Google in trouble with CCI again, this time for violating fair pricing rules

The Competition Commission of India on Friday said it will probe Google’s pricing model within 60 days, without immediately passing a verdict or enforcing penalties.

CCI’s decision has wider implications for Google, the dominant mobile operating platform in India, given the watchdog’s earlier rulings as well as the company’s run-ins with the domestic app ecosystem.

In a 21-page order on Friday, a copy of which Mint has seen, CCI said Google’s policies discriminated between physical and digital services offered through apps on the Google Play app marketplace.

Google does not charge any fee for apps that offer services such as food delivery, ride-hailing, or e-commerce. But digital services such as dating or music streaming platforms are subject to fees ranging from 11% to 30%.

The Competition Commission was hearing three separate appeals against Google, led by Anupam Mittal’s People Group, alleging that such differentiation between services was based on “an arbitrary distinction.”

“We are examining CCI’s order initiating the investigation. The CCI has previously examined our service fee in detail between 2020 and 2022 and found no illegality. However, we take our commitment to comply with local laws and regulations in India seriously and will cooperate with the process in every way,” a Google spokesperson said.

The competition watchdog has pulled up Google earlier as well. In October 2022, the CCI passed two separate orders in which it had found Google to have engaged in anti-competitive market practices through its Android mobile operating system and its Play store.

The regulator had fined Google ₹2,273.44 crore ($274 million) for its violations—which Google has since contested. A second investigation on Google’s compliance with CCI’s 2022 orders is expected to be concluded shortly.

“Subject to the further upcoming probe, CCI may be able to underline if Google is engaging in a pricing practice that is stifling innovation across the industry, since the Play store is installed by default across all Android devices,” said a senior competition lawyer who works with multiple Big Tech firms in India.

“In the present matter, app developers appear to have insignificant bargaining power vis-à-vis Google and are forced to accept terms that deter legitimate competition and increase their costs of operation. The app developer has no choice but to agree to the terms and conditions unilaterally decided by Google, otherwise they will not be able to access a vast pool of potential Android users in India,” CCI said in its latest order on Friday.

It also said Google does earn a share of advertising revenue from ‘free’ apps on the platform that do not pay any service fee. Google, in multiple filings and reports, has claimed that nearly 97% of all apps on the Google Play store do not pay it any fee.

But, CCI said, developers end up needing to spend 20% of their revenue on advertising and marketing to distribute their apps on the Play store, and that this “suggests a potential imbalance in the ecosystem, necessitating a thorough examination to ensure fair competition and equitable treatment of developers within the digital marketplace”.

Anupam Mittal, founder and chief executive of People Group, said, “Today’s order is a vindication not just for People Interactive but for the global Internet industry. While the matter remains under investigation, it is heartening to see CCI take a strong prima facie stand not just in the interest of industry and consumers but also against Google about spinning false narratives around CCI’s earlier orders.”

CCI also said that Google’s revenue share required from apps on the Play store to break-even in terms of cloud and other technology services that the company provides is 6% of app earnings.

“Based on this 6% break-even revenue share, Google is charging 4-5x of its cost to the app developers, which on a prima facie level appears to be disproportionate to the economic value of services being rendered to the app developers and appears to be an abuse of dominant position by Google,” CCI said.

The commission’s order comes after Google on 1 March suspended over 200 apps published by 10 startups alleging violation of the Play store’s policies. Following this, startups and Google met with Union IT minister Ashwini Vaishnaw on 4 March to discuss the issue. Senior government officials had said at the time that the government would not make a rushed decision to intervene in the matter, and would wait for verdicts from the CCI and the Supreme Court.

On 9 February, the Supreme Court had refused to issue an injunction against Google’s ability to charge a service fee. Less than a month later, Google enforced its service fees on startups.

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Published: 15 Mar 2024, 08:19 PM IST