On Friday, March 15, the Competition Commission of India (CCI) initiated an investigation into Google’s User Choice Billing System following allegations of market dominance abuse. Under scrutiny are claims that Google’s fee structure disproportionately burdens app developers, potentially violating sections 4(2)(a), 4(2)(b), and 4(2)(c) of the Competition Act.
NEW DELHI: On March 15th (Friday), the Competition Commission of India (CCI) directed its Director General (Investigation) to investigate the alleged matter against Google, that the company may be exploiting its dominant market position via its User Choice Billing (UCB) system.
CCI’s Chairperson Ravneet Kaur and members Anil Agarwal, Sweta Kakkad, and Deepak Anurag noted internal documents from Google indicating that the company could sustain itself by charging a mere 6% revenue share on paid app downloads. However, Google has been imposing fees of up to 30% on developers, which appears disproportionate to the services rendered.
The inquiry was initiated after a plea from the Indian Broadcasting and Digital Foundation (IBDF), the Indian Digital Media Industry Foundation (IDMIF), and several companies. They alleged that Google’s updated payment policies on its Play Store infringed Section 4 of the Competition Act, relating to abuse of dominant position.
“Based on this 6% break-even revenue share, Google is charging 4 to 5 times 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 its dominant position,” the Commission’s order stated.
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Google introduced the UCB system in September 2022, allowing app developers to offer alternative billing systems alongside the Google Play Billing System (GPBS) for digital content and in-app purchases. Despite this, Google continued to impose service fees ranging from 10% to 30% for GPBS transactions, while reducing commissions for alternative billing systems to 6%, 11%, or 26%.
“Sufficient degree of competition in the available channels for distribution of apps would have allowed the discovery of a competitive and fair price. However, it appears that Google has used its virtual monopoly power to reap trading benefits that it would not have reaped if there had been effective competition,” the Commission stated.
Google countered by asserting that the Commission is not a price regulator and should exercise restraint in assessing service fees.
However, the Commission emphasized its role in intervening where dominant players engage in pricing practices that harm consumers or impact competition. It highlighted Section 4(2)(a)(ii) of the Act, which prohibits unfair pricing by dominant enterprises.
Based on internal documents, the Commission found that Google could break even by charging only 6% of revenue.
Furthermore, developers are compelled to spend an additional 20% on advertising across Google’s platforms and third-party apps, indicating a potential imbalance in the ecosystem.
The Commission expressed concern over the selective implementation of the UCB system and the absence of objective metrics for distinguishing between digital and physical content and services.
Consequently, the Commission directed its Director General (Investigation) to conduct a thorough investigation into the implementation of the UCB system, citing potential violations of sections 4(2)(a), 4(2)(b), and 4(2)(c) of the Competition Act.
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