India’s competition watchdog has ordered an in-depth investigation into the tight links between Google’s mobile app store and its payment service, after an initial review found that the internet company was unfairly squeezing out competitors.

The Competition Commission of India said it had reached a “prima facie” view that requiring the use of Google Pay to buy apps or make in-app payments in the mobile Play store was an “imposition of unfair and discriminatory condition, denial of market access for competing apps of Google Pay and leveraging on the part of Google.”

The 60-day investigation will take aim at one of Google’s most promising businesses in India, where it is in a pitched battle with rival payment apps, including one from Walmart. A week ago, Facebook won long-delayed approval to launch a payments service through WhatsApp in India, as local and international players scramble for an early lead.

In comments to the regulators in India, Google denied it was taking advantage of any market dominance through its Android operating system and Play store.

Google on Monday also said it was “confident that the CCI will find that Pay operates in an extremely competitive environment, and owes its success to its ability to offer consumers a simple and secure payments experience”.

The in-depth investigation follows an anonymous complaint to the regulators claiming that the US company unfairly forces developers to use its in-house payments system, leading to “arbitrary and onerous” fees of 30 per cent.

The Play store allows other payment methods in India, such as credit cards and internet banking services. But the regulators concluded that the tight integration between the Google payment app and the UPI system, which allows real-time transfers between bank accounts in India, gave it an unfair advantage.

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Google has been facing persistent complaints from app developers in India over its Play store rules, echoing the backlash in some other countries against Apple over its similar App Store provisions. The latest flare-up came early last month, after Google moved to impose uniform rules globally to levy its 30 per cent fee on apps. It later said it was delaying the introduction of the fee in the country until next April to give developers more time.

Google claimed it was not using a dominant market position to promote its payment service in India. Although its Android operating system is installed on more than 90 per cent of smartphones in the country, the company said it faced plenty of competition from feature phones in India. It also claimed Android users had alternatives to the Play store, with 40 per cent of apps in India installed through side-loading or other means.

Google also said the UPI system has interoperability requirements that let rival apps connect to Google Pay, meaning that they can also be used to make purchases in the Play store. But the CCI said the way it had integrated with the banking system had given the internet company’s own app an unfair advantage in terms of user experience.

The CCI rejected parts of the complaint, including claims that Google was using its search engine and search advertising to get a leg-up in payments. But it supported a closer review of the company’s contracts with handset makers to see if it was using these to force the pre-installation of the app.

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Via Financial Times