Breaking down ADIF's petition to the CCI against Google.
Google has a lot of bargaining power, and bringing in a mandatory policy of only having one type of billing system would have huge repercussions.
On October 11, 2021, the Alliance of Digital India Foundation (ADIF) filed a petition before the Competition Commission of India (CCI) seeking interim relief from Google’s new PlayStore policy which goes into effect from March 2022.
Here we break down Google’s contentious policy, the ongoing investigation, and ADIF’s grounds for seeking interim relief.
What is Google’s new policy?
Google plans to take a 30% commission – 15% in certain cases – from app developers on all app purchases and in-app purchases by users. The company has also made it mandatory to use only Google’s own billing system.
Google is planning to mandatorily enforce this policy across multiple industries and categories like gaming apps, dating apps, OTT platforms, health and fitness apps, ed tech apps and communication apps from March 2022.
The Google Play Billing system charges a 30% commission on every transaction on Google Play Store compared to 2% charged by other payment processing systems.
Why is Google’s new policy problematic?
At present, Google has a lot of bargaining power since more than 70% of global smartphone users have Android OS installed on their phones. This ensures that Google Play Store reaches out to about 4.4 billion people globally.
In the Indian context, Android has about 95% market share. This ensures that Google Play Store is pre-installed in about 95% of the mobile devices in the country.
In this kind of a scenario, bringing in a mandatory policy of only having one type of billing system would have huge repercussions.
What is the ongoing investigation?
In November 2020, the CCI ordered a probe into Google following a complaint (XYZ v. Alphabet Inc. and Others) alleging that the Big Tech firm – through its control over the Play Store and the Android operating system (OS) – favours Google Pay over its competing apps. This, the complaint claimed, amounts to abuse of its dominant position.
Based on the complaint, the commission made certain observations in its prima facie order which are crucial to ADIF’s application:
On the mandatory use of Google’s payment system for paid apps & in-app purchases.
(This) restricts the choice available to the app developers to select a payment processing system of their choice especially considering when Google charges a commission of 30% (15% in certain cases) for all app purchases and IAPs.
On Google’s dominant position in the market for app stores for Android.
considering that Play is the dominant source of downloading apps in the Android OS (90% of the downloads) and its condition requiring use of application store’s payment system for paid apps & in-app purchases, it appears that Google controls the significant volume of payments processed in this market.
On Google’s fee affecting its competitors.
Such a policy of the application store may disadvantage its competitors in the downstream markets, such as music streaming, e-books/ audiobooks etc.
What does the ADIF petition state?
In its petition to the commission, ADIF has stated that the 30% commission charged by Google is extremely high and unfair. However, the core issue is the mandatory imposition of the Google Play Billing system and the exclusion of other methods of payment.
This has the disastrous effects of reducing choice in the hands of app developers and users as well as harming innovation by disrupting the cost structures and margins of multiple industries.
Why is ADIF asking for interim relief?
ADIF believes that if the status quo is not maintained pending the completion of the inquiry, Google will enforce its terms on the Play Store in March 2022. This would lead to adverse and irreversible consequences on India’s fledgling startup ecosystem.
The various stakeholders that would get adversely affected by Google’s new policy app developers, payment processors as well as the consumers.
Impact on app developers
The app developers would be restricted in their approach of giving multiple payment options to the consumers or select a payment method that helps them in sustaining their business and meeting margins.
Impact on payment processors
The payment processors would lose out on a major chunk of transactions since virtually all the digital services being offered by apps would only have GPB as the mode of payment.
Impact on consumers
The consumers would not have the choice of selecting their preferred mode of payment and would have to deal with higher prices of digital products and services since the app developers would need to increase prices charged to the users due to the commission or service fee being charged by Google.
ADIF is fighting against Google’s monopoly and for fair markets. You can help by joining the alliance: bit.ly/joinadif