Google Pay: Tiny target in a big battle

December 01, 2020 5:30 AM

The CCI’s battle to keep digital gatekeepers at bay continues to unwrap discreet narcissistic policies of tech moguls. Google Pay is the new target

It is fascinating to note that the CCI published the Google Pay order a day before its approval announcement of Google’s Rs 33 crore investment in Jio.

By Vivek Agarwal

Google Pay is yet another case of ‘antitrust nepotism’ from the Google corporate family where the parent entity’s policy of favouring its own apps got challenged before the Competition Commission of India (CCI). After reflecting upon it for over eight weeks, the CCI decided to order a detailed investigation into Google’s alleged anticompetitive practices. The allegation is that Google has been promoting its own Google Pay to the disadvantage of competing UPI-based payment apps on the Play Store. Google has the ability to do so as a result of its dominance in the Android ecosystem, where it owns Android OS and the Play Store.

This year witnessed many such complaints against Google: first, favouring Google Pay in digital payments, then exclusivity of Android in Smart TVs and, most recently, integration of Google Meet with Gmail. Whilst Android TV and Google Meet complaints continue to be under consideration, on November 9 the CCI opened an investigation into Google Pay. Although Google was denied oral hearing, it was allowed to make written submissions before the decision to investigate was made. On the request of the complainant, the CCI decided to keep its identity confidential (perhaps to protect the complainant from Google’s retribution).

Certain app developers are aggrieved with Google’s alleged mandate of using its own payment systems on Android phones and charging app developers a disproportionate 30% commission on app and in-app purchases (also known as the Google Tax). India is not the first to acknowledge concerns around high commissions charged by the two key app store owners, Google and Apple; the EU, the US, Australia and South Korea are already looking into this issue. This 30% charge imposed by Google and Apple on their app stores is a classic example of a dominant firm raising rivals’ costs in downstream markets (such as music streaming and audio/e-book apps) to promote its own products and squeeze the margins of competing apps. A similar complaint was filed by Spotify against Apple, which is now under investigation by the European Commission. A few days after the CCI’s Google Pay order, Apple announced it would reduce its 30% commission to 15% for small developers (with annual sales less than $1 million) from January 2021.

Google, being an indispensable business partner, could also coerce smartphone manufacturers to pre-install Google Pay on new Android phones, which would disincentivise consumers to download other UPI-based payment apps. Although Google Pay is the leader in UPI-based apps, the NPCI’s recent announcement of capping an app’s total volume share to 30% has brought a twist in the tale. From January 2021, Google Pay would be required to bring its typical 40% market share down to 30% within two years. One gets no points for guessing that Google would use this policy change as a defence before the CCI.

Besides, Google Pay allegedly offers a better user experience as compared to other UPI apps. This is because Google uses an automatic technology (‘intent flow’) to seamlessly integrate Google Pay into the Play Store. However, other UPI apps are integrated based on a manual methodology (‘collect flow’). There were other allegations against Google, such as manipulating search results on the Play Store, preferential listing of its own apps, unfair terms of use and non-compliance with data localisation requirements, but all these were rejected by the CCI for lack of evidence.

It is fascinating to note that the CCI published the Google Pay order a day before its approval announcement of Google’s Rs 33 crore investment in Jio. Perhaps it was the CCI’s way of sending out a message that no tech magnate could escape ex post scrutiny of actual anticompetitive conduct, despite the challenges to do so under the ex ante combination regime. This message seems to be consistent with the CCI’s earlier order approving the Facebook-Jio combination where it cautioned the parties that any anticompetitive conduct resulting from any data sharing would not escape ex post inquiry.

Although concocting new techniques to alleviate competition issues vexing the digital economy has been at the fore of discussions in the global competition law fraternity in 2020, the CCI has made it clear that it is not afraid of taking these issues head-on. Given that digital India has begun to shape itself, it is indispensable for the CCI to ensure that digital markets develop in a fair and competitive manner, not allowing any gatekeepers to the disadvantage of mavericks and innovators. I would, however, not hesitate to mention that competition law enforcement in hi-tech markets is a fine balancing act and the CCI must be wary of over-intervention not to impede innovation.

(The author is partner (Competition Law) at DMD Advocates. Views are personal.)

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