Google Play Store case: NCLAT partially upholds CCI's antitrust order, slashes penalty to Rs 216.7 crore

Google CCI

The National Company Law Appellate Tribunal (NCLAT) on March 28 partially upheld key aspects of the Competition Commission of India’s (CCI) antitrust order against Google for misusing its dominant position in relation to Play Store policies.

A two-member bench, comprising chairperson Justice Ashok Bhushan, however reduced Google's penalty from Rs 936.44 crore to Rs 216.69 crore, granting partial relief to the tech giant in a key growth market.

The tribunal directed Google to deposit the amount within 30 days, noting that it has already paid 10 percent of the penalty.

What did NCLAT say?

In its ruling, NCLAT upheld CCI's decision that Google has imposed unfair and discriminatory conditions on app developers by mandating the use of Google Play Billing System (GPBS) for paid app sales and in-app purchases.

It also agreed with CCI's finding that Google used its dominance over the Android and Play Store ecosystems to promote its payment app Google Pay over rival UPI digital payment apps.

NCLAT also upheld CCI's directives such as Google allowing app developers to use any third party billing or payment processing service for app sales or in-app purchases.

The tech giant cannot restrict app developers from communicating with their users or direct them outside the Google Play ecosystem to promote their apps and offerings. It also cannot discriminate against other apps facilitating UPI payments in India in favor of its own UPI app or prevent users from accessing or using features and services offered by app developers within their apps.

NCLAT however overtuned other aspects, stating that Google did not deny market access to rival payment processors and aggregators, since GPBS represents less than 1 percent of the broader digital payments ecosystem in India.

The tribunal also rejected CCI's claim that Google engaged in discriminatory pricing by allowing its own apps, such as YouTube, to avoid service fees while charging other apps 15-30 percent. It noted that since YouTube is Google's own app, there was no "sale of goods or services" involved.

Among the CCI directives that were overturned include providing a clear and transparent data-sharing policy, using Play Billing data to further its competitive advantage, and imposing any "unfair, unreasonable, discriminatory or disproportionate" conditions on app developers including price-related conditions among others.

"We welcome the NCLAT's decision to set aside certain directions in the CCI's order and substantially lower the penalty. Google is committed to supporting the growth of Indian developers and contributing to a thriving app ecosystem for both developers and users in India" Google said in a statement.

The firm stated that it will continue to comply with all applicable laws and regulations as it reviews the NCLAT’s judgment and evaluates its legal options.

Why did the penalty reduce?

The NCLAT stated that the CCI had imposed a penalty on Google's total turnover in India instead of on the relevant turnover, which in this case is the revenue generated from the Google Play Store.

This includes service fees collected from the sale of paid apps, in-app purchases, and subscriptions from Indian users; developer registration fees; and revenue from advertising displayed on Google Play, including in-app ads for FY19, FY20, and FY21.

Google's average total turnover in India for FY18, FY19, and FY20 was Rs 13,377.65 crore. However, the average combined relevant turnover for the same period was Rs 3,095.6 crore. A penalty of 7 percent on this relevant turnover translates to Rs 216.69 crore.

CCI's antitrust investigation

In October 2022, CCI directed the tech giant not to restrict app developers from using any third-party billing or payment processing services to purchase apps or for in-app billing on Google Play apart from a series of measures to modify the company's app payment policies, apart from imposing a penalty of Rs 936.44 crore and issuing a cease-and-desist order.

The competition watchdog held that making access to Play Store, for app developers, dependent on mandatory usage of Google Play Billing System (GPBS) for paid apps and in-app purchases constitutes an imposition of an unfair condition on app developers. Google filed an appeal against this order in January 2023 and NCLAT started hearing the matter in May 2024.

This order came about two years after CCI ordered an investigation into the mandatory use of Google Play Store's payment system for paid apps and in-app purchases in November 2020.

In the past few years, Google has taken several steps to modify its policies including lowering its commission fee and introducing third-party billing for in-app purchases, also called User Choice Billing system in India in 2023, as part of the company's efforts to comply with the CCI antitrust order.

User Choice Billing system allowed developers to offer an alternate billing system for in-app purchases alongside Google Play’s own billing system.

If a user pays through the alternative billing system, the transaction will still be subjected to a service fee, but at a 4 percent rate reduction. This effectively means that developers will have to shell out a service fee ranging from 6-26 percent for in-app purchases and subscriptions depending on the type of app/service and the annual revenue it generates on Google Play, as compared to the regular 10-30 percent service fee.

With these changes, the firm claimed in May 2023 that it is in compliance with the CCI's order. Many Indian app developers however objected to this system, claiming that it violated CCI's antitrust order. CCI announced an antitrust probe into this third-party billing system in March 2024, saying that it is 'prima facie' violative of the Competition Act, 2002.

Google was also fined Rs 1,337.76 crore for abusing its dominant position in the Android Mobile device ecosystem in October 2022. The company is said to have paid the entire penalty amount after NCLAT upheld the fine in March 2023.

Google also facing antitrust probes from CCI for alleged abuse of dominance in its other businesses such as smart television market, news aggregation, and more recently, the company's policies regarding the real-money gaming segment.