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Competition concerns in UPI sector: THE CASES OF GOOGLE PAY AND WHATSAPP PAY - PART I

Updated: Feb 10

by Harshita Dixit *


The Indian Digital Payment Market has witnessed exponential growth in recent years as a result of increased access to the internet and smart phones. A Unified Payment Interface System (UPI), which is the principal driving force behind this expansion, was introduced by the National Payments Corporation of India (NPCI) in 2016. UPI uses Immediate Payment Service (IMPS) System to connect users of two different banks through the virtual interface and third parties can also use this interface to create their applications for better user experience. These third parties, who create these applications, are referred to by the NPCI as Third Party Application Providers (TPAP).

In India, there are several major UPI Players such as Google Pay, PayTM, PhonePe, WhatsApp Pay, etc. These digital payment market's leading actors, just like any other business, often engage in exploitative and abusive activity in order to maximize earnings, which leads to detrimental effects on the ecosystem's healthy competition. Such abusive conduct is regulated by the Competition Commission of India. Section 4 of the Competition Act, 2002 (hereinafter referred as “the act”) defines dominant position and delineates what essentially constitutes as abuse in order to prevent such commercial practices. Although, having a dominant position solely is not prohibited by the law, the act views it as unlawful when it is utilized to restrict the flow of healthy and fair competition in the market. Two landmark cases in the context of TPAPs have been heard by the Competition Commission of India (CCI) and decisions have been laid down in each case. Even though the subject matter of both cases were quite similar, the approach adopted by CCI was distinct in each case and led to two opposed results.


CCI’s views in Google Pay case and WhatsApp Pay case

In 2020, CCI ordered an investigation against Google to determine whether Google took advantage of its dominance in India's digital payments industry via GPay. The informant against Google claimed that it had abused its position in the market of licensable OS for smartphones by pressuring manufacturers to pre-install G-Pay in their devices. Additionally, it was claimed that Google Pay had a significant competitive advantage over its competitors due to the "must-have" status of some of its products like Google Search, Chrome, etc. in the devices. In October 2022, CCI gave its verdict and imposed a penalty of Rs. 936.44 Crore on Google. It held that there was an unfair relationship between Google and smartphone manufacturers and Google had misused its dominant position in the market of UPI payment-facilitating apps.

In February 2022, when WhatsApp Pay got the permission to be launched from the NPCI, a complaint was filed before the CCI regarding the competition issue that the new UPI application might create in the market. The informant filed a complaint before the CCI under section 19(1)(a) of the Competition Act on account of an infringement of Section 4. Due to the pre-installation of WhatsApp Pay within the WhatsApp messenger app itself, WhatsApp was accused of using its existing position as a market leader for "web-based instant messaging applications" to attract new users to the "market for UPI-enabled digital payment applications." WhatsApp was alleged of tying its two distinct services (misusing its well established messenger service to attract customer for its UPI application), leading to appreciable adverse effect on the competition in the market. CCI cleared WhatsApp of all allegations of "tying in" or "bundling," stating that WhatsApp Pay was an optional feature and there was no proof that it was actively exploiting WhatsApp messenger's user base to increase its access.

Therefore, while the allegations and issues involved against both entities were similar, CCI took different decisions for both of them. CCI considered the following concepts of competition law while giving its verdict.


Relevant Market and Abuse of Dominant Position

The markets for both, the UPI-enabled digital payments apps and over-the-top (OTT) messaging apps, were taken into account by the CCI for WhatsApp. It agreed that WhatsApp had a distinct advantage over other OTT messaging apps for smart phones in the Indian market. However, when it came to the second market, CCI held that the mere presence of an application in the device did not guarantee any transaction and hence there was no weight found in the allegation of abuse of dominance. In addition, the company provided users with complete discretion when they used its payment app services and even offered them a separate registration that required their consent to its terms of service and privacy policy.

While deciding whether WhatsApp violated Section 4(2)(d) of the Act, CCI referred to the term "tying" as a practice in which the provider of a good or service (the "tying product") needs customers to additionally purchase a different good or service (the "tied product"). There are several requirements that must be met for tying products, such as a) tying and the tied product shall be a pair of separate products, b) the entity in question must hold the dominant position in the market for locking products, c) consumers shall not be allowed to buy one or more linked products individually and d) tying must be capable of restricting or closing access to the market. When put to the test on these criteria, CCI decided in WhatsApp's favour because it was not found to be a dominating entity in the market of UPI applications and users were not forced to use WhatsApp Pay exclusively.

In the Google Pay case, CCI accepted the dominating position of Google in two markets, the "market for licensable smart mobile device operating systems in India" and the "market for app stores for Android mobile operating systems”, and concluded that unfair advantage to Google in these markets would come under the ambit of Section 4 of the Competition Act. CCI also took notice of the fact that the majority of Android users would not choose side loading or file sharing due to their lack of technical understanding and the security dangers involved and would instead use an already downloaded app on the device, i.e., GPay.


Pre-installation of Google Pay and WhatsApp Pay

According to CCI, pre-installing Google Pay could give the impression that it is the only option available, preventing customers from downloading other applications especially when G-Pay already had a sizeable market share. Google's use of its dominant market share in entering into deals with device manufacturers could distort the competitive landscape. Although Google had argued that such agreements were voluntary, CCI considered it appropriate and essential to restrict these contractual agreements to an extent due to G-Pay's advantage over other TPAPs. It would prevent them from disrupting the market of UPI-based payment applications. When it came to the pre-installation of WhatsApp Pay within WhatsApp Messenger, CCI prima facie decided that this method of launching a new service could not be considered anti-competitive. This practice could not be referred as “tying” where the sale of one product requires the purchase of another product as a condition of the initial transaction. WhatsApp had given buyers free choice and there was no act of compulsion against users so no antitrust complaint could have been raised.

*Harshita Dixit is a fourth year student at Rajiv Gandhi National University of Law,Punjab at the time of publication of this blog.

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