Apple Fined by EU; Google is Fine in India

Barely hours after the world woke up to a $2 billion penalty imposed on Apple by the European Union, Google turned on its tracks and restored apps owned by several Indian companies, but with a caveat that they should still pay up across extended timelines. If so, where does it put the ruling by India’s antitrust regulator back in October on third-party payments? 

Google’s latest move comes after a series of meetings it had with India’s IT Minister Ashwini Vaishnaw, who apparently also met the aggrieved app makers. Last October, the Competition Commission of India (CCI) had slapped Google with a $113 million penalty for abusing its dominant position on Play Store while ordering it to allow app developers to use third-party payments processing services for in-app purchases or for purchasing apps. 

Here is what the minister said: “Google and start-up company, both have met with us. We have had very constructive discussions and finally, Google has agreed to list all the Apps as on the status which was there on Friday morning (1st March), that status will be restored. Google has been supporting our technology development journey and we believe that in the coming months, both the start-up company and Google will come to a long-term resolution.”

Here is what Google has said after reinstating the apps: “In the spirit of cooperation, we are temporarily reinstating the apps of the developers with appeals pending in the Supreme Court. Google maintains its right to implement and enforce its business model, as established in various courts. We will invoice our full applicable service fees in the interim and are extending payment timelines for these companies. We look forward to a collaborative effort to find solutions that respect the needs of all parties.” 

What do these two statements mean?

For starters, Google took four more days than stipulated by the Minister to get the apps back. Reports suggest that the Indian app makers are grudgingly complying with the Play Store billing rules to save their businesses. So, where does it leave the order from the National Company Law Appellate Tribunal (NCLAT) that had upheld the CCI’s penalty? Did it pay up the fines? And was it allowed to continue its hegemony with a 95% market share?

It may be recalled that last year, the Alliance for Digital India Foundation took up the issue that the new system requires app developers to pay between 11 to 26% commission to Google. This, they say, is not in line with the Competition Commission of India’s direction that Google shouldn’t impose “any condition on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided.”

Around the same time, Google had claimed in a blog post that the antitrust ruling on the fines and the removal of its monopoly would actually result in higher cost of smartphones. It also noted that the ruling on Android could result in increased exposure to online harm for the estimated 700 million users of smartphones powered by Google’s operating system. 

Where do things stand as they are?

Currently, the company offers three options to developers for in-app purchases. These include consumption-only models without a service fee, Google Play’s billing system where developers pay a long-standing fee of 15% to 30% or an alternative billing system where the developer fee to Google is reduced by roughly 4%. 

Following the discussions with Minister Vaishnaw, apps including Shaadi, Matrimony.com and BharatMatrimony were restored on the Play Store. Other apps such as Naukri, 99acres, Kuku F and Alt Balaji also returned. Some of the founders of these businesses said Google was offering preferential treatment to large firms like Spotify, which incidentally doesn’t pay any fees to Google Play or Apple for staying in their ecosystems.

What are the startups worried about?

Startups have consistently pointed out that they end up spending massive marketing dollars to drive installs via app stores and that Google’s fees are an extra burden. Shaadi.com’s Anupam Mittal was succinct in his analysis whether Google was evil (his words). The core issue, he says, stems from Apple and Google’s attempts to move the open internet to a closed app ecosystem where they can lord over the internet economy. 

“They have already succeeded in muscling large swathes of the Internet and now want 100% dominance.Google wants to charge anywhere between 11-30% to app developers if they have a premium service – Developers will file a tax return with Google every month so that they can audit & charge. Now, this charge is on top of the 20-50% of revenue developers spend to get distribution on the Play Store. Bottom line? They want 60-70% of our revenue! Think about it – Companies will only be viable if they were to pay these taxes!” he says in a series of posts. 

Very few are aware that alternative app stores are allowed on Android with the likes of Aptoid and more recently PhonePe’s Indus App Store struggling for now. Aptoid had claimed recently that it was driving half a billion downloads a year from across the world. 

Murugavel Janakiraman, the CEO of Bharat Matrimony recently noted that his company was not in a position to sideload as it had more than 150 apps on Play Store. “We can’t offer them via sideloading because most people go to the Play Store to download apps. And what about alternate app stores like the recently launched Indus app store from PhonePe?” Janakiraman told HT in a recent interview. 

Where does it all lead to now?

In the final analysis, it appears that Google is making a case by stating that fewer than 60 developers in India were paying more than 15% as fees. They also expressed concern that giving differential treatment would cause angst to the majority who were paying their fair share. The blog post also noted that these developers were given three years to comply as well as a grace period of three weeks post India’s apex court granting Google the right to take action. 

However, the companies feel regulatory intervention is a must and wants the CCI to initiate action against Google. They argue that Google had not complied with its earlier order letting developers use a third-party billing system. Even the Internet and Mobile Association of India  said that it was “deeply concerned” by Google’s move to delist apps.

The question now is whose court is the ball currently in? Let’s wait and watch for now.