Google's pricing faces CCI scrutiny over potential disproportionality

The Competition Commission of India (CCI) has directed a comprehensive investigation into Google Play services following findings suggesting potential unfair practices. According to an order issued on Friday, the commission indicated that Google might have engaged in unfair pricing practices and constrained the growth of the app market. The commission believes that Google is implementing its payment policy in a discriminatory manner.

The investigation was initiated based on three complaints, including those from Shaadi.com, Sangam.com, and Kuku FM, along with submissions from the Indian Broadcasting and Digital Foundation and the Indian Digital Media Industry Foundation. Concerns were raised regarding the revenue distribution model within Google Play, with developers potentially facing significant costs.

A key contention pertained to Google's service fee, which can amount to nearly half of the chargeable value for developers, including up to a 30 per cent commission, along with additional expenses on advertising across Google's platforms and third-party apps.

The Commission's order highlights the allegation that Google's updated payment policies on the Google Play Store may violate Section 4 (abuse of dominant position) of the Competition Act. The order suggests that Google's pricing structure could be disproportionate to the economic value of services rendered to developers, potentially constituting an abuse of dominant position.

In September 2022, Google had introduced User Choice Billing (UCB) to allow app developers to offer alternative billing systems alongside Google Play Billing System (GPBS) for apps and in-app purchases (IAPs). However, concerns were raised that Google's pricing policies disproportionately favoured its own apps and cemented its position in the payment processing market.

The Commission's examination of Google's internal documents revealed that the company could break even by charging only 6 per cent of the revenue share of app purchases and IAPs, suggesting that the current service fee might be excessive.

Further, the Commission noted that app developers have limited bargaining power and are compelled to accept terms that deter legitimate competition and increase operational costs. The investigation also raised concerns about the lack of transparency and objective metrics in the implementation of the User Choice Billing system.

In response, Google contended that the Commission is not a price regulator and should exercise restraint in considering claims about the level of the Google Play service fee. However, the Commission emphasised the need for intervention in cases where dominant players engage in pricing practices that harm consumers or stifle competition.

The Commission's order underscores the importance of ensuring a competitive marketplace and preventing unfair pricing in critical internet-based economic activities. It has directed the Director General to conduct a thorough investigation into the implementation of the User Choice Billing system for potential violations of the Competition Act. As the investigation unfolds, the outcome could have significant implications for app developers and consumers alike, potentially reshaping the dynamics of the digital marketplace in India.