Kuku FM, Shaadi.com: Startups await NCLAT’s May 10 hearing against CCI’s interim relief denial on Google Play billing

National Company Law Appellate Tribunal (NCLAT) will on May 10 hear a clutch of Startups’ including Kuku FM and Shaadi.com in their appeal against Competition Commission of India’s recent order denying them interim relief or protection against Google’s harmful conduct in the big tech’s User Choice Billing Policy (UCB). 

The CCI had in March rejected Startups’ interim relief application for complete restraint on Google from collection of its fees under tech giant’s updated payments policy. 

This ruling came close on the heels of the competition watchdog ordering an investigation against Google on March 15 for excessive pricing on Play Store. CCI had then held that tech giant’s Users Choice Billing (UCB) payments policy was “prima facie” violative of the Competition Act 2002.

The CCI Prima Facie found Google’s UCB as an abuse of dominant position and directed the Director General to conduct an investigation. The abusive conduct of Google as regards UCB included the service fees charged under UCB being excessive and disproportionate; unfair pricing model of Google with App developers potentially facing substantial costs; denial of market access; service fees being arbitrary and discriminatory, among others. 

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In its submission to NCLAT, Kuku FM (Mebigo Labs) noted that despite reprimanding Google’s conduct qua UCB in strong words in the Prima Facie order, the CCI had in its March 20 order (impugned order) denied the Startups grant of interim relief to prevent the harm to the market. 

In doing so, the Impugned Order not only failed to consider the imminent distortionary impact on the market, but also failed to account for settled principles of law in the grant of interim relief in an ‘in rem’ market remedy proceedings and contradicted its own string findings of the Prima Facie Order against Google. 

The Kuku FM petition, seen by businessline, highlighted that the service fee charged by Google under UCB policy is “exploitative, extortionary and disproportionate” to the service that is bringing provided. Also, the supposed service is provided by Google equally to all apps on the Google Play Store yet charged to only a small sub-section of app developers. 

Kuku FM has submitted to NCLAT that the impugned order suffers from perversity ignoring important facts and evidence placed on record. It highlighted that UCB is repackaged version of Google Play Billing System (GPBS), which severely hampers the economic viability and cash flow of app developers by forcing them to pay an exorbitant and disproportionate service fee of 11-26 per cent to Google when the transaction is actually processed by third party payment gateways that charge 1-2 per cent. 

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“Consequently, when there used to be no service (or transparent description and charges, thereof) for which an exorbitant service fee of 11-26 per cent is being charged, app developers ought not to be forced to comply with a policy that has already been declared abusive and anti-competitive at a threshold which is higher than the Prima Facie level”, the Kuku FM petition to NCLAT noted. 

Also the fees is discriminatory as physical apps and other apps who earn from advertisement (called as ‘free apps’) are not charged any service fee despite having the similar functionality and using the so called similar service offered by the Google Play Store, it added. 

It also noted that CCI move in not granting interim relief in favour of the App developers by way of the impugned order has the potential of destabilising the digital startup ecosystem of the country since they will be forced to pay a high unfair and discriminatory service fee. 

Kuku FM petition has also submitted that the Impugned Order erroneously denies interim relief because Google cannot recoup the costs associated with the Play Store if app developers do not pay the service fee mandated under UCB.

Noting that CCI has in the Prima Facie order already given findings on the “arbitrary, discriminate, disproportionate, unfair and non transparent nature of service fee”, the petition highlighted that CCI had yet incorrectly found that app developers should continue to pay the service fee and there is no need to restrain Google from such illegal collection and insidious act. 

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The CCI has already held that Google’s monetisation model is based on cross-subsidisation of various verticals and leveraging of data to generate significant advertisement revenue. There is no monetary loss to Google, Kuku FM petition has said, adding that CCI was oblivious to the fact that since 2008, the Google Play Store has run as a profitable venture, despite there being no service fee introduced until 2020 and not charged until 2022.

“Thus, Google’s argument that a service fee is required to recoup the cost of running Play is ex-facie wrong. Hence, by granting interim relief, Google’s ability to run the Play Store will not be affected”, the Kuku FM petition said.

However, the app developers’ economic health will be severely drained with no interim relief coming their way as they will be forced to continue paying the “unfair, disproportionate and discriminatory service fee, even though the matter is under adjudication”, it added. 

App developers (startups) have also asserted that they are not free riders since they already pay Google a listing fee as per Google’s terms, huge advertisement costs for better discoverability and visibility on the Google Play Store to generate business, which accounts for 30 per cent of their revenue apart from the service fee, from which Google is also earning. 

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