Google abused dominant position, but didn't deny market access to other players: NCLAT

The National Company Law Appellate Tribunal (NCLAT) on Friday concluded that while Google abused its dominant position in the Play Store ecosystem to promote Google Pay as a default payment processor for app developers, it did not deny market access to competitors. .While partially upholding the Competition Commission of India (CCI) judgment on Google's Play Store dominance, the NCLAT ruled, “We are satisfied that dominance in first two markets has been used to leverage to promote and protect its position in the market for UPI enabled digital payment apps. Thus, violation of Section 4(2)(e) stands proved...”However, it also held, “We, thus, find that no violation of Section 4(2)(c) was proved and the Commission’s finding that Appellant being dominant in app store market has caused denial of market access to the payment processors and aggregators is unsustainable.”.In October 2022, CCI fined Google ₹936.44 crore for abusing its dominant position regarding Play Store policies and issued a cease-and-desist order. Google was directed to allow third-party billing services for app purchases and modify its policies within three months.The investigation began in November 2020 over Google's mandatory Play Store payment system. CCI found this practice unfair, as it forced developers to use Google’s billing while exempting its own apps like YouTube from commission fees. This was deemed discriminatory and restrictive to competition.CCI ruled that Google's billing enforcement hindered innovation, limited market access for payment aggregators and imposed unfair conditions. Google was instructed to maintain transparency, avoid discriminatory practices and allow developers to engage users outside Play Store. It was also barred from using Play Billing data for competitive advantage..Below is a brief rundown of what has been upheld and what has been set aside by the NCLAT..CCI’s relevant market finding and effect analysis: Upheld.The NCLAT agreed with the CCI’s definition of the relevant market, rejecting Google’s argument that all digital payment methods (UPI, wallets, cards, net banking) were interchangeable. “We are of the view that 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 has been correctly determined. 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. Thus, we do not find any infirmity in such determination of product market by the CCI.”The NCLAT noted that effect analysis should consider both actual harm and potential harm caused by conduct. However, this analysis must be based on actions that have already occurred. A dominant entity cannot be penalised for possible future conduct. In effect analysis, both actual harm and the potential for anti-competitive effects must be assessed.“We are not persuaded to accept the submission of the Appellant that the Commission in its order has not conducted any effect analysis rather Commission in various paragraphs have noticed the Report of the DG, the response given by the Appellant and its conclusion and finding. Thus, we find substance in the submission of the Counsel for the Commission that effect analysis was conducted by the Commission.”.Mandatory use of Google Play Billing System (GPBS) is anti-competitive: Upheld.CCI found that Google forced app developers to use GPBS for paid apps and in-app purchases and was thus imposing unfair and discriminatory conditions.The NCLAT stated that unfair and discriminatory conditions in the purchase or sale of goods or services, as mentioned in Section 4(2)(a)(i), do not apply if such conditions or pricing are introduced to compete in the market. To exempt a discriminatory condition under this provision, it must be demonstrated that the condition was necessary to address competition. However, it stated, “...there is no material or pleadings on behalf of Google to satisfy that condition of mandatory requirement of use of GPBS has been adopted to meet the competition.” After reviewing the DG’s report, the Commission concurred that “Google has imposed unfair and discriminatory conditions.”Accordingly, NCLAT concluded that “the conclusion drawn by the Commission that there is breach of Section 4(2)(a)(i) of the Act is based on materials on record” and upheld the finding that “the Appellant has violated provision of Section 4(2)(a)(i).”.Discriminatory pricing between apps and YouTube:Overturned.CCI had found that Google charged 15-30% fees from other apps but only 2.3% for YouTube, violating the law.YouTube is Google’s own app, not a third-party service, so no "sale of goods/services" was involved. Hence, no discriminatory pricing was established.“YouTube in not paying service fee as being imposed on the other app. The above conclusion is wholly incorrect and cannot be sustained. We, thus, hold that no violation of Section 4(2)(a)(ii) has been established and the finding and decision of the Commission to that extent deserves to be set aside.”.Google leveraged dominance to favour Google Pay: Upheld.CCI found that Google used its dominance in Android OS & app stores to promote Google Pay over rivals. The NCLAT accepted this, ruling,"In view of foregoing discussions and findings returned by the Commission in paragraph 357, which finding is based on assessment of evidence available on record and the observations made by the DG, we are satisfied that dominance in first two markets has been used to leverage to promote and protect its position in the market for UPI enabled digital payment apps. Thus, violation of Section 4(2)(e) stands proved.”.Google’s actions denied market access: Overturned.CCI found that Google’s policies denied market access to rival payment processors and limited innovation by third-party payment processors.The NCLAT, however, noted that the UPI market is growing rapidly (Paytm, PhonePe, Razorpay expanding) and Google’s Play Store payments account for less than 1% of UPI transactions, so no significant impact was proven.“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. It is further relevant to notice that three markets, which were determined, on which entire investigation was conducted by the DG and findings have been returned by the DG, the market of payment processors/ aggregators, was not determined as relevant market. The market of payment processors/ aggregators, having not been established as relevant market, nor relevant facts have been evidenced regarding payment processors/ aggregators, the findings of violation of Section 4(2)(b)(ii), cannot be sustained.”.Preventive Directions set aside:.The CCI had held Google dominant in two markets (licensable OS and app stores) and termed it a gatekeeper, imposing obligations without proving specific violations. These included data sharing mandates by the CCI. The Appellate Tribunal emphasized that "penal provisions must be strictly construed". It noted the CCI’s findings on Google’s monetisation model were inconclusive, yet directions were issued based on gatekeeper status alone.Referencing the 2024 Digital Competition Law Committee Report, the NCLAT highlighted that the current Act is ex-posto (after the offence) and not ex-ante (before the offence). According to NCLAT, "By issuing ex-ante directions without proven abuse, the CCI overstepped its authority. These directions were thus deemed ultra vires and disproportionate.".Why was penalty reduced?.NCLAT ruled that the CCI erred in imposing a penalty on Google’s entire turnover instead of restricting it to the relevant turnover - specifically, revenue generated from the Google Play Store.The Appellate Tribunal recalculated the penalty based on Play Store’s relevant revenue (including service fees, developer fees, and advertising revenue) for 2018-19, 2019-20, and 2020-21.The revised penalty was set at 7% of the average relevant turnover (₹2,16.69 crore) instead of the earlier ₹936.44 crore..In a nutshell, the following directions were upheld:Google must stop forcing GPBS on developers.Must allow third-party payment options.Must avoid discriminatory conditions.However, NCLAT struck down the ex-ante regulations (preventive measures) imposed by CCI as they were beyond the CCI’s powers under current law..[Read Judgment]