Google’s Play Store policy of charging 30 percent commission is “extremely high and unfair”, the Alliance of Digital India Foundation (ADIF) asserted in a petition filed before the Competition Commission of India (CCI). The petition seeks interim relief from the new policy which will come into effect from March 2022.
The key issues in ADIF’s petition are the mandatory imposition of the Google Play Billing system on app developers while excluding other methods of payment which charge only two percent in commission.
“This will have a disastrous effect on India’s digital ecosystem by reducing choices available in the hands of app developers and users as well as harming the country’s innovation ecosystem by disrupting the cost structures and margins of multiple industries,” ADIF said in a statement.
The interim relief, if granted, could hinder Google’s rollout of its new Play Store policy in March next year and increase pressure on Google to reconsider its Play Store policies.
Google’s new policy, in brief
Google said that it will enforce its billing system on all apps downloaded from the Play Store, in a bid to collect a 30 percent commission from all in-app purchases made from Play store apps, according to its blog post.
The company had set January 20, 2021, as the deadline after which new apps had to use Google’s billing system. Existing apps, however, were given time till September 30, 2021, to comply with the changes but the deadline was extended again to March 31, 2022.
Google will also prohibit apps that support in-app purchases. Developers can no longer use in-app browsers or other such interfaces to lead customers to an external website, thereby bypassing Google’s payment system. In-app promotions that point users to better deals outside the app will also not be allowed.
Why did ADIF file the petition?
The organisation said that its hand was forced in order to “protect the choice of app developers to use other payment systems with far more favourable terms of service” as the new policy restricts certain categories of apps to use only Google Billing System (GBS) for accepting payments.
“…the policy make business models of a large number of start-ups infeasible,” ADIF said in a blog post detailing its petition.
“ADIF foresees that barring an order passed by CCI to maintain status-quo until the completion of the ongoing inquiry, Google shall proceed to enforce its terms on the Play Store,” said Sijo Kuruvilla George, Executive Director, Alliance of Digital India Foundation.
The petition then goes on to elaborate the impact of this new policy on various stakeholders:
Payment processors: The new Play Store policy will see payment processors lose a major chunk of transactions because all the digital services being offered by apps would only have GPB virtually as the mode of payment.
Consumers: It will restrict the options of modes of payment at the disposal of consumers and inflate the prices of digital products and services given that app developers would need to increase prices charged to the users due to the commission or service fee being charged by Google.
“…it is about the anti-competitive practice of forcing a payment option as well as of forcing out other payment providers. If not kept in check, such anti-competitive policies and gatekeeper commissions will be imposed on more and more categories,” said Murugavel Janakiraman, Founder and CEO, Matrimony.com.
Details of CCI’s investigation into Google’s payment policies
The petition draws heavily from CCI’s observations that there was prima facie evidence that Google may be abusing its dominant position in India, with regards to Play Store’s exclusivity and Google Pay (GPay) services. CCI launched an investigation in November 2020. The probe will look at the following aspects of Google’s practices:
- High commissions
- Exclusivity regarding the choice of payment systems for app purchases
- Preference to Google Pay for payments
- Advantage gained from data collection
Past antitrust infractions
This was not the first time Google had run afoul of CCI. In April 2019, CCI, in its 14-page order, said that Google had misused its dominant position in India by making it harder for phone makers to choose alternative versions of Android. Android currently powers 96 percent of India’s smartphones).
The CCI’s order found that Google’s restrictions on manufacturers seemed to amount to the imposition of “unfair conditions” under India’s competition law, and called for a thorough probe. The CCI began looking into the complaint against Google in 2018 and decided to launch a full investigation in April 2019, after finding that there was merit in accusations that Google abused its dominant position to hamper competition.
Precedent set by South Korea
South Korea’s National Assembly passed a first-of-its-kind bill this year in August forcing Google and Apple to open their app stores to alternative payment systems. South Korea was compelled to introduce this law after the new policy update was announced by Google in September, 2020. The law, which amends South Korea’s Telecommunications Business Act, stipulates the following:
- Use of alternate payment systems: The law prevents companies that run app stores from forcing developers to use the store’s in-app payment systems.
- No unusual delay in approval or inappropriate deletions of apps: The new law says that companies that run app stores cannot unreasonably delay the approval of apps or inappropriately delete them from the store. This may have been put in place to prevent companies from taking retaliatory measures when developers choose to use alternate in-app payment systems.
- Penalties for failure to comply: The law says that companies that fail to comply with these new rules could be fined up to 3 percent of their revenue earned in South Korea.
The country then fined Google 207.4 billion won ($177 million) in September 2021 for using its dominance to hinder the development of rivals to its Android operating system.
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