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Written by Maria Therese Syriac, Legal intern, and verified by Sunil Jose, Managing Attorney, Suns Legal.

A landmark ruling addressing the Competition Commission’s adjudicatory powers and Google’s compliance with digital payment regulations. 

Introduction

The digital world thrives on innovation, but it also requires fairness and choice to flourish. Imagine being able to decide how you pay for your favorite app or service, rather than being locked into a single payment method. This is the essence of Google’s User Choice Billing System. Designed to empower both app developers and users, this system allows apps distributed through the Google Play Store to offer alternative billing methods alongside Google’s own payment system. By doing so, it brings more flexibility, transparency, and competition to the digital marketplace.

The case of Alliance of Digital India Foundation vs Competition Commission of India & Ors.  (2023:DHC:2720) is relevant in the discourse surrounding digital rights and governance in India. The judgment investigates the intersection of technology, individual freedoms, and state regulation, addressing concerns about the balance between innovation and oversight. 

Background

This case, brought forth by the Alliance of Digital India Foundation (ADIF), highlights the growing tensions between the digital economy’s stakeholders and regulatory authorities. The Delhi High Court recently addressed an important question about the authority of Competition Commission of India (CCI) in this case brought by the Alliance of Digital India Foundation (ADIF). The case emerged from ongoing tensions between Google and Indian digital startups over payment systems, specifically challenging Google’s implementation of its User Choice Billing (UCB) System and the CCI’s ability to address non-compliance issues while operating with only two members instead of the mandated three.

At the heart of this case lay two critical issues: the CCI’s constitutional ability to function with just two members, and Google’s alleged non-compliance with previous CCI directives regarding its payment systems. ADIF sought the court’s intervention to ensure timely adjudication of their concerns about Google’s UCB system, which they claimed was essentially a cosmetic change to the original commission system previously found discriminatory by the CCI.

Legal Issues and Analysis

The case centered on two fundamental questions. Firstly, whether the CCI could legally continue its adjudicatory functions with only two members. Secondly, the applicability of the doctrine of necessity in addressing Google’s alleged non-compliance with previous CCI orders.

Justice Tushar Rao Gedela determined that Section 15 of the Competition Act serves as a saving clause, ensuring that vacancies or constitutional defects do not invalidate the CCI’s proceedings. The court interpreted Section 15 of the Competition Act to mean that any adjudicatory processes by the Competition Commission of India (CCI) remain valid even if there are vacancies or defects in its constitution. This is because the law uses the word “or,” which should be read disjunctively, ensuring that such issues do not impede the CCI’s adjudicatory functions. The intention of the Legislature is to ensure that the CCI retains its jurisdiction and can fulfil the objectives of the Act without being hindered by structural problems. Any other interpretation would undermine the purpose of the section.

The court examined the applicability of the doctrine of necessity, a legal principle that allows a potentially biased adjudicator to hear a case if no other qualified person or tribunal is available. 

Citing J. Mohapatra and Co. v. State of Orissa (1984 AIR 1572), the court clarified that this doctrine applies only in certain situations:

• An adjudicator is disqualified due to bias or interest in the matter
• No other competent person is authorized to adjudicate
• A quorum cannot be formed without the biased member
• No alternative tribunal can be constituted

The court explicitly distinguished between situations involving bias (where the doctrine might apply) and the present case of mere numerical deficiency in membership. Since the current case involved a straightforward quorum issue rather than bias, the court held that the doctrine of necessity was not applicable. Instead, the CCI’s authority to function stemmed directly from Section 15 of the Competition Act.

The court examined ADIF’s allegations that Google’s User Choice Billing (UCB) System effectively circumvented the CCI’s previous orders. The petitioners had argued that Google’s new system was essentially a “sham” that hadn’t materially altered the original commission system previously found discriminatory. The court recognized the urgency of addressing these compliance concerns, particularly given Google’s dominant position in the Android ecosystem.

Implications for Digital Governance

The judgment ensures that regulatory oversight of digital markets continues even when regulatory bodies face structural challenges. The ruling reinforces the importance of timely adjudication in matters affecting digital marketplace competition and consumer choice. It provides clarity on the operational legitimacy of regulatory bodies facing temporary structural limitations.

The Way Forward

The court directed the CCI to hear ADIF’s applications under Section 42 of the Competition Act by April 26, 2023, establishing a clear timeline for addressing the concerns about Google’s UCB system. This directive ensures that despite organizational challenges, the CCI must continue its vital role in maintaining fair competition in India’s digital marketplace.

This judgment maintains regulatory oversight over tech giants’ payment systems and protects the interests of smaller digital businesses and startups. It ensures continuity in competition law enforcement. It also establishes precedent for handling similar institutional challenges in other regulatory bodies

The Delhi High Court’s ruling in the ADIF is an approach to maintaining regulatory oversight while ensuring institutional legitimacy. By affirming the CCI’s authority to continue its adjudicatory functions despite reduced membership, the court has helped maintain the stability of India’s digital marketplace regulation. This judgment stands as a precedent for addressing similar challenges in regulatory bodies while ensuring their effective functioning in service of public interest.