Regulatory Clashes and Digital Market Dynamics: Analysing the Google Play Store Litigation in India

The fight over the payment fee charged to app developers on Google’s Play Store billing system recently spilt over from the Competition Commission of India (CCI) to the Madras High Court (MHC). The issue confronting the MHC in its recent judgment was whether it could consider multiple civil suits, or whether special statutes such as the Competition Act, 2002 (the “Competition Act”) and the Payment and Settlement Systems Act, 2007 (the “PSS Act”) barred its jurisdiction. The challenges were filed by various application developers (“App developers”).

The Competition Act regulates fair market development and prescribes the antitrust regime for the Indian market while the PSS Act provides for regulation and supervision of payment and settlement systems in India that deal with digital financial transactions. Both these laws designate their respective expert authorities: the CCI under the Competition Act, and the Reserve Bank of India (RBI) under the PSS Act. The MHC accepted the limits of its jurisdiction and held that its jurisdiction was barred expressly and implicitly under the Competition Act and the PSS Act, respectively.

The dispute before the MHC originated when 13 App developers instituted civil suits against Alphabet Inc. (Google’s parent company) and six of its subsidiaries (“Google”). The suits filed by the App developers were premised on the ground that Google’s Play Store policies violated provisions and regulations of the PSS Act. The App developers also claimed that Google was leveraging its dominant market position to make App developers accept allegedly unconscionable and one-sided terms and conditions.

Google filed an application for “rejection of plaint” and asserted that the civil suits ought to be rejected at the threshold since the civil court’s jurisdiction was barred under the PSS Act and the Competition Act. Google argued that allegations of abuse of dominance were expressly barred under Section 61 of the Competition Act since the same issues had already been decided by the CCI. Google further argued that violations of the PSS Act were barred by implication since the PSS Act is a self-contained code that empowers the RBI to deal with non-compliance with the PSS Act. In addition, Google also asserted that the agreement between the parties contained an exclusive jurisdiction clause through which parties had agreed to agitate contractual disputes in courts of California.

While the court of first instance (ie, a single MHC judge) agreed with Google’s contentions on the implied and express exclusion under the PSS Act and the Competition Act, it struck down the exclusive jurisdiction clause. This was carried up in appeal to the Division Bench.

The MHC dismissed the appeals of the App developers holding that all the claims asserted by the App developers were within the domain of the authorities designated under the PSS Act and the Competition Act. The judgment explains how the Competition Act contains an express bar on the jurisdiction of civil courts and the PSS Act contains an implied bar in the App developers’ case against Google. The judgment affirms the principle that where a right or liability is created by a statute that gives a special remedy for enforcing it, the remedy provided by that statute alone must be used.

The judgment further holds that the Competition Act is a complete code and the CCI is has the power to determine allegations of dominance. The MHC observes that the CCI is the appropriate forum to litigate allegations of abuse of dominance due to the express bar under Section 61 of the Competition Act excluding civil courts.

Notably, the judgment provides much needed clarity regarding the correct forum in which to litigate breaches of the PSS Act. It held that the scheme of the PSS Act demonstrates it is a self-contained code, which impliedly ousts the jurisdiction of civil courts. The judgment held that concerns regarding violation of the PSS Act and any regulations made under the PSS Act can be raised before the designated authority: the RBI.

In addition, the judgment also recognises the ability of the CCI to reconcile any issues which require input from other sectoral regulators by seeking their opinion(s) as a method to resolve cross-sectoral issues. Section 21A of the Competition Act authorises the CCI to refer an issue to the relevant statutory authority in cases where the CCI’s decision may involve implementation of another statute. Accordingly, the MHC has held that the CCI can reach out to the RBI to avoid conflict in cases where there is an overlap of issues under the Competition Act and PSS Act.

While holding that civil courts did not have the requisite jurisdiction to entertain the civil suits filed by the App developers, the judgment struck down the exclusive jurisdiction clause contained in the agreement between the parties, which required them to litigate disputes only before the federal or state courts in California. It held that such an exclusive jurisdiction clause was contrary to the public policy of India and the clause is impermissible under Indian law as it restrains legal proceedings.

The PSS Act is an important piece of legislation which has gained significance in the past few years with the increase in digital transactions. The RBI regulates the digital financial infrastructure of India under the PSS Act. The PSS Act regulates operators and participants in key payments systems, such as Unified Payments Interface, National Electronic Fund Transfer, all card payment networks, and payment gateways. Exercising powers under the PSS Act, the RBI also regulates payment aggregators (payment platforms which facilitate online payment transactions by aggregating payments from customers for the merchants).

The PSS Act does not designate a court-based forum where litigants can pursue claims arising from its breach. The PSS Act does, however, authorise the RBI to oversee compliance through the power to audit, inspect, and summon documents/evidence. The RBI is also authorised to pass directions against (i) entities operating or participating in a payment system or (ii) any entity relating to the conduct of business of a payment system. The RBI also has the power to impose penalties in the case of contravention of the PSS Act. Lastly, the RBI has set up a dispute resolution mechanism (the Integrated Ombudsman Scheme) to look at consumer-facing disputes.

Despite the RBI’s powers to ensure compliance of the PSS Act and the regulations made under it, parties generally do not pursue remedies with the RBI. The judgment highlights that a party asserting violations of the PSS Act ought to approach the RBI and not civil courts. The judgment should dissuade litigants from filing civil suits when an authority has been established to oversee and enforce special laws such as the PSS Act and the Competition Act.

The judgment recognised that all allegations and concerns relating to abuse of dominance fall within the jurisdiction of the CCI. The judgment notes that the App developers had pursued actions before the CCI, which alone was competent to look into such allegations of unconscionability of bargain and abuse of dominant position. The express bar of civil courts’ jurisdiction under the Competition Act not only needs to be respected but is also not diluted by the fact that the Competition Act is in addition to and not in derogation of other laws. Accordingly, any action which falls within the competition domain will necessarily fall outside the domain of Indian civil courts.

The App developers have challenged the judgment before the Supreme Court. The judgment is unlikely to be the last word on this issue; this is an evolving area with increasing numbers of sectoral regulators being set up with comprehensive powers and extensive jurisdiction. Jurisdiction over issues overseen by such regulators is a question Indian courts will surely have to confront again.

NB: The authors are representing Google in this dispute with the App developers.