(ATF) The Competition Commission of India ordered another inquiry into Google on Monday, targeting the centrepiece of its Indian fintech ambition, Google Pay (GPay).
The investigation will look into two of several allegations to ascertain whether the internet giant is abusing its market position to unfairly promote its mobile payments app in the country.
These allegations were filed in February by an unnamed informant who said that Google, through its control over the Play Store and the Android operating system, favours Google Pay over competing apps.
The Asia Eight: Daily must-reads from world’s most dynamic region
This amounts to abuse of its dominant position by Google, the complaint said.
Google says it has evidence to show that Google Pay operates in an "extremely competitive environment". But experts say that, given the watchdog has ordered an investigation and is moving fast, it seems convinced that its case against Google is strong.
“Since Android controls over 75% of the market share in India, smaller players have to depend on Play Store to reach their users. If all in-app payments are tied to Google Pay, there will be no means for new players to enter,” Amit Kapoor, chairman of the Institute for Competitiveness told Asia Times Financial.
“Google has had a history of favouring its own products through its search engine and mobile OS dominance and competition bodies in both EU and US markets have acknowledged that as well. The CCI does have a strong case against Google,” he said.
Too big and inflexible
This is not Google’s first tussle with the Indian competition regulator. In 2018, the CCI targeted the cornerstone of Google’s empire, its search engine, when it fined the internet giant $21 million for search bias.
Google’s appeal against that case is still pending.
And last year, the CCI also started probing Google for allegedly misusing its dominant position to reduce the ability of smartphone manufacturers to opt for alternative versions of its Android mobile operating system.
But Google faced its biggest challenge in the middle of October when a group of 15 startup founders complained to the watchdog about Google’s anti-competitive policies in India.
They protested that Google’s imposition of its Play Store billing system on Indian developers, as well as the 30% commission it charged for selling digital products and services through the system.
The founders said phones with Google’s Android OS are preloaded with the Play Store app distribution platform, giving it an inherent advantage over Indian app developers by forcing them to build and change apps based on its operating system and app store.
“Google’s tax is like a distributor asking for 30% of the sales revenue as a cut. Today, we are all at the mercy of Google. We don’t know when they will remove the apps, based on some policy that they decide,” said Murugavel Janakiraman, founder & CEO of Matrimony.com, who is one of the 15 complainants.
“The internet in our country is controlled by Google and we all are at its mercy,” he added.
Google claimed in a blog in September that GPay had rapidly grown in India to reach 67 million monthly active users, driving transactions worth more than $110 billion.
India’s digital payments space is dominated by Google Pay and Walmart-owned PhonePe. Competitors including local ones like the SoftBank and Alibaba-backed Paytm, privately-owned Mobikwik, government-owned BHIM, and the recent debutant Amazon Pay, jostle for the roughly 20% balance of market share.
Data from Counterpoint Research showed that in September that Android mobile operating platforms power around 98% of the 490 million smartphones in India.
Best for consumers
But Google’s defence against such accusations has been that it does what is best for the customer.
In response to the CCI’s announcement, Google said on Monday that the commission had rejected several claims made by the anonymous complainant.
“On the remaining concerns, first, we are confident that the CCI will find that GPay operates in an extremely competitive environment, and owes its success to its ability to offer consumers a simple and secure payments experience,” it said.
The company also claimed that numerous distribution channels exist for apps on the Android platform and that Google Play is not the only option for the operating system.
“Users choose Google Play because we ensure a safe, secure, and seamless experience,” the company said. “Play’s billing system is a fundamental part of meeting this user expectation and helps ensure our continued investment in the many important things needed to make developers successful.”
Google also argues that if it ever fails to satisfy its users, the market will punish it the same way it as was the case for Yahoo, AOL, and Myspace.
Crucial for startups
Yet experts say the allegations are serious, and the CCI has to act fast.
“A majority of startup initiatives in India commercialise their products and services through apps. Any finding from the CCI that would influence the relationship between app developers and app distribution platforms, such as Google Play store, will be bound to have a direct effect on the startup ecosystem,” Kanika Chaudhary Nayar, a partner at the law firm L&L Partners told ATF.
“This is also evidenced by the fact that media reports suggest the CCI has issued questionnaires to several startups asking them about the challenges faced by them in listing apps and the kind of partnerships they have with play stores,” she added.
On Wednesday, The Mint reported that the CCI has written to 17 startup founders, questioning them and collating their views on the ongoing controversy over Google abusing its dominant position in the operating system market.
In that letter, the watchdog sought details about the difference in app development on Android OS versus other operating systems, plus constraints that startups face in development or maintenance of apps on Android, as well as challenges in listing on the Play Store, the report said.
“The case is considerably important for the startup ecosystem in India,” Kapoor of the Institute for Competitiveness, said.
The outcome of this case could allow startups to collaborate with others, he said, and give them more freedom when choosing a payment platform.
“Second, it will also allow new apps to enter the market,” he said.
Meanwhile, Google may have made a smart move by teaming up with Mukesh Ambani, India’s richest man and most powerful tech entrepreneur.
Late on Wednesday, Google received CCI approval to buy 7.73% of Ambani’s digital venture, Jio Platforms.
In July, Google announced that it had agreed to buy a stake in Jio Platforms for $4.5 billion as part of a recently announced $10-billion India digitisation fund.