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Google slashes Play Store commissions for apps in certain categories

While the move is welcome, Google has offered no relief to gaming apps which contribute to the bulk of Play Store revenues.

Amidst mounting regulatory pressure, Google announced changes to its Play Store policy that reduces commissions for certain categories of apps:

  • Commissions on subscriptions reduced to 15 percent: Apps that offer subscriptions will only have to pay a 15 percent commission from January 2022. Currently, Google charges 30 percent for the first year of a recurring subscription and then reduces it to 15 percent for subsequent years. “For developers offering subscriptions, this means that first-year subscription fees will be cut in half,” Google said. The company explained that this change was made “after learning from and listening to developers across many industries and regions, including developers like Anghami, AWA, Bumble, Calm, Duolingo, KADOKAWA, KKBOX, PicsArt.” CEOs of Bumble and Duolingo both welcomed the reduction in fees saying it will allow them to better invest in growing their services.
  • Commissions on ebook and music streaming services reduced to 10 percent for eligible apps: Earlier this year, Google launched the Play Media Experience program that reduced commissions to 15 percent for eligible video and music streaming services and ebooks. Google is now making ebooks and music streaming services eligible for a service fee as low as 10 percent, the company said. “The new rates recognize industry economics of media content verticals and make Google Play work better for developers and the communities of artists, musicians and authors they represent,” the company stated. However, to avail this lower rate, apps will have to meet certain eligibility standards such as enabling integrating with WearOS and Google Cast platforms.

This is the second major change to commissions that Google has made this year. In March, Google announced that it will charge developers 15 percent for the first $1 million they earn in revenue in a year instead of the standard 30 percent. Google claims that 99% of developers qualify for this reduced rate.

Despite these concessions, the fact is that Google earns the bulk of its revenue from a small number of gaming apps and so far there is nothing that the company has announced that will offer relief to game developers. In its announcement today, Google reiterated the need for a service fee saying it allows the company “to continually invest in Android and Play while making them available for free to device makers all over the world.”

Google’s commissions in the spotlight in India

In September 2020, Google notified that it will enforce its billing system on all apps downloaded from the Play Store for in-app purchases. This meant that all in-app purchases will be subject to the 30 percent commission charged by the company. Although not a new policy per se, certain apps were able to get away with not paying commission to Google by using their own billing system. Google’s policy update indicated that this will no longer be tolerated.

Google’s announcement kicked up a storm in India as many start-ups and developers objected to the high rate of commission. Bowing to pressure, Google deferred the enforcement of its billing system policy to March 2022. Notwithstanding this, start-ups approached the Competition Commission of India (CCI), which ordered a detailed investigation into the Play Store last November.

In launching its investigation, the CCI said 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 services. It ordered an investigation into the following aspects of Google’s practices:

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  • High commissions 
  • Exclusivity regarding the choice of payment systems for app purchases
  • Preference to Google Pay for payments
  • The advantage gained from data collection

Earlier in October, the Alliance of Digital India Foundation (ADIF), filed a petition with CCI seeking interim relief from Google’s billing system mandate until the antitrust watchdog’s investigation is complete.

Separately, CCI is also reviewing an antitrust complaint filed against Apple App Store in September.

Regulatory challenges to app stores around the world

South Korea: A South Korean law passed in August requires app stores to allow alternative in-app purchase mechanisms allowing developers to use their own billing system and avoid paying Google’s or Apple’s service fees.

Apple Settlement to lawsuit (US): Apple on August 27 proposed a number of changes to its App Store policy and agreed to pay $100 million in a bid to settle a 2019 class-action lawsuit filed by US app developers. The biggest concession is that developers can now let users know about payment methods available outside the in-app billing system through external communications like e-mail. But critics have argued that this doesn’t go far enough because in-app notifications and redirections to alternate payment systems are still banned.

Japan: Earlier in September Apple made a concession to settle an investigation by Japan’s Fair Trade Commission into the Apple App Store. The concession allows developers of “reader apps” like Netflix and Spotify to include an in-app link to their website for users to set up or manage an account.

Epic lawsuit: Epic Games, maker of the popular Fortnite game, filed lawsuits against both Apple and Google in August 2020 alleging that the two companies are engaging in anti-competitive practices in their respective markets for distribution of apps and in-app payment processing. While a verdict has been reached in the Epic vs Apple case, both the companies have appealed it. Meanwhile, the hearing is yet to begin in Epic vs Google case, but Google recently filed a counterlawsuit.

Netherlands: The Dutch antitrust authority has found that Apple’s rules requiring app developers to use its own payment system are anti-competitive. While the Netherlands’ Authority for Consumers and Markets has not fined Apple, it has demanded changes in the company’s in-app payment policies.

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China: China’s Supreme Court in September dismissed Apple’s plea and ruled that an antitrust lawsuit filed by a consumer against the company’s China entity can proceed. In its plea, Apple had argued that the lawsuit should not be allowed because its China entity does not deal with App Store operations. The court, however, said that Apple had potentially abused its market position and undermined competition, and hence the case can be heard.

US proposed bill: On August 11, US lawmakers introduced a new bill titled Open App Markets Act that proposes:

  • Operating systems must allow third-party app stores
  • Developers must be allowed to choose their choice of in-app payment system
  • Pricing for various app stores or in-app payment systems can be determined by developers
  • Developers can freely communicate pricing offers with users
  • Google and Apple cannot use non-public data to build competing apps
  • No self-preferencing in app stores
  • Third-party developers must be provided with the same access to developer tools

EU and UK: The European Union has launched an investigation into Apple App Store following a complaint from Spotify and the United Kingdom has launched a broad investigation into Google’s and Apple’s effective duopoly over the supply of operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome). Both investigations are ongoing.

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