Google Play Billing Policy: Whether Anti-Competitive In Nature

ABSTRACT:

The goals of both, namely the maximization of public welfare, can be compared in terms of how competition law and policy handle the process as well as to those of political democracy.[1] But because of the quick rise of e-commerce and the digital market, it has grown increasingly complex. The paper describes the entire situation by the way of taking an example of the contemporary Indian problem that occurred in relation to the Google Play billing system, contextualize it with the competition law and its current state, and draws attention to the shortcomings in the ruling itself.

INTRODUCTION:

Due to the rapid growth in field of e-commerce and digital market place there has been an insurgence of platform to facilitate the process and in turn gaining power from it. This new field is governed by multiple laws but the focus of the article is on the competition law which keeps the power of the platforms in check in order to preserve the right of freedom of choice and welfare of the consumer by keeping in check the competition in the marketplace.

The Google Play Billing System (hereinafter “GPBS”) in context to the digital market place of Google Play have been in spotlight as was fined for anti-competitive practice which was been followed. The GPBS has been rightfully charged by Competition Commission of India (hereinafter (CCI) and in this article after critically analyzing the facts, issues will lay down the judgement of the court, then point out the Main Factors which the Commission took aid in order to reach an ultimatum as well as substantiating it and then even pointing out the lacunae that even this judgement suffers from.  

ANALYSIS:

India has seen a drastic change in the technology and in the modern times due to increasing availability of electronic devices as smart phones, laptops, etc. with the supplement of the Internet has been the epicenter for the emergence of the e-commerce platform and mobile payment systems. Due to this emergence as the law changes with the change to the society so there has been changes, amendment and even addition of laws or legal provision governing the area of the digital market place. In Businesses operating in the digital market place in India have to comprise with multiple laws such as:

  1. The Information Technology Act, 2000,[2]
  2. The Indian Contract Act, 1872,[3]
  3. The Consumer Protection Act, 2019,[4]
  4. The Competition Act, 2002,[5]
  5. The Payment and Settlement Systems Act, 2007,[6]
  6. The Reserve Bank of India (RBI) regulations on digital payments,[7]
  7. The Copyright Act, 1957,[8]
  8. The Trademark Act, 1999,[9]
  9. The Patents Act, 1970.[10]

But, this article focuses on the aspect of assessing the junction where the interfaces where two domains of completion law and the digital market place meets, in the recent times due to the fine imposed by the CCI against the Google for GPBS being anti-competitive in nature and impugned monetary fine of Rs. 936.44 crores as result of the case of XYZ vs Alpahabet Inc..[11]

XYZ v. ALPHABET INC.:

BACKGROUND:

There was a two-fold allegation made by the informants on Google as recognized by the commission, firstly was the mandatory use of the GPBS for purchasing apps as well as to conduct in-app purchases restricts the choice available to the app developers and also keeping in mind the 30 percent service tax which may be 15 in some cases which is mandatory to be given to Google under the GPBS for any purchasing of the app for the google play store and for ant in-app purchases as well. Secondly, was that the other mobile wallets and UPI apps are not accepted as legitimate payment methods in the Google Play payment system.[12]

Issue arose:

  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?
  2. Whether exclusion of other UPI apps/mobile wallets as effective payment options on Play Store is unfair and/or discriminatory as per Section 4(2) of the Act?
  3. Whether pre-installation and prominence of Google Pay UPI App (GPay) by Google is in violation of Section 4(2) of the Act?

WHETEHR GPBS PRACTICE IS ANTI-COMETITICE IN NATURE OR NOT:

Yes, the GPBS system was anti-competitive in nature and the commission was right in its approach and holding them liable under 4(2)(a)(i),[13] 4(2)(a)(ii),[14] 4(2)(b)(ii),[15] 4(2)(c),[16] and 4(2)(e) of the Act.[17] and we can analyze each of the aspects discussed by the court while substantiating it even further:

GPBS:

GPBS is the proprietary billing system of the google, in which the app developer makes account with Google, and in this system the Google gets its “service fee” on all the app purchase or in-app purchase. In the due process of creating an account by the app developer with Google they have to agree to the DDA (Developer Distribution Agreement) and the DPP (Developer Program Policies) which clearly mandates the compulsory use of the GPBS.[18] Further, if seen in the Section 4 of the Google Play’s Payment Policy can be clearly inferred that the not only does it mandates the use of GPBS,[19] but in addition it also has an “Anti-steering provisions” which means it also restrict the ability of the app-developer to inform the consumer about in-app purchase from some elsewhere. There were number of factors as to why the GPBS system is anti-competitive in nature such as subsequently discussed.

DISCRIMINATORY PRACTICES:

Then Court finally highlighted the part of discriminatory practice which comes to light when we see that YouTube which is owned by Google does not use GPBS but YouTube is in connection with third-party payment processors directly, Google had given liberty to YouTube but not to the others who still have to follow the GPBS and have to pay the exorbitant rate of 15-30% service fee every time putting them at a disadvantage;[20] (cite) When we say discriminatory practice, we say so in the light of the practices which results in denial of market access in violation of provisions of section 4. (cite para 40 Arshiya Rail Infrastructure Limited Vs. Respondent: Ministry of Railways Arshiya Rail Infrastructure Limited vs. Ministry of Railway: MANU/CO/0076/2012). Also, the Supreme Court itself has interpreted denial of market access under Section 4(2)(c) widely, noting that denial of market access ‘in any manner’ would fall under its ambit, regardless of whether it is a denial of access to competitors or denial of access to players in vertically affected markets.[21] So the denial of market access used in this context is an umbrella term. Here, Google turning a blind eye to the YouTube in turn to increase their revenue allowed them engage with a third-party payment processor and like others they are charged significantly lesser fee then they themselves charge to others which ranges from 15-30%.

ACCESS TO DATA:

All the Google-owned services have access to the all data giving competitive advantage as a result of having access to this downstream competitors’ data set. Google would be able to use this information to enhance its offerings and more effectively target its potential clients. On the other side, the downstream rivals wouldn’t have access to the entire data set, which would hurt their ability to compete;[22] as can be inferred from the clause 9.2 of the DDA,[23] and also from the “Share usage & diagnostics information with Google” as explained on the Google Play’s Support page itself.[24] From the very insurgence of the digital marketplace access to data have been both an enabler and driver of competition and like any tool it serves the competitive as well as the anti-competitive services. There are companies like Google in at this very instance we can see that it misused their data access and companies not being careful not to abuse their control over the data will harm consumer welfare as well as limit the competition.

INNOVATION AND BARRIER TO ENTRY:

The GPBS has an adverse effect on the even though Google argues that GPBS as evident from its averments that it aids in levelling the playing field for app developers and stops monopolistic practices by app shops. On the other hand, while in reality as accepted by the commission as well GPBS stifles innovation by preventing developers from experimenting with fresh business models and sources of income.[25] The same argument is forwarded with respect to barrier to entry as it raises barriers to entry for competitors and inhibits developers’ capacity to provide alternative payment systems, Google’s requirement that app developers utilize its billing system reduces competition and choice for app developers and customers.[26]

UPI

There was another issue of UPI, Google has made only itself available to the intent flow technology while the other UPI only have access to the collect flow technology, to differentiate between in intent flow and collect flow in simple terms would be that, intent flow is a connected chain of steps, user-friendly and simple while collect-flow technology is a broken chain of steps which are disconnected with each other,[27] through this this Google was discriminated between developers of “similarly placed apps, equally placed transactions”.[28] While rejected the last contention as the option of pre-installation is available to all the others just because one utilizes it does not make it abuse of dominant position.

LIMITATION TO THE JUDGEMENT:

The main aim of the competition law is to maintain the following aspects:

  1. Prohibition of anti-competitive agreements
  2. Prohibition of abuse of dominant position
  3. Merger control
  4. Consumer protection

When any practice which is in contravention of any of the point and is having an adverse-effect on market competition is an anti-competition practice.[29]

With the rise of the e-commerce and digital marketplace there has been a sharp rise in anti-competitive practice like price-fixing, predatory pricing, Exclusive dealing, tying and bundling, abuse of market power.

As said by Ashok Kumar Gupta, chairman of Competition Commission of India that, “Digital markets are epicenters of technological innovation but lately they have become zones of “entrenched and unchecked dominance”,[30] all this has been possible due to the presence of lacunae in the act of competition law itself. Some of the lacunae are:

LACUANE 1: “RELEVANT MARKET IN DIGITAL MARKET PLACE”

The “relevant market” defined in Indian Competition law,[31] is based on the geographic region as in Section 2(s),[32] and the nature of product or service being offered as in Section 2(t),[33] which is ingenious only in case of the single side transaction, but does not take into account the interconnectedness of the sellers on each other which occurs in a multi-side transaction. There are substantial differences between a multi-side transaction and a single side transaction such as the unlike the traditional market where there was a seller and a buyer, here there can be multiple buyer as well as seller and may at times for one buyer to earn money there has to be involvement of other buyer, all of the people interact through a platform which is to say there is an intermediary role and there is a degree of the network effect, there are pricing models and even risk allocation.[34]

The biggest limitation to Indian Competition Law is the Multi-sided transaction as it is not possible to find the “relevant market” based on the available test, when looking at judicial procurements we see that courts have only recognized multi-sided nature of platform,[35] but have not adopted any means to aid the situation as can be seen from the subsequent judgement including Xyz v. Alphabet Inc.,[36] where to the CCI did not give any weightage to the multi-sided nature of the app store which connects the smartphones users to app developers just applying the tradition test of substitutability and geographic region just gave three separate relevant market and had delineated between market for licensable mobile operating system for smart mobile devices and the market for app store for Android OS.

Keeping in mind the past inconsistent judicial procurements with respect of “relevant market” in competition law ranging from cases such as Matrimony.Com Limited vs Google LLC & Ors,[37] Make My Trip case,[38] to contemporary cases such as Harshita Chawla,[39] Delhi Vyapar Mahasangh cases.[40]

LACUNAE 2: DETERMINATION OF DOMINANT POSITION AND ABUSE OF POWER BASED ON SHARES:

Market share measures the percentage of total sales or revenue in a market that a company controls, but it does not take into account other factors that can affect a company’s ability to exercise market power, such as barriers to entry, network effects, economies of scale, and access to data or other resources. Even though, in the judgement the court while accessing the case of Xyz v. Alphabet Inc.,[41] the court had taken into account other factors such as access to data, entry barriers, etc. but had clearly stated that the Commission is of the view that market share is one of the primary though not determinative parameters to assess dominance in a relevant market.[42] Accepting market share as a dominant factor to access the dominance in the market place can be very misleading in the current age witnessing the rise of e-commerce and digital market place as mentioned above.

CONCLUSION:

To sum up, the key takeaway from this article is that GPBS was anti-competitive in nature and is one of the major accomplishment of the CCI in identifying the issue and then delivering the judgement it in a very detail and a descriptive manner had discussed the issue while shedding light to the aspects of discriminatory practice, access to data and even to the effect of innovation and the barrier on entry, while also highlighting the second clubbed issue of UPI which was discussed then afterwards highlights the lacunae which the decision itself suffers from and through this highlights lacunae we can clearly see the way forward which is, accepting and understanding our own shortcomings which is that unlike other countries with competition law India still falls a bit short, India as a way forward just as a suggestion can take two different ways like:

  1. Can pass a similar ruling as the seminal ruling of Ohio v. Amex, the CCI can take into account the feedback effects and competitive constraints in transaction and non- transaction platforms which is unique to the multi-side transaction,[43] or
  2. Can either join or create something similar to the Digital Markets Act in the EU,[44] so that the there is a separate legislation to deal with digital market place altogether.

While at the current juncture though there is the Competition (Amendment) Bill, 2022, which a has passed both the Lok Sabha as well as the Rajya Sabha on March 29, 2023 and April, 3 2023 respectively and one of its key issue is analysing digital market, so the India may in the future successfully tackle issues such as which arose at the current instance.[45]

Author : Arkadeep Poddar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD

[1] JSTOR: INDIAN COMPETITION LAW: GLOBAL CONTEXT, by B.S. Chauhan, published in Journal of the Indian Law Institute, July-September 2012, Vol. 54, No. 3 (July September 2012), pp. 315-323, at page 315,  available at, https://www.jstor.org/stable/44782475, (last visited 14th May, 2023).

[2] The Information Technology Act, 2000.

[3] The Indian Contract Act, 1872.

[4] The Consumer Protection Act, 2019.

[5] The Competition Act, 2002.

[6] The Payment and Settlement Systems Act, 2007.

[7] Master Direction on Digital Payment Security Controls, Reserve Bank of India, available at, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12032&Mode=0, (last visited 14th May 2023).

[8] The Copyright Act, 1957.

[9] The Trademark Act, 1999.

[10] The Patents Act, 1970.

[11] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[12] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[13] The Competition Act, 2002, § 4(2)(a)(i).

[14] The Competition Act, 2002, § 4(2)(a)(ii).

[15] The Competition Act, 2002, § 4(2)(b)(ii).

[16] The Competition Act, 2002, § 4(2)(c).

[17] The Competition Act, 2002, § 4(@)(e).

[18] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 249.

[19] Google Play, Google Play’s payment policy: Google Terms and Services, § 4, Rights and Restrictions, available at, https://play.google.com/about/play-terms/index.html, (last visited on 14th May, 2023).

[20] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 29.

[21] Competition Commission of India v. Fast Way transmission Pvt. Ltd., Civil Appeal No. 7215 of 2014.

[22] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 282, 284.

[23] Google Play Developer Distribution Agreement, clause 9.2, available at, https://play.google.com/about/developer-distribution-agreement.html, (last visited on 14th May, 2023).

[24] Google Play Support page: “Share usage & diagnostics information with Google”, available at https://support.google.com/accounts/answer/6078260?hl=en, (last visited at 14th May, 2023).

[25] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 314.

[26] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 186, 193.

[27] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 354.

[28] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 355.

[29] Competition Commission of India v. Bharati Airtel Limited and Ors. (2018) SCC OnLine SC 2678.

[30] Khurana and Khurana Advocates and IP Attorneys, The Antitrust issues in digital markets – Modifiable anti-competitive conduct of Artificial Intelligence, published at 12th October, 2021, available at, https://www.khuranaandkhurana.com/2021/10/12/the-antitrust-issues-in-digital-markets-modifiable-anti-competitive-conduct-of-artificial-intelligence/, (last visited at 14th May, 2023).

[31] The Competition Act, 2002, § 2(r).

[32] The Competition Act, 2002, § 2(s).

[33] The Competition Act, 2002, § 2(t).

[34] Business Model Analyst: Mutisidedx Platform Business Model, available at,  https://businessmodelanalyst.com/multisided-platform-business-model/, (last visited 14th May, 2023).

[35] Vijay Gopal Vs. Big Tree Entertainment Pvt. Ltd. (BookMyShow) and Ors., 2022 SCC OnLine CCI 36.

[36] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[37] Matrimony.Com Limited vs Google LLC & Ors, 2018 SCC OnLine CCI 1.

[38] Makemytrip India Pvt. Ltd. MMT and Another V. Competition Commission of India and Others, 2022 SCC OnLine Del 4440.

[39] Harshita Chawla (informant) Whatsapp Inc. and Facebook Inc. v. Competition Commission of India, 2020 SCC OnLine CCI 32.

[40] Amazon Seller Services Private Limited, represented by its Authorized Signatory Mr. Rahul Sundaram v. Competition Commission of India, represented by its Secretary and Others, 2021 SCC OnLine Kar 12626.

[41] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63.

[42] Xyz and Ors. V. Alphabet Inc. and Ors., 2022 SCC OnLine CCI 63, ¶ 164.

[43] IndiaCorpLaw: Delineating Relevant Market for Multisided Platforms: Transaction vs Non-Transaction Platforms, by Harshit Upadhyay and Sanigdh Budhia, publishe at October 26, 2022, available at, https://indiacorplaw.in/2022/10/delineating-relevant-market-for-multisided-platforms-transaction-vs-non-transaction-platforms.html, (last visited 14th May,2023).

[44] European Commission: The Digital Markets Act: ensuring fair and open digital markets, available at https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-ensuring-fair-and-open-digital-markets_en, (last visited 14th May, 2023).

[45] PRS Legislative Research: The Competition (Amendment) Bill, 2022, by the Ministry of Finance, available at, https://prsindia.org/billtrack/the-competition-amendment-bill-2022, (last visited on 14th May, 2023).

By IIPRD, on April 3, 2024 at 9:15 am, under Copyright, Patent Act. Tags: , , , , , , , , , . No Comments
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