Explained: Why CCI has slapped Google with another massive fine

Google is having a rough week.

On Tuesday, the Competition Commission of India (CCI) on Tuesday slapped Google with a penalty of Rs 936.44 crore – its second major ruling against the company in less than a week.

The regulator also last week imposed a Rs 392 crore fine on MakeMyTrip, Goibibo and OYO.

But why has CCI taken action against Google yet again?

Let’s take a closer look:

What happened?

The latest fine has been levied against the internet major for abusing its dominant position with respect to its Play Store policies.

Google’s Play Store constitutes the main distribution channel for app developers in the Android mobile ecosystem, which allows its owners to capitalise on the apps brought to market.

The CCI has also issued a ‘cease and desist’ order to the company, as per Moneycontrol.

The decision comes after CCI in November 2020 ordered an inquiry into the issue of mandatory use of Google Play Store’s payment system for paid apps & in-app purchases, as per the report.

The commission at the time said its prima facie view was that such a policy is unfair as it ‘restricts the ability of app developers to select a payment processing system of their choice’.

What’s the issue?

The issue is a Google Play Store policy dictators that app developers exclusively use Google Play’s Billing System (GPBS) to accept payments for apps distributed or sold through the Google Play Store and for some in-app purchases, NDTV reported.

Google’s Android OS has thus successfully reaped the benefits of indirect network effects by understanding market dynamics for mobile operating systems available for licencing in India, as per the report.

The regulator said making access to the Play Store for app developers dependent on mandatory usage of GPBS (Google Play’s Billing System) for paid apps and in-app purchases constitutes an imposition of an unfair condition on app developers, as per NDTV.

CCI also ordered Google not to restrict app developers from using any third-party billing/ payment processing services for purchasing apps.

The investigation found that the tech giant was not using its billing system for its own apps such as YouTube, which amounts to “imposition of discriminatory conditions as well as pricing” since their own apps are not paying the app commission that are imposed on other apps, as per Moneycontrol.

The commission further said the mandatory imposition of this billing system “disturbs innovation incentives and the ability of both the payment processors as well as app developers to undertake technical development and innovate”.

Similar to the observations made in its ruling against Google in the Android matter, CCI on Tuesday said the penalty amount is provisional as there were glaring inconsistencies and wide disclaimers in presenting various revenue data points by Google.

According to the release on Tuesday, Google has been asked to implement various measures, including allowing and not restricting app developers from using any third-party billing/ payment processing services, either for in-app purchases or for purchasing apps.

“Google shall also not discriminate or otherwise take any adverse measures against such apps using third-party billing/ payment processing services, in any manner,” the release said.

Further, the internet major has been asked not to impose any anti-steering provisions on app developers as well as not restrict them from communicating with their users to promote their apps and offerings, in any manner.

Google should not restrict end users, in any manner, to access and use within apps, the features and services offered by app developers, the release said.

According to CCI, the company should set out a clear and transparent policy on data that is collected on its platform, the use of such data by the platform and also the potential and actual sharing of such data with app developers or other entities, including related entities.

Among other directions, the regulator has told Google that the competitively relevant transaction/ consumer data of apps generated and acquired through GPBS should not be leveraged by the company to further its competitive advantage.

“Google shall also provide access to the app developer of the data that has been generated through the concerned app, subject to adequate safeguards, as highlighted in this order,” the release said.

Also, CCI has asked the internet major not to impose any condition on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to them.

As per the regulator, Google should ensure complete transparency in communicating to app developers, services provided, and the corresponding fee charged. Google shall also publish in an unambiguous manner the payment policy and criteria for the applicability of the fee.

“Google shall not discriminate against other apps facilitating payment through UPI in India vis-a-vis its own UPI app, in any manner,” it added.

Meanwhile, the watchdog said that recently Google has allowed rival UPI apps to be integrated with the intent flow.

The penalty amount translates to seven per cent of the company’s average relevant turnover.

Google has been given a time of 30 days to provide the requisite financial details and supporting documents, the release said.

The regulator has been probing Google in other cases as well, including those pertaining to alleged anti-competitive practices by the internet major with respect to news content and smart TV.

In February 2018, the regulator imposed a fine of Rs 136 crore on Google for unfair business practices in the Indian market for the online search.

Google did not comment on the latest CCI order.

What happened last week?

The Competition Commission on Thursday had imposed a penalty of Rs 1,337.76 crore on Google for abusing its dominant position in multiple markets in the Android mobile device ecosystem.

Besides, the fair trade regulator has directed the internet major to cease and desist from unfair business practices.

In a press release, the Competition Commission of India (CCI) said it has also directed Google to modify its conduct within a defined timeline.

In April 2019, the regulator ordered a detailed probe into the matter following complaints by consumers of Android-based smartphones in the country. Android is an open-source, mobile operating system installed by Original Equipment Manufacturers (OEMs) of smartphones and tablets.

The allegations of unfair business practices pertained to two agreements — Mobile Application Distribution Agreement (MADA) and Anti Fragmentation Agreement (AFA) — which were entered into by the OEMs of Android OS with Google.

The regulator has also issued a cease and desist order.

As per the release, CCI said that mandatory pre-installation of entire Google Mobile Suite (GMS) under MADA, with no option to un-install the same, and their prominent placement amounts to imposition of unfair condition on the device manufacturers and thereby contravenes competition law.

“These obligations are also found to be in the nature of supplementary obligations imposed by Google on OEMs and thus, in contravention of Section 4(2)(d) of the Act,” it added.

‘Denial of market access for competing search apps’

Section 4 of the Competition Act pertains to abuse of dominant position.

Google has perpetuated its dominant position in the online search market resulting in denial of market access for competing search apps. Also, it has leveraged its dominant position in the app store market for Android OS to protect its position in online general search which violates the competition law.

Further, CCI noted that the internet major has leveraged its dominant position in the app store market for Android OS to enter as well as protect its position in non-OS specific web browser market through Google Chrome App.

“Google has leveraged its dominant position in the app store market for Android OS to enter as well as protect its position in Online Video Hosting Platforms (OVHPs) market through YouTube and thereby contravened provisions of Section 4(2)(e) of the Act,” the release said.

With inputs from PTI

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