Competition Commission of India Imposes Penalty on Google

The Competition Commission of India (CCI) on October 25 imposed a penalty of Rs. 936.44 crore on Google for abusing its dominant position with respect to its Play Store policies, apart from issuing a cease-and-desist order. The Commission also directed Google to modify its conduct within a defined timeline.

This is the second penalty on Google within a week taking the total penalty amount to Rs. 2,274 crore while Google said it is reviewing the decision to take further steps, adding that Indian developers have benefited from its technology.

For app developers, app stores have become a necessary medium for distribution of their apps to the end users and the availability of app store(s) is directly dependent on the OS installed on a smart device. 

According to a government statement released on October 25, an appreciation of the market dynamics in licensable mobile operating systems in India makes it evident that Google’s Android OS has successfully reaped the indirect network effects. 

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

Based on its assessment, the CCI found Google to be dominant in the markets for licensable OS for smart mobile devices and market for app stores for Android smart mobile OS, in India.

Selling of in-app digital goods constitutes an important means for app developers to monetize their creations/innovations. However, for in-app digital goods to be distributed to purchasing users, developers must configure their apps so that all purchases of the digital goods go through Google’s payment system, which processes the transactions. 

According to the statement, Google’s Play Store policies require the App developers to exclusively and mandatorily use Google Play’s Billing System (GPBS) not only for receiving payments for Apps (and other digital products like audio, video, games) distributed/sold through the Google Play Store but also for certain in-app purchases made by users of Apps after they have downloaded/purchased the App from the Play Store. 

Further, app developers cannot, within an app, provide users with a direct link to a webpage containing an alternative payment method or use language that encourages a user to purchase the digital item outside of the app (anti-steering provisions).

If the app developers do not comply with Google’s policy of using GPBS, they are not permitted to list their apps on the Play Store and thus, would lose out the vast pool of potential customers in the form of Android users. 

According to the CCI order, making access to the Play Store dependent on mandatory usage of GPBS for paid apps and in-app purchases is one sided and arbitrary and devoid of any legitimate business interest. 

As a result, the app developers are left bereft of the inherent choice to use payment processors of their liking from the open market. You can click here to read the full CCI order.