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Legislation – need of the hour for a conducive digital economy
Developers must have the choice to use payment gateways of their choice.
All developers selling digital goods and services in their apps are required to use Google Play’s billing system – and pay 15-30% on each transaction. Come June 1, 2022, any app that is not compliant will be removed from Google Play. For Indian app developers, the timeline for this take-it-or-leave-it policy is October 31.
App review processes in the stores have been criticized for being opaque and apps are rejected or removed without clarity of reasons. PayTM was removed from Google Play similarly in 2020.
Both Google and Apple’s app stores have anti-steering provisions which prohibit developers from using any other payment system except the one provided by the app stores. Developers also cannot direct users to other payment methods from within the app, except for some categories. Due to this, developers cannot avoid commissions of up to 30%.
Because app stores bundle a variety of services like developer tools, payment gateway, app discovery etc., it is difficult to distinguish the fair fee for each service. They also charge separately for advertisements.
CCI is currently investigating Google and Apple for abuse of market power.
Why we need to take action now
Indian developers – through their vocal opposition and with ADIF’s support – have been able to buy some time. But after October 31, the 15-30% commission will become unavoidable for them and they will be forced to use only Google’s billing system. The payments policy would dent Indian developers’ profit margins, affecting both business viability and innovation. Indian payment gateways will lose business.
Apps will be forced to raise prices which could lead to reduced demand from users. Many Indian companies will not be able to pay the hefty commissions. The Indian startup ecosystem will face significant losses in revenue and might be forced to leave the market, impacting the vision of an Atma Nirbhar Indian startup ecosystem.
Global Opposition to monopolistic, arbitrary and unreasonable practices of app stores:
South Korea: In August 2021, South Korea passed a law barring app stores from forcing developers to use the app stores’ proprietary billing system, becoming the first major legislation worldwide to impact app store policies.
Netherlands: In December 2021, the Netherlands competition regulator (ACM) found Apple’s App Store in violation of its competition laws. It levied a series of weekly penalties totalling €45 million.
Italy: The country’s competition authority imposed fines of €10 million each on Apple and Google for resorting to “aggressive methods” in the commercial use of user data.
US & European Union: The proposed US’s Open App Markets Act and EU’s Digital Markets Act will impose similar curbs and monetary penalties.
India: CCI is investigating Google and Apple for abuse of market power.
Next steps: What kind of regulation/action is needed:
Disallowing app stores from imposing only specific methods of payment on app developers. Developers must have the choice to use payment gateways of their choice.
Review process must be made transparent, and app stores must be barred from delaying review or removing apps without giving proper notice, or reasons for the same.
App store operators must be barred from preferencing their own apps above those of competitors on the app stores. App stores should treat own apps at par with those of competitors in search and ranking algorithms.
Strict monetary penalties must be imposed on app stores for violation of the legislation (In Netherlands, the competition authority has been fining Apple around 5 million Euros per week, but Apple has seemingly chosen to pay the fine, over complying. This suggests that strict penalty provisions will need to be instituted to ensure compliance from Apple/Google).
This article also appeared in the Times of India.