Google case verdict may set direction for tech businesses

The verdict on Google's competition case in India may set the direction for app marketplaces and Big Tech business models in the country, lawyers said. The National Company Law Appellate Tribunal (NCLAT) is hearing Google's appeal against Competition Commission of India's (CCI) $113 million penalty imposed in 2022. The verdict may also have an impact on Google's Play Store fees.

Two top lawyers said the NCLAT hearing may conclude by August, and the matter may further move to the Supreme Court.

The apex court is already hearing an appeal on CCI’s first $161-million penalty on Google in October 2022, and the second order and penalty is likely to join suit, too.

In NCLAT hearings, Google’s lawyers have opposed the CCI order on alleged market dominance and anti-competitive practices concerning its Play Store. At Wednesday’s hearing, Google's lawyers said the CCI order was “overbearing”, adding the penalty is based on assumptions, and does not prove how Google’s practice has been anti-competitive.

A day earlier, Google had argued that its Play Billing system accounts for a tiny share of the country's overall payments industry, and that only 3% of all Play Store apps face commissions.

Once Google concludes its arguments, CCI’s counsel will follow.

“Google will look for all avenues to identify shortcomings in CCI’s order. As the appellate court, NCLAT does hold the power to identify on merit if any argument against a competition order would hold substance, and on that note, could issue an order that partly accepts or quashes, or even fully accepts or quashes, an existing CCI order,” said Anisha Chand, partner at law firm, Khaitan & Co.

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A second lawyer at a top law firm, who also advises Google across various issues, said that more than the penalty, getting a favourable verdict would be “a matter of principle” for Google.

“Any competition lawsuit could alter the very basis of a business operation. On that note, the NCLAT appeal’s hearings will likely be highly significant to the ongoing service fee conversations between Google and startups,” the lawyer added.

Google notices to startups

On 1 March, Google issued notices to 10 startups who operated over 200 apps on its Play Store, warning them of non-compliance with its service fee policy and suspending them from the platform. The startups, who incidentally had already filed appeals against the Big Tech firm accusing it of abusing its dominant market power, subsequently filed appeals against the suspension. Following an intervention by Union IT minister Ashwini Vaishnaw, the apps were reinstated—initially without an in-app payment tool, but subsequently in full, albeit with a declaration from Google that each of them would be billed for its service fee henceforth.

Google levies a service fee of 11-30% from apps that sell “digital services” on its Play Store, a fee that many parties say is disproportionate to the service that Google provides. On 15 March, CCI initiated a fresh probe into Google’s Play Store pricing. The investigation is expected to be completed by next week.

A third lawyer who advises Google said on condition of anonymity, that it was “unusual” for a competition regulator to be involved in deciding market pricing. “One tenet of competition law is to let a party continue with pricing as deemed fit—if the pricing is high, this implies high demand, which in itself is an impetus for competitors to enter the industry and eventually bring the pricing down. However, in this case, Apple and Google essentially run a duopoly, and the app marketplaces is not a competitive arena. Even then, determining fair pricing would take far more complications into account,” the lawyer said.

In FY23, Google’s India revenue of $3.36 billion accounted for just over 1% of its global revenue of $307 billion. But for Google, India is strategically important as it is one of the world’s largest markets for consumer and enterprise digital services. And this makes the NCLAT verdict significant, which is likely to end up in Supreme Court, and bring about material changes to how its business is operated in the country.

A spokesperson for Alliance of Digital India Foundation (ADIF), the industry body representing startups that appealed to the CCI alleging unfair practices by Google, did not comment on the matter. An emailed query sent to Google also remained unanswered.

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