Competition Regulation of Apple’s App Store in India: The Relevant Market Conundrum

Recently a complaint was filed before the Competition Commission of India (CCI) alleging that Apple forces developers on Apple’s App Store to use its in-app payment system and charges an exorbitant 30% commission on all in-app purchases. Such policies allegedly have several anti-competitive effects, including foreclosure of competition, increased prices, and decreased innovation. This post looks at the first step of the assessment of Apple’s App Store’s policies’ compliance with competition law, namely, the delineation of the ‘relevant market,’ as this concept is used in competition law to identify and define the boundaries of competition between firms. The post argues that the success of the CCI’s attempts to define a relevant market for Apple’s App Store in a manner that is both coherent and compatible with the CCI’s previous decisions remains doubtful.        

In 2020, the CCI initiated an investigation against Google’s Play Store for the imposition of similar policies. The CCI prima facie found that Google was dominant in the primary relevant market for ‘licensable smart mobile device operating systems’ and the secondary relevant market for ‘app stores for android mobile operating systems’. These findings on relevant market and dominance were based on the CCI’s decision in Umar Javeed v Google. Given Google’s dominance, the CCI found the imposition of its in-app payment system and 30% commission to be an abuse of dominance. Although both Google Play Store and Umar Javeed were merely prima facie orders and might not constitute stare decisis, the CCI will still have to consider and reconcile these previous decisions with its Apple’s App Store order in line with principles of fairness and non-arbitrariness, especially since these decisions pertain to similar conduct and markets. Notably, Android and iOS differ in material ways and these differences reveal that when a similar relevant market delineation exercise is undertaken for Apple as for Android, the Google Play Store order proves to be a hindrance rather than a help.

Regarding the primary relevant market pertaining to smart mobile operating systems, Apple’s proprietary operating system iOS, unlike Android’s operating system, is non-licensable. Therefore, the relevant market for ‘licensable’ smart mobile operating systems as defined in the Google Play Store order cannot be directly used. Could Apple’s market power then be considered as exercised within the  relevant market for ‘non-licensable’ mobile operating systems or as a single-brand relevant market of iOS? Interestingly, the California District Court’s recent order in Epic v Apple, while considering similar allegations against Apple’s App Store, rejected the argument that iOS is a relevant market in itself. The Court noted that something that can neither be sold nor licensed to anybody cannot be treated as a relevant market. This idea is not only analytically persuasive but also has statutory backing in India. Section 2(t) of the Competition Act of 2002 defines a relevant product market as consisting of those products or services which are regarded as interchangeable or substitutable by the consumer.

It is worth examining whether questions of substitutability could arise for products or services which can neither be sold nor licensed and, if a substitutability analysis were indeed redundant in such cases, then arguably a relevant market definition along these lines is unjustifiable. From the perspective of the original equipment manufacturers, non-licensable mobile operating systems (such as iOS and the Blackberry operating system) remain unavailable and, therefore, there is no market for them. Similarly, from the perspective of the end-consumer, the substitutability analysis occurs at the vertically-integrated level of smartphones and not at the level of individual mobile operating systems. Hence, extrapolating the Google Play Store and Umar Javeed orders to define the relevant market for iOS as non-licensable mobile operating systems would be untenable.  

The relevant market for iOS might then have to be defined even more narrowly for a single-brand consisting of only iOS. This narrower relevant market definition also consists of non-licensable products or services and continues to remain potentially indefensible for the reasons discussed above. Additionally, the CCI, in Sonam Sharma v. Apple Inc. (here again in the context of iPhones) observed that single-brand relevant markets are rarely tenable and relevant markets generally cannot be limited to a single manufacturer’s products.

The Court, in the Epic case, avoided these problems of relevant market definition by situating its analysis in the interaction between the plaintiff (Epic, a gaming company) and Apple’s App Store and, accordingly, defining the relevant market as that of ‘mobile gaming transactions’. However, in light of the CCI’s relevant market definitions in Google Play Store and Umar Javeed, it would seem arbitrary and inconsistent for the CCI to suddenly break away from this analysis and define the relevant market from a different vantage point, i.e. based on the interaction between developers and app stores. Moreover, unlike Epic where the identity of the plaintiff as a gaming company made it easier to define the relevant market on the basis of their interactions, the complaint before the CCI against Apple has been brought by an NGO, whereas the one against Google’s Play Store has been brought by an anonymous informant. Both these complaints relate broadly to the interaction between app stores and all developers and not just a subset of developers. Hence, defining the relevant market broadly to cover all interactions or transactions between a diverse group of developers and the concerned app store would be challenging and potentially ineffectual.    

 The CCI is not alone in struggling to define a relevant market for app stores. The European Commission has also defined the relevant market for Android as that of ‘licensable mobile operating systems,’ and the relevant market for Google’s Play Store as ‘Android app store’ in the Google Android order. The European Commission is now investigating Apple’s App Store and will potentially find itself facing a similar dilemma. However, the European Commission’s situation is still prone to adaptations, as the Google Android order did not define these relevant markets in the context of Google’s Play Store policies vis-à-vis developers but in relation to Google requiring manufacturers to pre-install Google’s search engine and Google Chrome as a precondition for licensing Google’s Play Store. Hence, the European Commission’s investigation of Apple’s App Store could still distinguish itself from the Google Android case, on the basis that the conduct under investigation is different (ie relates to policies about developers), and thereby redefine the relevant market. Either way, the approach adopted by the European Commission in its Apple’s App Store investigation will be informative for the CCI.

The CCI thus finds itself caught between a rock and a hard place. While previous decisions in Google Play Store and Umar Javeed might propel it to define the relevant market as that of non-licensable smart mobile operating systems or as a single-brand market of iOS, such a relevant market definition risks being (in the words of the Court in Epic) ‘artificial’ and ‘illogical’, and also legally untenable. At the same time, deviating from the factually similar Google Play Store order and defining the relevant market differently (for instance, by adopting an interactions-based definition like in Epic) would not only seem inconsistent and arbitrary, but also ineffectual. The potential issues in defining the relevant market for Apple’s App Store could result in a peculiar scenario where similar policies of different app stores are subject to dissimilar regulations. Since the Google Play Store order is merely a prima facie order and Apple’s App Store complaint is still at a preliminary stage, it will be interesting to see if the CCI, in its final orders for each of these two cases, manages to avoid this conundrum and to define the relevant market for their app stores in a way that is coherent and consistent.

Madhavi Singh is a Research Fellow at the Law, Technology and Society Initiative of the National Law School of India University, Bangalore.