NCLAT reduces CCI’s fine on Google in Play Store case by 75% to ₹217 crore

The National Company Law Appellate Tribunal (NCLAT) has reduced the Competition Commission of India’s (CCI’s) October 2022 penalty on Google by about 75%, from ₹936.44 crore to ₹216.69 crore. The penalty was for abusing its dominant position in mobile app markets through its Android Play Store. NCLAT has directed Google to deposit the revised penalty in a month. Google said it had already deposited 10% of the total penalty, which NCLAT noted.

The ruling, delivered by an NCLAT bench led by chairperson Justice Ashok Bhushan, partially accepted Google’s appeal by setting aside some portions of CCI’s 2022 order. However, the tribunal upheld other aspects of the CCI’s findings.

A detailed judgment is awaited.

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The decision brings significant relief to Google, which dominates the Indian smartphone market with Android. According to StatCounter, Android currently has a 94.56% market share in India, while Apple’s iOS has 3.93%. Both Google and Apple charge commissions of 15% or 30% on purchases of paid apps and in-app purchases in India.

CCI’s investigation into Google

In its investigation leading up to the October 2022 ruling, CCI had found that the Play Store, the primary app distribution platform for Android devices, gave Google an unfair advantage by enforcing use of the Google Play Billing System (GPBS) for paid apps and in-app purchases. Developers were also barred from informing users about alternative payment methods, a restriction CCI deemed unfair, restrictive and discriminatory.

CCI also flagged Google’s preferential treatment of YouTube, which was exempt from GPBS service fees, unlike other apps. CCI also criticised Google Pay’s privileged integration into Play Store payments via the superior “intent flow” technology, while rival UPI apps were limited to the less efficient “collect flow”, leading to market access restrictions.

The regulator ordered Google to stop these anti-competitive practices and make changes, such as allowing third-party billing systems, removing anti-steering provisions, and ensuring equal treatment of all UPI apps.

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The ₹936-crore penalty was calculated as 7% of Google’s average relevant turnover, and the company was given 30 days to submit financial details. The regulator argued that Google’s service fees on Play Store purchases restricted developers’ ability to invest in better technology and services. CCI said alternative payment processors typically charged lower fees (around 1%), which would allow developers to allocate more resources for innovation.

CCI said the test for abuse of dominance was not whether a competitor went out of business, but whether Google’s policies eroded competition and prevented fair market access. Although Google introduced an alternative billing system after the CCI ruling, the service fee remained high.

Google’s defence

Google challenged the CCI order in January 2023, arguing before NCLAT that the penalty was excessive and the ruling lacked sufficient evidence. The company claimed CCI had wrongly defined the relevant market by excluding digital payment alternatives such as credit and debit cards.

Google also said that GPBS only collected service fees and did not prevent other payment processors from operating in India. It said CCI failed to demonstrate actual harm to competition and that Google was merely following National Payments Corporation of India (NPCI) regulations for its integration with UPI.

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This was the second major penalty CCI imposed on Google in 2022. In an earlier case related to Android dominance, the company was fined ₹1,337.76 crore, bringing the total penalty to more than ₹2,200 crore across two rulings in October 2022. While Google paid the Android-related fine in full, it chose to challenge the Play Store penalty.