What South Korea’s decision to limit Apple and Google control over app store payments means for India
This legislation has opened the way for app developers to themselves choose their payment option as well as for other payment providers to compete in the app economy.
Over the last few years, startups and developers from around the world have been challenging Apple and Google over its app store policies. Epic Games, the developer of the popular game Fortnite, was the trailblazer who fired the first salvo with its anti-trust lawsuits in the US. The trigger: Epic being kicked out by Apple from their AppStore.
The India edition of the battle started with two independent but back-to-back actions by Google: the company’s decision to remove Paytm from its Playstore and the announcement to enforce its own billing system on developers. Following this, founders and developers in India were up in arms, knocking on the doors of the government to intervene.
The Competition Commission of India (CCI), at the time, found prima facie merit in the claim that Google was indulging in anti-competitive practises on its Playstore. The CCI also started an investigation into the matter.
While the CCI verdict is still awaited, the South Korean Assembly recently went on to enact groundbreaking legislation, one that bars app marketplace operators like Google and Apple from forcing developers to use their in-app payment systems.
This legislation has opened the way for app developers to themselves choose their payment option as well as for other payment providers to compete in the app economy. The bill also contains provisions for authorities to intervene in the case of any disputes, prevent retaliation or any actions that undermine fair competition.
The Heart of the Matter
At the heart of the disputes is the practice being adopted by both Apple and Google, whereby any and every app developer that sells digital goods on their stores is mandated to use only their in-app payment systems. On top of that, they have to pay a 30% fee, charged as commission on every digital good sale transaction that occurs on the app.
This policy and practice were challenged as being anti-competitive, one that ran foul of fair competition laws. The major violations were on two counts: first, that Google and Apple were forcing their own billing option on developers – thereby forcing out other payment companies from competing in the app economy and denying choice of payment processor to app developers, and second, that the two giants were unilaterally and arbitrarily charging a 30% commission for every dollar earned by developers through their apps.
The only payment option being extended, forced rather, was their own proprietary in-app purchasing system. On top of that, a 30% royalty tax is charged as commission on every transaction and dollar earned via their mobile apps. It didn’t matter whether the store even played a role in enabling discovery or that other payment providers were charging as low as 1-2% fee.
Developers who attempted to integrate an alternate payment method, or did as much as to communicate to their own customers the option of alternate payment methods, risked being kicked out of the store and losing their business.
A Welcome Development and Way Forward
The South Korean legislation sets the precedent of law, which can act as a guiding point for Indian regulators as well as for other countries and markets. The fact that it was a near-unanimous decision – with 180 of the 188 members voting in favour – makes it all the more significant.
Until now, the conversation was limited to advocacy – bringing attention to the policies of Apple and Google and how they affect large segments of app store beneficiaries. It has now sharply shifted towards legislation.
The issue has never really been about the 30% figure, but rather the arbitrary and high-handed manner in which rules were being enforced by both Apple and Google in the name of “policies”. Viewed from this perspective, nearly every notable app developer has been at the receiving end of their gatekeeper approach. This is also why enabling legislation is needed – to pave the way for fairer markets, fairer distribution of power and better enforcement of rights.
The need for legislation is all the more pertinent in India, given that we do not have strong anti-trust laws, and without enabling legislation, it would be near impossible for companies to pick up a battle with either of the Big Tech companies. Any legislative action will also force Apple and Google to adopt fairer policies.
Our work at ADIF was also focused on raising awareness around the issue and bringing the voice of the developers and startups to the policymakers. We will now look to re-engage the government on the matter and advocate for similar legislation in India as well.
This op-ed has also appeared in VC World.
Among the issues ADIF is working on, we are fighting Google and Apple on their app store monopolies.
The Alliance is now 450+ members strong. Join the Alliance of Digital India to become a part of our journey to transform India’s startup ecosystem into the best in the world.