Competition Commission orders probe against Google on complaint by gaming company WinZO

"The CCI's order is a step toward restoring fairness in the digital ecosystem. Monopolistic practices stifle innovation and hinder competition, which are the lifeblood of any thriving industry. This decision is a significant move to ensure equitable opportunities for all players, fostering innovation and creating a level playing field that benefits both businesses and consumers" said WinZO co-founder Saumya Singh Rathore in a statement.

Started by Rathore and Paavan Nanda in 2018, WinZO enables developers to host games on the platform and earn revenue through a microtransaction-based monetisation model ranging from Re 1 to Rs 10, instead of the traditional in-app purchases and advertisement-based models.

WinZO claims to have a portfolio of over 100 games spanning various genres, including strategy, sports, casual, card, arcade, racing and action and board games, across 14 languages such as English, Hindi, Gujarati, Marathi, Bengali and Bhojpuri.

The complaint

WinZO, which counts Griffin Gaming Partners, Maker’s Fund, and Courtside, among its investors first approached CCI in 2022.

In its complaint, WinZO alleged that app developers must agree with "Google’s one-sided Developer Distribution Agreement (DDA) and Developer Program Policies (DPP) which contain unreasonable and unjust conditions" and the company's app marketplace Play Store also restricts hosting of RMGs in India.

Real-money games are those where the transfer of money is involved. It currently forms the bulk of revenues of India's overall gaming industry that clocked a topline of $3.8 billion in FY24, marking a 22.6 percent growth from $3.1 billion in FY23. The sector is expected to touch an estimated $9.2 billion by FY29, according to a report by gaming and interactive media venture fund Lumikai.

WinZO claimed that due to Google's "unreasonable and restrictive" policy all apps offering real money games of skill are only available for download from their website (also called sideloading). When users download the app from the website on Android devices, the tech giant displays a disclaimer/warning to consumers.

"The warning is peculiar to the Google operated Android OS and lack any merit or reason and is completely illegal...it is not only misleading which tarnishes Informant’s (WinZO's) market reputation but also is an active misrepresentation resulting in loss of business" WinZO stated its in complaint to CCI.

It also alleged that Google displays payment warnings to users who use Google's payment application Google Pay to make payments in real-money games or when the payment exceeds certain thresholds fixed by Google.

Google's RMG apps pilot

Since September 2022, Google has been allowing daily fantasy sports (DFS) and rummy apps on Google Play on a pilot basis. The tech giant doesn't levy any service fees on these applications at present.

WinZO argued in the complaint that this decision to limit the pilot programme to certain formats is "devoid of any reason and is thus, discriminatory and arbitrary constituting abuse of its dominant position by Google."

In a statement, Rathore claimed that this policy "effectively distorts the market"

"95 percent of the fantasy market is owned by a single player, and 90 percent of the rummy market is owned by three players. The policy caused the marketing and customer acquisition costs for the selected games to drop to a quarter of the previous spends, disproportionately benefiting the margins of these businesses over others" she said.

Read: Google Play's pilot for fantasy and rummy apps gets mixed response from startup founders. Here's why

These developments also comes at a time when the sector is undergoing a turbulent period due to challenges posed by the 28 percent GST regime that has increased the tax outflow of companies by as much as 350 to 400 percent, according to several industry executives.

"The format included in the policy, i.e. Fantasy & Rummy could absorb the higher GST regime due to improved margins with this distortion, unlike many other players who did not benefit from this policy further distorting the market dynamics and ability to compete in a fair market" Rathore said.

To be sure, Google announced plans to allow more types of real-money gaming apps on Play Store in January. However, it paused these plans in June, citing challenges related to the lack of a central licensing framework in certain markets and the complexities in developing an appropriate monetisation model.

India's burgeoning real-money gaming sector is still without a regulatory framework that offers clear direction and oversight to companies.

In April 2023, the Ministry of Electronics and Information Technology (MeitY) had notified gaming-related amendments to the IT Act 2021, which will allow multiple self-regulatory organisations (SROs) to determine whether a real-money game is permitted to operate in India or not. But the ministry later reportedly dropped the plan to appoint SROs.

Advertising policies

Among other allegations, Winzo claimed that Google modified its advertising policies in November 2022 to restrict only DFS and rummy app advertisers from hosting advertisements using Google Ads, thereby constituting an abuse of its dominant position.

Google, however, submitted to the CCI that it has never altered its advertising policy. The tech giant said it has permitted ads only for DFS and Rummy applications in India since 2019, as the local laws have characterised them as games of skill.

"Based on that, Google reasonably concluded that permitting ads for those two types of RMGs would present the least risk and exposure for Google. Google has no commercial interest in refusing ad revenue unnecessarily and its approach reflects both its decision to mitigate legal risk and its obligation to comply with the law" the company said, as per the CCI order.

Google further noted that, given the significant confusion regarding the characterisation of games as those of skill or chance, it is neither the firm's intention nor place to "decide whether - or which - games are games of skill or games of chance"

CCI said that it was of the prima facie view that the ad restrictions imposed by Google appear to be discriminatory

"Given Google’s pivotal role in the digital advertising ecosystem, any arbitrary criteria for selecting sub-categories of RMG apps allowed to advertise on its platform can raise significant competition concerns. The selective onboarding of certain app categories (i.e., DFS and Rummy) appears to distort the competitive landscape to the disadvantage of other RMG apps excluded from advertising on the Google platform" it said in the order.

CCI also noted that a prolonged duration of a pan-India pilot consisting of only selective RMG apps prima facie appears to deny market access to other RMG apps, due to the network effects in an app store market.

"By granting preferential treatment to select app categories, Google effectively creates a two-tier market where some developers are accorded superior access and visibility while others are discriminated against and thus, left with a competitive disadvantage" the watchdog said.