The story so far: On March 1, Google announced that it was pulling the apps of almost a dozen firms out of its marketplace for Android apps. While the announcement seemed sudden, it was preceded by years of wrangling between the search giant and Indian companies, with proceedings in the Madras High Court and the Supreme Court. After the Ministry of Electronics and Information Technology intervened, the apps were restored on Monday, but the issue remains unresolved.
What is the problem?
At the heart of the issue is Google’s platform fees. For all in-app purchases that involve a purely digital service — such as an ebook purchase or an OTT streaming subscription — Google collects a fee of anywhere between 11 to 30% per transaction. This fee, Google argues, helps the company pay for Google Play and develop the Android ecosystem. The exact fee paid by each developer varies. If a developer is using Google’s own billing product, and is offering a recurring subscription service, or if they make less than $1 million a year in revenue from in-app payments, the company charges 15%. For app purchases for bigger firms, the amount is 30%. In India and South Korea, where regulatory scrutiny on these fees has been among the most intense, Google collects 11% or 26% in fees if developers choose to use a different payment method. However, Indian developers — like many global counterparts — see these fees as a high price to pay. Some, including Bharat Matrimony and Disney+ Hotstar, approached the courts at different stages to avoid paying the fee altogether.
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“While Google should definitely be able to charge a fee for creating and maintaining the app store ecosystem, the main contention is the size of the fee,” Rohit Kumar, founder of the public policy firm The Quantum Hub explained.
What about other marketplaces?
Apple has not faced similar pushback in India, as relatively fewer Indians use its products. Android, however, dominates the smartphone market, and Google Play is widely seen as the best bet for developers who want to be discovered by consumers. However, both Apple and Google have faced serious international resistance to these fees, and both firms have pushed back strongly against developers’ resistance. The music streaming firm Spotify filed a complaint with the European Commission, after Apple stopped Spotify from telling its users how to pay for its service using a browser to avoid the App Store’s fees. Additionally, Spotify said this was anti-competitive because Apple Music was not subjected to the 30% barrier that was erected for Spotify. Following the complaint, Apple was hit with a €1.84 billion fine by the European Commission, which ruled that it had fined the company over unfair trading conditions. Similarly, in the U.S., Epic Games, the developer of the popular Fortnite franchise, sued Apple as well as Google over the 30% fee.
Unlike Apple, Google allows third party app stores around the world, something that gives app developers a little more leeway in avoiding these fees. But Google Play comes installed by default on most Android phones.
How have regulators responded?
The Competition Commission of India (CCI) had in 2022 fined Google ₹936.44 crore for its Play Store policies. The company is in the process of appealing that fine, as well as orders by the CCI that it give developers comprehensive choices for in-payments. An appeal by Google against this fine is pending at the National Company Law Appellate Tribunal. Meanwhile, the Indian apps that went to the Court are back on the platform for now. In-app payments are not yet a major part of the digital economy in India, as purely digital services for which Indian consumers have been willing to pay have been limited to content streaming, dating and matrimonial services — the very segment that is largely up in arms against Google’s fees. “What we really need is regulation to increase competition in the app store market,” Mr. Kumar said. “This should involve removing barriers to the adoption of other app stores (by placing restrictions on arrangements that Google makes with phone manufactures to set defaults and give primacy to its own apps) and allowing sideloading (for apps to be downloaded via websites).”
- After the Ministry of Electronics and Information Technology intervened, the apps were restored on Monday, but the issue remains unresolved.
- Apple has not faced similar pushback in India, as relatively fewer Indians use its products. Android, however, dominates the smartphone market, and Google Play is widely seen as the best bet for developers who want to be discovered by consumers.
- The Competition Commission of India (CCI) had in 2022 fined Google ₹936.44 crore for its Play Store policies.
