Google Abused Dominant Position Through Restrictive App Store Billing Policy But Didn't Deny Market Access: NCLAT Reduces Penalty From ₹936 Cr To ₹216 Cr

The Tribunal however held that there was no violation of section 4(2)(c) as conduct of Google did not deny market access to the payment processors and aggregators. It observed that reduction of market share by less than 1% cannot be read to mean denial of market access.

It further held that Google did not hinder innovation under Section 4(2)(a)(ii) since the broader UPI payment market remained open.

The Tribunal reduced the penalty imposed by the CCI from Rs.936.44 crores to Rs. 216.69 crore (imposed earlier in October 2022) based on 'relevant turnover' of Google's Play Store, rather than the turnover of the entire company.

Background

Google LLC launched an app store for Android phones called Play Store i.e. Google Play. On 17.08.2017, Google India Digital Private Limited launched a payment app- 'Tez' based on Unified Payment Interface (UPI). In August 2018, Tez App was renamed as 'Google Pay'.

On 09.11.2020, the Commission directed the Director General (DG) to investigate the Appellant based on information submitted to CCI under section 19. The DG submitted its report on 16.03.2022.

On 01.09.2022, Google introduced a user-choice billing pilot for non-game developers in India. On 14.09.2022, the CCI requested financial details of Google Play's revenue and profits in India. Google submitted this information on 06.10.2022. The CCI issued its final order on 25.10.2022 (impugned order). By the impugned order, the Commission issued various directions against the Appellant and imposed a penalty of Rs. 936.44 crore under Section 27(b) of the Act.

Alphabet Inc., with three other Google entities (Appellants), challenged the impugned order passed by the CCI under Section 27 of the Competition Act, 2002.

Submissions for the Appellant

Counsel for the Appellant submitted that the Commission's identification of the market as “apps facilitating payment through UPI in India” was flawed, as all digital payment modes are substitutable from the consumer perspective.

It was submitted that Google demonstrated no abuse of dominance in integrating UPI apps differently on Google Play. The Commission misapplied legal tests on dominance. It found Google violated Sections 4(2)(a)(ii), 4(2)(c), and 4(2)(e) despite concluding Google was not dominant. Without dominance, abuse cannot be established. The Commission also erred in alleging leverage under Section 4(2)(e). It failed to (i) define relevant markets, (ii) specify anti-competitive conduct, and (iii) establish a causal link between dominance in one market and influence in another.

It was submitted that the Commission incorrectly held that Google Play's Billing System (GPBS) violated Section 4(2)(a)(i) without applying the “fairness or reasonability test” as laid down by the CCI in Indian National Shipowners' Assn. vs. ONGC. The observation that GPBS was “one-sided and arbitrary” and devoid of any legitimate business interests was without any basis.

Further, the Commission failed to demonstrate that Google's conduct caused anticompetitive effects in the undefined downstream markets. It was submitted that the Commission was required to carry an 'effect analysis' to prove an abuse of dominance, as held in Google LLC & Anr. vs. CCI (1st Google Case).

Shri Sajan Poovayya challenging the penalty imposed under Section 27(2) submitted that the CCI erred in quantifying the penalty based on Google's entire turnover in India rather than Google's relevant turnover i.e. turnover attributable to Google Play.

It was also submitted that DG's investigation ignored the principle of natural justice by excluded key stakeholders from its inquiry, including Google's largest competitor for app distribution, Apple.

Submissions for the Respondent

Counsel for the Respondent submitted that the Act aims to combat not only anti-competitive harm that has already occurred but also to prevent conduct likely to cause such harm. Referring to the 1st Google Case, it was argued that 'effect analysis' is required to determine abuse of dominance under Section 4, including conduct capable of causing harm.

It was contended that the Commission correctly analyzed the DG Report, Google's response, and other evidence, and returned findings on violations of Sections 4(2)(a)(i), 4(2)(a)(ii), 4(2)(b), 4(2)(c), and 4(2)(e). The Commission properly defined the 'relevant market' and held that UPI-enabled digital payment apps and debit/credit cards do not fall in the same market.

It was further submitted that Google charges a service fee of up to 30%, which is unfair and discriminatory. Google pays only a 2.35% fee to payment processors for YouTube while imposing a 15–30% fee on other apps, creating a competitive disadvantage. The mandatory imposition of GPBS unfairly restricts app developers from using their own payment systems. Anti-steering provisions limiting in-app communication violate Section 4(2)(a)(i), and discriminatory service fees violate Sections 4(2)(a)(i), 4(2)(a)(ii), and 4(2)(e).

On penalties, it was submitted that the Commission correctly applied the two-stage analysis from Excel Crop Care Ltd.: (i) identifying relevant turnover and (ii) considering aggravating/mitigating factors. Google's revenue from ads and service fees was considered. The penalty calculation based on Google's overall turnover is appropriate for digital market platforms.

It was stated that the mandatory imposition of GPBS eliminated alternatives, reinforcing role of Google as 'gatekeeper'.

Observations on Identification of 'Relevant Market

The Tribunal noted that the CCI correctly identified three relevant markets: (i) licensable OS for smart mobile devices in India, (ii) app store for Android smart mobile OS in India, and (iii) apps facilitating payments through UPI in India. The Tribunal referred to the case of Competition Commission of Inida vs. Bharti Airtel Ltd. & Ors. (2019), wherein the Supreme Court held that market definition is a tool to identify and define the boundaries of competition between firms. The main purpose of market definition is to identify systematically the competitive constraints that the undertakings involved face.

The Tribunal upheld the findings entered by the CCI while determining the relevant market and holding the relevant markets, i.e. market for Apps facilitating payment through UPI in India. It held that the said product market is not interchangeable or substitutable by the consumer by other payment system, i.e. payment by credit or debit cards, Wallet and net banking.

On Legal Standards for 'effect-based' Analysis

The Tribunal first referred to its decision in the 1st Google Case (29.03.2023), where it considered whether proving abuse of dominant position under Section 4 of the Competition Act, 2002, requires an effect-based analysis. It relied on Indian National Shipowners' Association (INSA) v. ONGC, where the CCI observed:

“…examination of exploitative conduct which involves imposition of an unfair condition by a dominant enterprise in a B2B transaction is essentially to undertake a fairness or reasonability test, which requires examining both how the condition affects the trading partners of the dominant enterprise as well as whether there is any legitimate and objective necessity for the enterprise to impose such condition.” (Para 135)

The Tribunal also referred to the Supreme Court's judgment in Uber (India) Systems Pvt. Ltd. v. CCI (2019), which held that proving an abuse of dominance requires both the existence of a dominant position and its effect on competition.

The Tribunal noted the CLRC's 2019 report, which affirmed that the effect analysis falls within the scope of Section 4(2) and no legislative amendment was required.

The Tribunal concluded that effect-based analysis under Section 4 includes both actual restriction of competition and conduct capable of restricting competition. The Tribunal held that the Commission in its order conducted an effect analysis.

'Google's Mandatory Use of Google Play Billing System (GPBS) Violates Section 4(2)(a)(i), not Section 4(2)(a)(ii)'

The Tribunal upheld the decision of CCI that making access to the Play Store dependent on mandatory usage of GPBS for paid apps and in-app purchases was one-sided and arbitrary, and devoid of any 'legitimate business interest'.

The Tribunal noted that as per explanation to section 4(2), the unfair and discriminatory 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. It held that Google did not satisfy that the condition of mandatory requirement of use of GPBS had been adopted to meet the competition.

The Tribunal upheld CCI's decision that Google violated Section 4(2)(a)(i) by imposing an unfair and discriminatory condition on app developers through mandatory use of GPBS.

The Tribunal held that Google did not violate Section 4(2)(a)(ii) as it did not hinder innovation among third-party payment processors. “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," the Tribunal stated.

'Google Abused Dominant Position, But Didn't Deny Market Access'

The Tribunal observed that in no manner is Google denying market access to payment processor, as GBPS transactions constitute less than 1 percent of the total market leaving over 99 percent open to competitors. While app developers are required to use GPBS for Play Store transactions, this did not amount to a complete restriction on market access. A broad interpretation of “in any manner” in Section 4(2)(c) does not second the claim that Google has entirely blocked payment processor from operating.

It further said that Google as a buyer of payment processing services facilitates rather than restricts market access for payment processors. Google's choice of service providers reflects its right to select business partners. The CCI failed to define the relevant market for alleged denial of access and did not establish any significant anti competitive effects. It noted that Google Play transactions constitute less than 1 percent of India's digital payment ecosystem which continues to grow. The decline in GPay's market share further weakened the claim of foreclosure. The market of payment processors was not identified as a relevant market. Hence, the finding that Google denied market access was not sustained. No violation of section 4(2)(c) was established.

'Google Leveraged its Dominance in the UPI-Enabled Digital Payments'

The Tribunal relied on National Stock Exchange of India Ltd. vs. CCI – (2014), where the Competition Appellate Tribunal (COMPAT) held the language of section 4(2)(e) of the Act itself suggests that there have to be two markets, one in which the enterprise has a dominant position and the other in which it intends to enter or protect. However, both the markets must be relevant markets distinct from each other.

The Tribunal noted that the CCI found that Google leveraged its dominance in Android OS and app stores to favour Google Play. It upheld the finding stating that Google used its market power to promote and protect its position in UPI- enabled digital payments which clearly violated section 4(2)(e) of the Competition Act.

'No Violation of Section 4(2)(a)(ii) in Requiring Payment of Commission of 15- 30%'

CCI had held that Google's imposition of a 15-30% commission on app developers using the GPBS while allowing YouTube to use a separate payment processor at a lower fee (2.3%) constitutes discriminatory pricing under Section 4(2)(a)(ii). The Tribunal observed that “Section 4(2)(a)(ii) is attracted only when price in purchase of sale of goods or services is discriminatory. With regard to YouTube which is Google's own app, no concept of sale of goods or services by Google is involved.” It overturned the CCI's finding of violation of Section 4(2)(a)(ii).

'CCI couldn't have issued Ex-Ante Directions'

The Commission in the impugned order 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 also termed the Appellant as 'gatekeeper'. The Tribunal held that by terming the Appellant as gatekeeper, the observation that the Appellant bears certain special responsibilities cannot be the basis for reaching to any conclusion with regard to violation of Section 4. Violation of Section 4 has to be specifically pleaded and proved for imposing any penalty under Section 27. It thus held that the Commission could not have issued any ex-ante directions.

'CCI could have imposed Penalty only on the “relevant turnover”'

The Tribunal held that CCI erred in imposing a penalty on Google's entire turnover rather than restricting it to the relevant turnover, i.e. revenue generated from the Google Play Store. The Tribunal referred to the judgment of the Supreme Court in Excel Crop Care Ltd. vs. Competition Commission of India & Anr., where the Supreme Court laid down that adopting the criteria of 'relevant turnover' for imposition of penalty will be more in tune with the ethos of the Act.

The Tribunal modified the penalty by adding relevant revenue of Play Store, including service fees, developer fees, and advertising revenue, for the last three financial years i.e. 2018-19, 2019-20, and 2020-21. It imposed a penalty @ 7% of the relevant turnover (Rs. 216.69 crore) revising the earlier penalty of Rs. 936.44 crore.

Relief

The Tribunal allowed the appeal. It upheld the decision of CCI holding contravention of provision of Section 4(2)(a)(i) and 4(2)(e). However, it did not uphold the finding of the CCI of contravention of Section 4(2)(a)(ii), 4(2)(b(ii) and 4(2)(c). The Tribunal also modified the penalty imposed on Google of Rs.936.44 crores to Rs. 216.69 crore.

Case Title: Alphabet Inc. & Ors. vs. Competition Commission of India & Anr.

Case Number: Competition Appeal (AT) No. 04 of 2023

For Appellant: Mr. Sajan Poovayya and Mr. Ritin Rai, Sr. Advocates with Mr. Karan Chanhiok, Mr. Kaustav Kondu, Ms. Deeksha Manchanda, Ms. Tarun Donadi, Ms. Bhavika Chhabra, Mr. Palash Maheshwari, Mr. Daayar Singla and Ms. Raksha Agarwal, Advocates.

For Respondents: Mr. Balbir Singh, Sr. Advocate with Mr. Samar Bansal, Mr. Manu Chaturvedi, Mr. Kaustubh Chaturvedi, Mr. Vedant Kapur, Mr. Karan Sachdev, Ms. Shivali Singh, Ms. Ananya Singh, Mr. Vedant Kohli, Mr. Khwaja Umair and Ms. Monica Benjamin, Advocates for R-1/ CCI.

Mr. Jayant Mehta, Sr. Advocate with Mr. Abir Roy, Mr. Vivek Pandey, Mr. Aman Shankar, Mr. Sasthibrata Panda, Ms. Biyanka Bhatia and Ms. Shreya Kapoor, Advocates for R-3.

Date of Judgment: 28.03.2025

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