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One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=770305 https://www.taxtmi.com/caselaws?id=770305 Anti-competitive practices - abuse of dominant position - identification of 'relevant market' by the CCI - legal standards for effect based analysis - Commission has conducted any effect analysis in its decision or not - Appellant by requiring app developers to mandatory use of Google Play (GPBS) have imposed a discriminatory condition in sale of goods and services and violation of Section 4(2)(a)(i) or not - requirement of payment of commission/fee by the app developers to the extent of 15-30%, which fee is not being paid by the YouTube for which payment processor is engaged by Google on payment of 2.3% is discriminatory and violates Section 4(2)(a)(ii) - Google restrictions for mandatorily using of GPBS - Google has abused its dominant position in the app store market and indulged in practices resulting in denial of market access - dominance in market for licensable mobile OS and app stores for Android OS - charging of commission/ service fee from 15% to 30% is discriminatory or not - ex ante regulation for undefined "gatekeepers" beyond the CCI power - mention of directions contained in paragraph 395 are ultra vires, overboard and disproportionate remedial directions or not - penalty imposed by CCI on entire turnover of the Google. Whether identification of 'relevant market' by the CCI insofar as market for apps facilitating payment through UPI in India is wrong and whether all digital modes of payment, i.e. wallets, UPI net banking, credit and debit card are substitutable both from customer and market perspective? - HELD THAT:- The CCI while considering the question of substitutability between UPI, digital payments and other payments has also noticed the evidence, which were on the record, i.e. evidence of Amazon Pay Pvt. Ltd., Paytm, PhonePe, Xiaomi. The observations and findings of the CCI were recorded noting that there is no substitutability between UPI enabled payment system and other payment system, i.e. Wallets, credit and debit cards and net banking - 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 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, there are no infirmity in such determination of product market by the CCI. What are the legal standards for effect based analysis. Whether effect based analysis means both proof of conduct leading to actual restriction as well as conduct which is capable of restricting competition? - HELD THAT:- It is clear that in "effect analysis assessment", the conduct of dominant entity which has caused anti- competitive effect or it is likely to have an adverse effect on the competition, both need to be looked into. Effect analysis cannot only confine to conduct which has caused actual anti-competitive effect. If an effect is likely to have effect on the restricting competition by the dominant undertaking that can very well also be examined by Competition Authority to find out abuse by dominant entity - the submission made by the Commission that effect analysis need to include both conduct leading to actual harm and also conduct that was capable of causing such harm has to be accepted. Whether Commission has conducted any effect analysis in its decision or not? - HELD THAT:- The order of the Commission cannot be read to mean that the Commission has held that merely because Appellant is dominant any of its act shall lead to contravention - Both the conduct which has caused actual harm i.e. anti-competitive conduct which is capable of causing anti- competitive effect contravention can be proved. It is 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, there are substance in the submission of the Counsel for the Commission that effect analysis was conducted by the Commission. Whether the Appellant by requiring app developers to mandatory use of Google Play (GPBS) have imposed a discriminatory condition in sale of goods and services and violation of Section 4(2)(a)(i) was proved? - HELD THAT:- To take out a discriminatory condition out of the provision under Section 4(2)(a)(i), it has to be proved that the condition has been adopted to meet the competition. There is no material or pleadings on behalf of the Google to satisfy that condition of mandatory requirement of use of GPBS has been adopted to meet the competition. The Commission after noticing the report of DG and the plea taken by the Commission has already recorded its concurrence with finding and observations of the DG that Google has imposed unfair and discriminatory condition which finding of the Commission is contained in paragraph 312 which we have already extracted above. 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. The decision of the Commission insofar as it held that Appellant has violated provision of Section 4(2)(a)(i) upheld. Whether requirement of payment of commission/fee by the app developers to the extent of 15-30% which fee is not being paid by the YouTube for which payment processor is engaged by Google on payment of 2.3% is discriminatory and violates Section 4(2)(a)(ii)? - HELD THAT:- The revenue generated by YouTube is a revenue of the Google and no elements of sale on goods or services with regard to revenue of YouTube is involved nor Google is fixing a price for sale of goods or service with respect to YouTube. Thus, alleged discrimination with regard to not claiming 15-30% fee from YouTube is wholly unfounded and without any basis. It is satisfying that no allegation of discrimination with regard to condition by which Google claims fee of 15-30% from its app developers who host their paid app and that of engaging a payment processor on lesser payment for its payment in YouTube can be held. The Commission has not adverted to this important aspect of the matter and has erroneously came to the conclusion that there is violation of Section 4(2)(a)(ii) i.e. by imposing discriminatory as Google's own app i.e. YouTube in not paying service fee as being imposed on the other app. The above conclusion is wholly incorrect and cannot be sustained. Thus, 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. Whether Google restrictions for mandatorily using of GPBS have significant negative effect on the improvements and innovative solutions that third party payment processors/ aggregators would be able to bring to the market and is in violation of Section 4(2)(b)(ii) of the Act? - HELD THAT:- It is relevant to notice that Google is not a payment processor or payment aggregator. Google's GPay is an UPI app for making payment with regard to paid app and in-app payments and with regard to different apps hosted by developers in Google Play. Payments through the UPI market has been growing upwardly, which is reflected from pleas made and materials provided by the Appellant before the DG. Growth in the sector having increased upwardly, the observation and finding of the Commission that Google's requirement for mandatorily using of GPBS have limited or restricted technical or scientific development relating to goods or services to the prejudice of consumers, are unsustainable. The payments under Google Play under GPBS being less than 1%, the finding of the Commission that Google has restricted or limited technical or scientific development relating to market of payment processors/ aggregators, cannot be sustained. 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 - there are no violation of Section 4(2)(b)(ii) of the Act proved before the Commission. Whether Google has abused its dominant position in the app store market and indulged in practices resulting in denial of market access, which is violative of Section 4(2)(c) of the Act? - HELD THAT:- Google is a buyer of payment processing service and is actually facilitating market access for payment processors. Google's choice of payment processors reflects Google's right to choose its service, to service provider. The CCI has failed to identify the market, where the alleged denial of access has taken place and further failed to establish anti-competitive effect in that market. Reduction of market share by less than 1%, cannot be read to mean denial of market access. Payment under Google Play constitute only miniscule, which is less than 1% of the wider digital payment ecosystem in India, which continues to flourish. The Appellant has also pleaded that in the year 2021-22, share of transactions through GPay on Play has decreased. The market definition as determined by the Commission has been noted. The market of payment processors/ aggregators is not being determined as relevant market. In paragraph 234 of the Commission's order only three markets have been referred, i.e., market for licensable OS for smart mobile devises in India; market for app store for Android smart mobile OS in India; and market for Apps facilitating payment through UPI in India. Google share payment in Google's Play account is less than 1% of the payments made through UPI. Hence, it cannot be said that Google has abused its dominant position in the app store market to cause denial of payment processing. Thus, 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. Whether practices followed by Google making developers dependent on Google to access the users on its platform, result in leveraging its dominance in market for licensable mobile OS and app stores for Android OS, to protect its position in the downstream markets, is in violation of the provisions of Section 4(2)(e) of the Act? - HELD THAT:- The 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. Whether the CCI found charging of commission/ service fee from 15% to 30% discriminatory? - HELD THAT:- The DG has returned its observation in paragraph 319.9 that charging of 15% to 30% fee is excessive and therefore, unfair in terms of Section 4(2)(a)(ii) of the Act. The above question need no elaboration, since the Commission itself has returned its finding in paragraph 327 that information available on record is not sufficient to give a finding on the monetization model, as followed by Google. Thus, the Commission did not give any finding on violation of Section 4(2)(a)(ii), with regard to charging of 15% to 30% fees - no violation on the basis of charging fee of 15% to 30% of Section 4(2)(a)(ii) has been proved. Whether directions in paragraphs 395.2 to 395.8 of the impugned order amounts to form of ex ante regulation for undefined "gatekeepers" beyond the CCI power under Section 4 and 27 of the Act? - HELD THAT:- The Commission observation are that as gatekeeper, the Appellant has special responsibility. As per the statutory regime existing on the date, violation of Section 4 has to be proved for issuing any directions and penalty under Section 27(b). By terming the Appellant as gatekeeper, the observation that certain special responsibilities are on there on the Appellant, cannot be the basis for reaching to any conclusion for violation of Section 4. Violation of Section 4 has to be specifically pleaded and proved for imposing any penalty under Section 27. We, thus, are of the view that the Commission could not have issued any ex-ante directions. The correctness of directions 395.2 to 395.8 shall be considered hereinafter. Whether directions contained in paragraph 395 are ultra vires, overboard and disproportionate remedial directions? - HELD THAT:- Directions under paragraph 395.4 and 395.5 related to the finding of violation of Section 4(2)(e), which directions are sustained. Directions under paragraph 395.6 and 395.7 are general and insofar as price related condition, the commission itself found no discrimination with regard to fee and commission. Hence, direction under paragraph 395.6 and 395.7 are not sustained. Directions under paragraph 395.8 are sustained. Whether penalty imposed by CCI on entire turnover of the Google is unsustainable and the CCI could have imposed penalty only on the relevant turnover, i.e., turnover of Play Store and the penalty imposed is unsustainable? - HELD THAT:- Appellant has abused its dominant position and has violated Section 4(2)(a)(i) and 4(2)(e), the Commission could have very well imposed the penalty. Although, it is held that violations under Section 4(2)(a)(ii), 4(2)(b), and 4(2)(c) not proved, but penalty was still leviable on proof of violation under Section 4(2)(a)(i) and 4(2)(e). The penalty imposed by the Commission is modified and is substituted by the relevant turnover as reflected in Table-1, 2, 3 and 4, as submitted by the Appellant vide its letter dated 06.10.2022 - penalty @ 7% of the relevant turnover, as per the turnover of last three preceding Financial Year i.e. 2018-19, 2019-20 and 2020-21 imposed - Penalty @ 7% of the average turnover comes in INR 2,16,69,12,773 (USD: 2,98,89,312.39). The order passed by the Commission imposing penalty under paragraph 460-470 is modified and substituted accordingly. Conclusion - i) The decision of the Commission holding contravention of provision of Section 4(2)(a)(i) and 4(2)(e) are upheld. ii) The finding and decision of the Commission of contravention of Section 4(2)(a)(ii), 4(2)(b(ii) and 4(2)(c) are not upheld. iii) The directions issued in paragraphs 395.1, 395.2, 395.3 and 395.8 are upheld. Directions issued in paragraphs 395.4, 395.5, 395.6 and 395.7 are set aside. iv) The penalty imposed on the Google is modified as per computation contained in paragraph 105 of this order. Thus, the penalty imposed on the Google for relevant turnover of last three preceding year of Rs.936.44 crores, is modified to the amount of INR 2,16,69,12,773 (USD : 2,98,89,312.39). The Appellant having deposited 10% of the penalty in the present Appeal, rest of the amount of penalty shall be deposited by the Appellant within 30 days from today. Appeal allowed in part. Case-Laws Law of Competition Fri, 28 Mar 2025 00:00:00 +0530