeeper which direction amounts to a form of ex ante regulation for undefined "gatekeepers" beyond the Commission's powers under Sections 4 and 27 of the Act. The Report of the Committee on Digital Competition Law and Raghavan Committee Report has made certain recommendations on the law which is yet to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the principles of proportionality set out by the Hon'ble Supreme Court in Excel Crop's case. Commission could not have imposed a provisional penalty which are against the pronouncement made by this Tribunal in Google LLC vs. CCI (1st Google Case). All directions issued by the Commission in paragraph 395 need to be set aside as well as the penalty imposed. Actual anti-competitive effect has not been proved by any effect analysis. No violation of any of the provision of Section 4 has been established. There was no occasion to pass any order under Section 27. DG's investigation was not in accordance with the principle of natural justice. The DG posed leading questions to the select group which he chooses to include in inquiry. DG excluded key stakeholders from its inquiry, including Google's largest competitor for app distribution, Apple. DG Report cherry picked evidence while ignoring swathes of contrary evidence and submissions from Google and third parties. In submissions, Appellants has raised objections to the procedure adopted by DG in conducting the investigation which was all ignored by the Commission. Google has legitimate business consideration for providing Google Pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no independent finding has been returned by the Commission on various violation is not correct. The Commission has returned independent finding on each of the violation after considering the material and evidence on record. Coming to the market determination by the Commission, it is submitted that the Commission has determined the relevant market. The submission of the Appellant that other digital payments like wallet, debit card, credit card, net banking are substitutable with payment through UPI app cannot be accepted. The Commission has considered the submissions elaborately and has returned its finding. The Commission has rightly held that UPI enable digital payment apps and debit/credit cards based payments do not fall in the same market. The Commission has also noticed the difference between payment through UPI and net banking and held that there is no substitutability between payment through UPI and transfer through net banking. Similarly, the Commission has also examined and held that payment to UPI and mobile wallets are two different. The Commission has also rightly held that Google to be dominant in the market for licensing OS for smart mobile device in India and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like, industry practice of making payment in 2-3 days, Google provides itself a leeway wherein the payments are released after a gap of 15 to 46 days from the day of transaction, this is unfair for app developers especially small app developers. If the app developers would have freedom to choose a payment processor of their choice, they would be able to receive payment in shorter time. 5.1. Coming to the imposition of penalty, it is submitted that the Commission follows the two stage analysis prescribed in Excel Crop Care Ltd. case i.e. identifying the relevant turnover for imposing of penalty and (ii) considering all aggravating and mitigating factors in arriving at the quantum of penalty. The impugned order correctly holds that relevant turnover must cover all relevant revenue streams. The Google generates revenue through both advertising and by charging service fees. The conduct of Google is a continuation of its vertical integration strategy based on data collection and monetisation. Data given by Google was incomplete accompanied by several caveats and unsupported by certificates of Chartered Accountants. The impugned order has correctly considered the turnover of Google as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Section 4 contains heading of 'Abuse of dominant position'. Section 4 of the Act provides as follows: "Abuse of dominant position 4. (1) No enterprise or group shall abuse its dominant position. (2) There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a group] - (a) directly or indirectly, imposes unfair or discriminatory- (i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. Explanation.- For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or (b) limits or restricts- (i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers; (i) countervailing buying power; (j) market structure and size of market; (k) social obligations and social costs; (l) relative advantage, by way of contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider relevant for the inquiry." 11. Section 26 deals with 'Procedure for inquiry under Section 19. Section 26, sub-section (1), (3) and (4) are as follows: "Procedure for inquiry under section 19] 26.(1) On receipt of a reference from the Central Government or a State Government or a statutory authority or on its own knowledge or information received under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director General to cause an investigation to be made into the matter: Provided that if the subject matter of an information received is, in the opinion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in the order by the Commission; (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any:; (f) Omitted by Competition (Amendment)Act, 2007 (g) pass such other order or issue such directions as it may deem fit. Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause(b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group." 13. In the present case, after receipt of the information dated 20.02.2020, the CCI registered Case No.07 of 2020. An order under Section 26(1) was passed by the CCI in Case No.07 of 2020 forming a prima facie view that the Opposite Party (Appellant herein) has contravened various provisions of Section 4 of the Act, which warrant detailed investigation. Two further information were also received by the CCI i.e., from Matc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Android smart mobile OS in India c. Market for Apps facilitating payment through UPI in-India" 17. The CCI in paragraph 235 has also held Google to be dominant in the first two relevant markets, i.e., market for licensable OS for smart mobile devices in India and for app store for Android smart mobile OS in India. Paragraph 235 is as follows: "235. Further, the Commission also holds Google to be dominant in the first two relevant markets i.e., market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India." 18. After holding the Google to be dominant in first two relevant markets, the CCI proceeded with the assessment of alleged abuse of dominant position by Google and proceeded to notice the observations of the DG, response given by the Google, its averments have been noticed by the CCI from paragraph 301 onwards. The CCI concurred with the observations of the DG that Google has imposed unfair and discriminatory conditions in violation of provisions of Section 4(2)(a)(i) and 4(2)(a)(ii) of the Act. The observation of the CCI are contained in paragraph 312 of the order, which are to the following effect: "312. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section4(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 visa-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." 20. The order of the CCI is contained from paragraphs 393 to 420. In paragraph 394, the CCI again hold that the Google has abused its dominant position in contravention of the provisions of Section 4(2)(a)(i), Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-a- vis its own UPI app, in any manner." 22. The discussion of imposition of penalty is contained in paragraph 398. The CCI imposed penalty of Rs.936.44 crores upon Google for violation of Section 4. Paragraphs 416 and 417 are as follows: "416. On a holistic appreciation of the facts and circumstances of the case and the mitigating factors put forth by the OPs, the Commission is of the view that the ends of justice would be met if a penalty of 7 % of the relevant turnover. Accordingly, the Commission imposes a penalty on Google@ 7 % of its average of the average of relevant turnover for the last three preceding financial years 2018-19, 2019-20 and 2020-21, as provided by Google. Accordingly, the computation of the quantum of penalty imposed on Google is set out below: Turnover for FY 2018-19 Turnover for FY 2019-20 Turnover for FY 2020-21 Average turnover for three preceding financial years Penalty @ 7% of the average turnover 10,365.32 13,025.10 16,742.52 13,377.65 936.44 417. Consequently, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the provisions of Section 4(2)(e) of the Act? (9) Whether the CCI found charging of commission/ service fee from 15% to 30% discriminatory? (10) Whether directions in paragraphs 395.2 to 395.8 of the impugned order amounts to form of ex ante regulation for undefined "gatekeepers" beyond the CCI power under Section 4 and 27 of the Act? (11) Whether mention of directions contained in paragraph 395 are ultra vires, overboard and disproportionate remedial directions? (12) Whether penalty imposed by CCI on entire turnover of the Google is unsustainable and the CCI could have imposed penalty only on the relevant turnover, i.e., turnover of Play Store and the penalty imposed is unsustainable? (13) To what relief, if any, the Appellant is entitled?" Question No.(1) (1) Whether identification of 'relevant market' by the CCI insofar as market for apps facilitating payment through UPI in India is wrong and whether all digital modes of payment, i.e. wallets, UPI net banking, credit and debit card are substitutable both from customer and market perspective? 25. As noted above, the CCI has determined following markets for purposes of the case: a. Market for lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of competition between firms. It serves to establish the framework within which the competition policy is applied by the Commission. The main purpose of market definition is to identify in a systematic way the competitive constraints that the undertakings involved face. The objective of defining a market in both its product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of constraining those undertakings' behaviour and of preventing them from behaving independently of effective competitive pressure. Therefore, the purpose of defining the "relevant market" is to assess with identifying in a systematic way the competitive constraints that undertakings face when operating in a market. This is the case in particular for determining if undertakings are competitors or potential competitors and when assessing the anti- competitive effects of conduct in a market. The concept of relevant market implies that there could be an effective competition between the products which form part of it and this presupposes that there is a sufficient degree of interchangeability between all the products forming part of the same market ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther effect based analysis means both proof of conduct leading to actual restriction as well as conduct which is capable of restricting competition? 32. Submission of Counsel for the Appellant is that it is now well settled that effect based analysis is requirement before finding out any breach of Section 4. Counsel for the Appellant has referred to judgment of this Tribunal in 1st Google Case where this Tribunal has held that effect basis analysis is required for establishing any contravention of Section 4. It is submitted that the effect based analysis should consider actual harm which has caused to the competition and unless actual harm is not determined, no violation of Section 4 can be found. It is submitted that the Commission has not conducted any effect based analysis. It is submitted that the Commission did not analyse whether different integration methods produced any adverse effect on competition in India. The Commission proceeded on the basis that there is no requirement to conduct an effect analysis. Counsel for the Appellant has referred to paragraph 347 of the order of the Commission. Appellant submits that it is demonstrable from the material on record that there h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of this Tribunal in 1st Google Case delivered between the parties while deciding an Appeal challenging the order of the Commission holding violation of Section 4 of the Act by Google. In the above case decided by this Tribunal on 29.03.2023 against which judgment, although an appeal is pending before the Hon'ble Supreme Court but there is no interim order staying the judgment. 36. In the above case, one of the issues which has been framed by this Tribunal was "Whether for proving abuse of dominant position under Section 4 of the Competition Act, 2002 any 'effect analysis' of anticompetitive conduct is required to be done? And if yes; what is the test to be employed?". This Tribunal proceeded to consider the above issue. This Tribunal has referred to and relied upon the judgment of the Competition Commission of India in "Indian National Shipowners' Association (INSA) vs. Oil and Natural Gas Corporation Limited (ONGC) - Case No.01 of 2018" decided on 02.08.2019. Paragraph 135 of the judgment of the Commission was noticed. It is relevant to extract following part of paragraph 135 which laid down that while examination of exploitative conduct which involves imposition of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alysis by the CCI is well within the text of Section 4(2), hence, no amendment is required in Section 4, sub-section (2). It was stated that current test of Section 4(2) has not proven to be a hindrance to the CCI's ability to assess effects in abuse of dominance disputes. In paragraph 4.11 and 4.12 the Committee stated following: "4.11. Based on the above, the Committee discussed that the CCI has interpreted Section 4(2) keeping in mind that one of the key aims of the Act is to prevent practices which adversely affect competition in India.326 It has therefore, wherever appropriate, analysed the effects of alleged abusive conduct by dominant entities before passing orders regarding such conduct. The CCI has relied on the effects built into some of the clauses of Section 4(2) to support its approach, e.g. "denial of market access in any manner" in Section 4(2)(c). 4.12. The Committee did not find any significant issues with the decisional practice of CCI discussed above, and found it to be in line with global practices. After conducting an analysis of the CCI's orders, the Committee came to the conclusion that the current text of Section 4(2) has not proven to be a hindrance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -whether the quantity of its purchases be large or small-from the undertaking in a dominant position. This formalistic approach was followed in several cases on rebates. In Intel v Commission the General Court continued to adopt a strict approach to exclusivity rebates, which it said were illegal unless the dominant firm could show an objective justification for granting them. However, there was an increasing intellectual consensus against the application of per se rules to unilateral behaviour, and the judgment of the General Court in Intel attracted particular hostility because of its formalistic approach. On appeal the Court of Justice, in paragraph 137 of its judgment, cited paragraph 89 of the judgment in Hoffmann-Law Roche; however, in paragraph 138 the Court added an important qualification to what appeared to be a per se prohibition: However, that case-law must be further clarified in the case where the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that it conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects (emphasis added). The 'clarification' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse effect on consumer welfare." 40. After considering the relevant cases, this Tribunal recorded its conclusion that effect analysis has to be undertaken. In paragraphs 65 and 66, following has been held:- "65. The Section 4, thus, specifically excludes discriminatory conditions or prices, which may be adopted to meet the competition. For giving effect to statutory scheme as delineated in Explanation, analysis has to be undertaken as to whether discriminatory condition or price have been adopted to meet the condition or is anti-competitive. As noted above, the object of the Competition Act is to prevent practices which have adverse effect on the competition. For finding of abuse under Section 4 relating to the dominant position, it has to be held that the conduct is anti-competitive. We, thus, accept the submission of the learned Counsel for the Appellant that statutory scheme of the Competition Act delineated by Section 4 and Section 18, indicate that conduct of a dominant enterprise or group, which is held to be abusive has to be anti-competitive conduct and there has to be effect analysis on the above point. 66. We, thus, answer Issue No.1 in following words: For proving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge from Richard Whish & David Bailey where it has observed:- "Where it is not possible to say that the object of a dominant firm's conduct is to harm competition, the jurisprudence of the Court of Justice is clear that conduct should be condemned as abusively exclusionary under Article 102 only where it is demonstrated to have the actual or likely effect of restricting or distorting competition" 44. Counsel for the Commission had also relied on the judgment of the European Court of Justice in "Tomra Systems ASA v. Commission- Case C-549/10 P, EU:2012:221" wherein in paragraph 68, it was held that it is sufficient to show that the abusive conduct of the undertaking in a dominant position tends to restrict competition or that the conduct is capable of having that effect. Reliance has also been placed on the judgment of the European Court of Justice in "Post Danmark A/S vs. Konkurrenceradet, Case C-209/10, EU:C:2012:172" wherein paragraph 44, following was laid down:- "44. Having regard to all the foregoing considerations, the answer to be given to the questions referred is that Article 82 EC must be interpreted as meaning that a policy by which a dominant undertaking charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onduct, while they must not be of a purely hypothetical nature, they do not necessarily have to be concrete. It is sufficient that the conduct tends to restrict competition or is capable of having that effect, regardless of its success. The Commission is not therefore required to demonstrate that a particular practice has actual anti-competitive effects." 47. We need to notice one more judgment of the Competition Appeal Board of Singapore in "Re. Abuse of a Dominant Position by SISTIC.com Pte. Ltd., CCS/600/008/07". In paragraph 290 of the above judgment, it was held that it is sufficient for the competition authority to show a likely effect, and is not necessary to demonstrate an actual effect on the process of competition. In paragraph 290, following was held:- "290. The legal test of abuse of dominance as established under EU/UK law, is neatly summarised by the CCS at [212] of its Closing Submissions as follows: "...an abuse will be established where a competition authority demonstrates that a practice has, or likely to have, an adverse effect on the process of competition. In particular: (a) It is sufficient for the competition authority to show a likely effect, and is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has been defined as meaning a position of strength, enjoyed by an enterprise, in the relevant market which enables it to operate independently of competitive forces or to affect its competitors or consumers in its favour. Thus, once an entity is found to be dominant in the relevant market, the Act recognizes its ability to adversely affect competition in the market unilaterally through its conducts. As such, the dominant enterprise is clothed with a special responsibility not to indulge in the conducts which are enumerated in Section 4(2) of the Act. Resultantly, once a dominant undertaking is found to have indulged in any of the acts provided in Section 4(2) of the Act, the contravention of the Act stands established. This is further evident from the phraseology used in Section 4(2) of the Act which, inter alia, provides that there shall be an abuse of dominant position if an enterprise directly or indirectly "imposes" unfair or discriminatory condition/ price in purchase or sale of goods or services. The moment there is any imposition of any unfair or discriminatory condition by a dominant player, the statutory prohibitions shall trigger. The same is true for other instances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling system is a service that enables you to sell digital products and content in your Android app." 247. GPBS is the proprietary billing system of Google. It is an App developer facing system whereby the App developers create account with Google. Further, Google remits App developers the payments collected from users of these Apps who (i) purchase the App from the Google Play Store; or (ii) make purchases of digital goods/services and/or subscriptions within the App. In the process, Google deducts its "service fee" or commission for facilitating this process of collecting payments from users and remitting to App developers. 248. The relevant extract of Google payment policy (DPP)18 for Google Play is as under: "Payments 1. Developers charging/or app downloads from Google Play must use Google Play's billing system as the method of payment for those transactions. 2. Play-distributed apps requiring or accepting payment for access to in-app features or services, including any app functionality, digital content or goods (collectively "in-app purchases"), must use Google Play 's billing system for those transactions ..... Examples of app features or services requiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on mandatory usage of GPBS for paid apps and in-app purchases is one sided and arbitrary and devoid of any legitimate business interest. In paragraph 312, the Commission found violation of Section 4(2)(a)(i) in following words:- "312. .......................The Commission is of the view that the conduct of Google constitutes an imposition of unfair condition on app developers. It has also been found during investigation that Google is following discriminatory practices by not using GPBS for its own applications i.e., YouTube. Therefore, the Commission concurs with the finding of the DG that Google has imposed unfair and discriminatory conditions in violation of the provisions of Section 4(2)(a)(i) of the Act. This also amount to imposition of discriminatory pricing as Google's own apps i.e., YouTube is not paying the service fee as being imposed on other apps covered in the GPBS requirements. Thus, the Commission is of the view that Google has violated Section 4(2)(a)(ii) of the Act." 56. We need to consider the question as to whether mandatory conditions put by Google on app developers to make purchases of digital goods service and subscription within app is a discriminato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to- (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. (b) "predatory price" means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. [(c)"group" shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.]" 57. What explanation provides is that the unfair and discrimination condition in purchase or sale of goods or services referred to in sub-clause (i) shall not include such discriminatory condition or price which may be adopted to meet the competition. Thus, to take out a discriminatory condition out of the provision under Section 4(2)(a)(i), it has to be proved that the condition has been adopted to meet the competition. There is no material or pleadings on behalf of the Google to satisfy that condition of mandatory requirement of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is own app of the Google, no concept of sale of goods or services by Google is involved. The revenue generated by YouTube is a revenue of the Google and no elements of sale on goods or services with regard to revenue of YouTube is involved nor Google is fixing a price for sale of goods or service with respect to YouTube. Thus, alleged discrimination with regard to not claiming 15-30% fee from YouTube is wholly unfounded and without any basis. We, thus, are satisfied that no allegation of discrimination with regard to condition by which Google claims fee of 15-30% from its app developers who host their paid app and that of engaging a payment processor on lesser payment for its payment in YouTube can be held. The Commission has not adverted to this important aspect of the matter and has erroneously came to the conclusion that there is violation of Section 4(2)(a)(ii) i.e. by imposing discriminatory as Google's own app i.e. YouTube in not paying service fee as being imposed on the other app. The above conclusion is wholly incorrect and cannot be sustained. We, thus, hold that no violation of Section 4(2)(a)(ii) has been established and the finding and decision of the Commission to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle Pay Billing System cannot led to any limit or restriction to technical or scientific development relating to goods or services to the prejudice of consumers. It is on record that payments under the Google Pay Billing System with respect to Play Store are less than 1% with respect to payments made through UPI. It is useful to notice non-confidential version of Appellant's response to the Report of DG dated 01.08.2022. In paragraph 4.59, 4.60, 4.61 and 4.63, following has been pleaded: "4.59. The Report failed to establish that GPB has caused a denial of market access to payment processors or that such denial has any material effect. An assessment of the performance and level of competition amongst payment processors shows that this market is rapidly expanding, which proves that GPB has in no way stymied market access or materially impacted payment processors. 4.60 The use of payment processors in India has shown significant growth, and is expected to become the second largest e-commerce market in the world by 2034.289 Indeed, statements made by payment processors relied on by the DG - including in their submissions to the DG - also support that payment processing is expandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Google Play. Payments through the UPI market has been growing upwardly, which is reflected from pleas made and materials provided by the Appellant before the DG. Growth in the sector having increased upwardly, the observation and finding of the Commission that Google's requirement for mandatorily using of GPBS have limited or restricted technical or scientific development relating to goods or services to the prejudice of consumers, are unsustainable. The payments under Google Play under GPBS being less than 1%, the finding of the Commission that Google has restricted or limited technical or scientific development relating to market of payment processors/ aggregators, cannot be sustained. When more than 99% market of payment through UPI is open and available, it does not appeal to reason that Google has limited or restricted technical or scientific development. It is further relevant to notice that three markets, which were determined, on which entire investigation was conducted by the DG and findings have been returned by the DG, the market of payment processors/ aggregators, was not determined as relevant market. The market of payment processors/ aggregators, having not been estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present matter, the practices followed by Google, by virtue of its dominant position in the app store for Android OS market, results in denial of market access to the payment processors in the vertically affected market. Google argues that DG has not defined the relevant market in which the denial is alleged in order to assess whether there has been any anti-competitive effect. In this regard, the Commission notes that there is no legal requirement to precisely define a separate relevant market where the impact of an abusive conduct takes place. Be that as it may, as already stated above, the dominant position in the app store market has been abused to cause denial to payment processors in general. This is sufficient to give a finding under Section 4(2)( c) of the Act. Further, as already stated, access to Play Store is dependent on agreeing to use GPBS and thus, app developer would lose access to market, if it does not agree to mandatory use of his GPBS. Thus, the Commission finds that the practices followed by Google results in denial of market access for payment aggregators as well as app developers, in violation of the provisions of Section 4(2)( c) of the Act." 68. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant position is made out on facts, whether a broadcaster is in competition with MSOs is a factor that is irrelevant for the purpose of application of Section 4(2)(c) which, as has been found by us, becomes applicable for the simple reason that the broadcaster is denied market access due to an unlawful termination of the agreement between the said broadcaster and Respondents 1-4." 69. In the present case, market access to payment processors is not being denied by the Google. As noted above, payments with respect to Google Play by GPBS being less than 1%, for which payment Google has launched Google Pay, its own UPI based app for payments to be done under this app. When more than 99% market is open for payment processors, Google's requirement by app developers to use the GPBS for pay app and in-app payments, with respect to above apps hosted on Google Play, cannot be said to be denial of market to payment processors. There can be no quarrel that expression "in any manner" has to be given wide and natural meaning, but present is not a case, where in no manner, the Google is denying the market access to payment processors. 70. We notice that Google is a buyer of payment processi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gree 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 m 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." 73. The Google's response to the above violation is contained in paragraph 300.7, which is as follows: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply not done. Once it was established that the Appellant has no presence in the downstream market in any manner, there would have been no question of applying Section 4(2) (e). Even if it was held that Schott Kaisha was being favoured, so as to make it strong in the downstream market, it will have to be established, the lack of which would not be sufficient for breach of Section 4(2)(e) Breach would be possible only, if a finding is given, that the Appellant was itself trying to enter into the downstream market or was trying to secure its presence in the downstream market. Both these factors are absent and therefore, there is no question of any such breach of Section 4(2)(e) In that view, we do not find the Appellant guilty of Section 4(2)(e) and exonerate the same. We set aside the finding of the CCI in that behalf." 76. The statutory scheme as delineated by Section 4(2)(e) and the judgment of Competition Appellate Tribunal as noted above, has clearly laid down that there should be existence of two markets, one in which entity is dominant and another where the entity seeks to enter and protect. The submission of learned Counsel for the Appellant is that the Commission has not det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopers within three days. The App Developers, specially the small App Developers suffer due to non-payment. The Commission after analyzing has returned its finding in paragraph 357, where it was held that Google's imposition of collect flow technology on other UPI, 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 enable digital payment apps. The findings recorded by the Commission in paragraph 357 are as follows: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid principles given the special responsibilities cast upon it being a dominant entity holding the position of a gatekeeper in the Android ecosystem." 81. Thus, no violation on the basis of charging fee of 15% to 30% of Section 4(2)(a)(ii) has been proved. Question No.(10) (10) Whether directions in paragraphs 395.2 to 395.8 of the impugned order amounts to form of ex ante regulation for undefined "gatekeepers" beyond the CCI power under Section 4 and 27 of the Act? 82. The Commission in the impugned order has found Appellant dominant in two relevant market, i.e. market for licensable OS for smart mobile devices in India and market for app store for Android smart mobile OS in India and has also termed the Appellant as gatekeeper. The Commission had made observations and findings in the order that Appellant being gatekeeper has certain special responsibilities. The Appellant has been held to be in gatekeeper position. The observation holding Appellant in the gatekeeper position has been made in paragraph 323 and 327 by holding that the Appellant has special responsibilities, it being dominant in holding the position of the gatekeeper. In paragraphs 325 and 327, the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily Media Pvt. Ltd. & Ors.- Company Appeal (AT) (Ins.) No.1606 of 2024. Paragraphs 8 and 9, which are relevant are as follows: "8. ..... We need to examine the statutory scheme under Section 65, unless the promoters can also be covered under the statuary scheme, the prayer of the appellants to impose penalty on the promoters cannot be accepted. Section 65 is a penal provision. Hon'ble Supreme Court in AIR 1954 SC 496- "Tolaram Relumal and Anr. vs. State of Bombay" laid down:- "........if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty." 9. .... It is well settled that penal statute are to be strictly construed. We may refer to the judgment of the Hon'ble Supreme Court in "(2013) 8 SCC 71- Aparna A. Shah vs. Sheth Developers Pvt. Ltd. & Anr." where in reference to Section 138 of the NIA Act, the Hon'ble Supreme Court has occasion to consider the construction of penal provision. In paragraphs 15 & 16, following was laid down:- "15. In S.K. Alagh v. State of U.P. [(2008) 5 SCC 662 : (2008) 2 SCC (Cri) 686] this Court held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case arising out of order passed by Commission dated 25.10.2022 has been noticed. In paragraph 2.5, the Committee's observations are as follows: "2.5. For instance, the Committee noted that in one case involving allegations of abuse of dominant position by a large digital enterprise in the market for licensable operating system ("OS") for smart mobile devices in India, the Director General submitted their investigation report to the CCI after more than two years of passing of order under Section 26 of the Competition Act by the CCI. The CCI passed final order imposing monetary penalty on the enterprise in question a year later in October 2022. The Committee noted that this matter was filed before the CCI in 2018, and even after a period of five years, it is yet to reach finality as the matter is currently sub-judice before the Supreme Court." 86. The Committee, thus, opined that strengthening and supplementing the CCI's existing ex-post facto powers are the need of the hour. Paragraph 2.11 of the Report is as follows: "2.11. In line with the deliberations above and taking into account the pace at which the Indian digital market is evolving, the Committee feels that the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for imposing any penalty under Section 27. We, thus, are of the view that the Commission could not have issued any ex-ante directions. The correctness of directions 395.2 to 395.8 shall be considered hereinafter. Question No.(11) (11) Whether directions contained in paragraph 395 are ultra vires, overboard and disproportionate remedial directions? 90. In paragraph 394, the Commission holds the Google dominant and has held that contravention of provisions of Section 4(2)(a)(i), 4(2)(a)(ii), 4(2)(b)(ii), 4(2)(c) and 4(2)(e) of the Act have been proved and on the basis of said findings, the remedies has been dealt in paragraph 395 and directions from 395.1 to 395.8 have been issued, which have been challenged in this Appeal. Before we come to individual directions under paragraph 395, we need to notice paragraph 392, where the Commission has recorded its conclusion. Paragraph 392.1 records following observation: "392.1. making access to the Play Store, for app developers, dependent on mandatory usage of GPBS for paid apps and in-app purchases constitutes an imposition of unfair L:umlilion on app developers. Thus, Google is found to be in violation of the provisions of Section 4(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4(2)(e), which directions are sustained. Directions under paragraph 395.6 and 395.7 are general and insofar as price related condition, the commission itself found no discrimination with regard to fee and commission. Hence, direction under paragraph 395.6 and 395.7 are not sustained. Directions under paragraph 395.8 are sustained. 94. Coming to paragraph 396, the said direction to the extent of breaches as identified above, are sustained. Question No.(12) (12) Whether penalty imposed by CCI on entire turnover of the Google is unsustainable and the CCI could have imposed penalty only on the relevant turnover, i.e., turnover of Play Store and the penalty imposed is unsustainable? 95. The Commission imposed penalty under Section 27, sub-section (b) of the Act. The penalty imposed by the Commission is captured in paragraphs 416 and 417, which for ready reference is again extracted below: "416. On a holistic appreciation of the facts and circumstances of the case and the mitigating factors put forth by the OPs, the Commission is of the view that the ends of justice would be met if a penalty of 7 % of the relevant turnover. Accordingly, the Commission imposes a penalty on Google ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness operation in India. The Commission for taking the total turnover for imposition of penalty has based its finding on the rationale that Google's products/ services (including Play) are monetized through advertising revenue; Play generates more revenues through advertising than through service fee; and Google provided data with various disclaimers and caveats and failed to provide an affidavit of Chartered Accountant, as required by the CCI. Learned Counsel for the Appellant submitted that even if CCI was not satisfied with the data of turnover provided by the Google, it would have made its best judgment on the relevant turnover, but that could not have caused the Commission to impose penalty on the entire turnover of the Google. Learned Counsel for the Appellant further submitted that in the submissions given by the Google to CCI on 06.10.2022, the revenue from advertisement was also included and the Commission could have imposed penalty on the relevant turnover, i.e. revenue earned in the Google Play as well as from advertisement. Learned Counsel for the Appellant has referred to the confidential letter dated 06.10.2022, by which it made submissions and has given the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y will be more in tune with ethos of the Act and the legal principles which surround matters pertaining to imposition of penalties. For arriving at this conclusion, we are influenced by the following reasons. 84. Under Section 27(b) of the Act, penalty can be imposed under two contingencies, namely, where an agreement referred to in Section 3 is anti-competitive or where an enterprise which enjoys a dominant position misuses the said dominant position thereby contravening the provisions of Section 4. In case where the violation or contravention is of Section 3 of the Act it has to be pursuant to an "agreement". Such an agreement may relate to a particular product between persons or enterprises even when such persons or enterprises are having production in more than one product. There may be a situation, which is precisely in the instant case, that some of such enterprises may be multi-product companies and some may be single product in respect of which the agreement is arrived at. If the concept of total turnover is introduced it may bring out very inequitable results. This precisely happened in this case when CCI imposed the penalty of 9% on the total turnover which has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been applied while imposing penalty, we hold that penalty under Section 27(b), could have been imposed on the Appellant on proof of violation of Section 4(2) on relevant turnover. Learned Counsel for the Appellant has contended that at best, the revenue as reflected in Table-1, 2, 3 and 4, which was revenue from advertisement, could have been added for imposing penalty under Section 27(b). We, thus, are of the view that penalty imposed by the Commission in paragraphs 416 and 417, need to be modified. We having held that Appellant has abused its dominant position and has violated Section 4(2)(a)(i) and 4(2)(e), the Commission could have very well imposed the penalty. Although, we have held that violations under Section 4(2)(a)(ii), 4(2)(b), and 4(2)(c) not proved, but penalty was still leviable on proof of violation under Section 4(2)(a)(i) and 4(2)(e). We, thus, modify the penalty imposed by the Commission and substitute it by the relevant turnover as reflected in Table-1, 2, 3 and 4, as submitted by the Appellant vide its letter dated 06.10.2022. By adding all relevant revenue as reflected in Table 1, 2, 3 and 4, following are the composite relevant revenue turnover of thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reliefs: "a) Treat paragraphs 97-100 of the Order, to the extent they contain extracts from the Revenue Data Response, as confidential and redact them in the Order publicly available on the Hon'ble Tribunal's website; b) Only provide the redacted version of the Order to parties seeking certified copies or inspections; c) Maintain confidentiality over other Confidential Documents submitted by Google during the hearings and not allow access to the Confidential Documents to any other party except the Commission; and d) Considering the confidential nature of the issues involved, consider the present Application and grant the aforementioned prayers in Hon'ble Tribunal's chambers." 2. Learned counsel for the applicant submits that the confidential document i.e., letter dated 06.10.2022 which was response to revenue information given by the Appellant No. 2 was a document with regard to which confidentiality was maintained by the commission, however in the judgment, paragraphs 97 to 100, the extracts from said confidential document has been quoted, hence confidentiality needs to be maintained and thus paragraphs 97 to 100 be redacted from the judgment as well as fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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