A non-profit called Together We Fight Society has filed an antitrust case against Apple over its App Store practices with the Competition Commission of India (CCI), Reuters reported. The legislation comes at a time when both Apple and Google are facing increased regulatory scrutiny and legal battles across the world.
Targetted at Apple’s in-app purchasing system
The filing accuses Apple of abusing its dominant position in the apps market by forcing developers to use its in-app purchase system, the report stated. Apple charges a 30 percent commission on all in-app purchases, which developers have alleged is too high.
“The existence of the 30% commission means that some app developers will never make it to the market … This could also result in consumer harm,” the filing said according to Reuters. The complainant added that it filed the case in the interest of protecting Indian consumers and startups.
In speaking with MediaNama, Together We Fight said that the following issues were highlighted in its complaint:
- Higher prices for consumers: The 30 percent in-app purchase fee called the “Apple tax” not only impacts start-ups but also end consumers because app developers pass on the “Apple tax” to final consumers by charging higher prices.
- Restrictions on communications: App developers are not allowed to communicate to users about alternative purchasing options that don’t attract the 30 percent commission.
- Unreasonable suspension and removal of apps: The complainant has also highlighted the “capricious, whimsical nature of the App Store policy” that may lead to either suspension or removal of apps, but the same rules do not apply to Apple’s own apps. This suspension further leads to loss of revenue, reputation for the start-ups, the organization said.
- Apple is player and umpire: Apple sets the rules of the game with the App Store guidelines, plays in the game with its own apps, and is also the umpire because it is the adjudicator on whether to allow, suspend or remove an app, Together We Fight noted.
The CCI will review the case and could either order an investigation or dismiss it if it finds no merit in it. With a mere 3.2 percent market share, Apple’s iOS is not a widely used operating system in India.
MediaNama’s take (Nikhil adds): Typically, the CCI looks at two factors when adjudicating an antitrust case: first it ascertains market dominance, and once it is able to establish market dominance, it then determines whether there has been an abuse of this dominance. In this situation, given that Apple can argue that Android and the Play store dominate their domains, and that these are (imperfect) substitutes for Apple’s ecosystem, the question of Apple abusing its dominance doesn’t even arise.
MediaNama reached out to Apple for comment, but the company declined.
Recent concessions made by Apple and Google to quell criticism
Apps like Netflix and Spotify allowed to link out to the web for sign-ups: In a major concession, Apple on September 1 announced that it will allow developers of “reader apps” to include an in-app link to their website for users to set up or manage an account. Reader apps are apps that provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video, Apple said.
Developers allowed to email users of alternate payment methods: Last week, Apple in a settlement to a 2019 US lawsuit proposed allowing developers to let users know about payment methods available outside the in-app billing system through communication methods outside the app like email. But this minor change did not go far enough to appease the developer community because apps were still not allowed to use in-app prompts to share information about or directly link to external payment methods.
Reduced 15 percent commission: After coming under fire from multiple companies, Apple last November said that it will reduce commissions to 15 percent for developers that make less than $1 million per year. Google followed Apple with a similar, albeit slightly different, announcement saying that it will charge developers 15 percent for the first $1 million they earn in revenue in a year.
CCI investigation against Google Play store
The CCI has already ordered a detailed investigation into Google’s Play store practices. Initiated last November, the CCI said that there was prima facie evidence that Google may be abusing its dominant position in India, with regards to Play Store’s exclusivity and Google Pay services. It ordered an investigation into the following aspects of Google’s practices:
- High commissions
- Exclusivity regarding the choice of payment systems for app purchases
- Preference to Google Pay for payments
- The advantage gained from data collection
Indian developers dissatisfied with Google’s in-app billing policy
In September last year, Google kicked up a storm when clarified that it will enforce its billing system on all apps downloaded from the Play Store for in-app purchases of digital goods and services and gave developers until September 30, 2021, to integrate into its billing system. When apps use Google’s billing system, the company will take a 30% cut from the payment. While this wasn’t an entirely new policy, Google’s announcement indicated that the company was tightening its grip on the situation by ensuring that apps do no use alternate payment systems.
Multiple Indian startup founders pushed back against this move. “How can companies survive by paying 30% Google tax and Apple tax,” one founder asked. The main issues raised by these founders were:
- Abuse of dominance: “If you’re talking about 30% billing as compulsory, as being mandatory, else your app won’t be published (on the Play Store), you are forcing companies to use Google’s in-app billing. It’s a monopoly trying to control things,” Matrimony.com’s Murugavel Janakiraman told MediaNama.
- Cost factor: For startups, digital advertising is their primary mode of acquisition of customers, and the fact that Google is taking an additional 30% of billing, really hurts. “30% of revenue on advertising. 30% billing revenue on top of that. That’s almost 50% of income going to Google,” Janakiraman said.
- The risk of scope creep: This move to charge 30% smells of scope creep to some founders. “Today they mentioned music, video, health tech, education etc. These are digital services. Tomorrow they can widen it to food delivery, companies offering physical services. Literally, Google is taxing startups,” Janakiraman said.
- National Interest: “Someone [Google Play] who is not in this jurisdiction, puts restrictions of their own policies on Indian apps”, a VSS added. “It is in the national interest to have viable alternate options for app stores and app billing,” GOQII’s Vishal Gondal said. “Today Google controls 95% of the app ecosystem in India. More than 80% of our traffic is mobile apps,” Janakiraman explained, “almost all of which are through Google. Google controls the Indian Internet ecosystem. How do you ensure that there is fairness?” he asked.
Eventually, the Ministry of Electronics and Information Technology held a virtual meeting with startup founders across the country, giving them around two weeks to compile a document on issues with Google’s dominance in India and other concerns around the dominance of large platforms in India.
Bowing to pressure, Google in October deferred the enforcement of its billing system policy only for India to March 2022. The company said this will ensure that developers have enough time to integrate with the Play billing system and implement UPI payment for subscriptions.
What countries around the world are doing?
South Korea passes first major law to curb Google, Apple dominance: South Korea on August 30 passed a first-of-its-kind bill that forces Google and Apple to open their app stores to alternative payment systems. This allows developers to use their choice of payment systems, effectively allowing them to avoid the commissions charged by Google and Apple.
New antitrust bill in the US: On August 11, US lawmakers introduced a new bill titled Open App Markets Act that proposes:
- Operating systems must allow third-party app stores
- Developers must be allowed to choose their choice of in-app payment system
- Pricing for various app stores or in-app payment systems can be determined by developers
- Developers can freely communicate pricing offers with users
- Google and Apple cannot use non-public data to build competing apps
- No self-preferencing in app stores
- Third-party developers must be provided the same access to developer tools
Investigation in EU: The European Commission in June 2020 opened formal antitrust investigations to assess whether Apple’s rules for app developers violate EU competition rules in response to a complaint by Spotify. It particularly focuses on the mandatory use of Apple’s in-app purchase system and restrictions on the ability of developers to inform users of alternative cheaper purchasing possibilities. In April this year, the commission informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store.
Investigation in the UK: In June, the UK government launched an investigation into Google’s and Apple’s effective duopoly over the supply of operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome). The investigation will examine the amount of power Google and Apple have in the distribution of mobile apps and the extent to which there are suitable alternatives to the default app stores. It will also examine if Google and Apple are using their position to launch competing apps and services and if these are favoured over third-party apps when showcased to consumers. The final report of this investigation will be published by 14 June 2022, based on which the government will establish a new pro-competition regulatory regime for digital markets.
Russia warning: Russia’s Federal Antimonopoly Service (FAS) on August 30 gave Apple a warning over abusing its dominant position in the distribution market for iOS apps and asked the company to eliminate signs of violations before the end of September. FAS reported that several iOS users and app developers reported concerns that users are not allowed to be informed about the possibility of cheaper purchase options outside of the app.
Update (3 Sep, 2:15 pm): Added comments provided by Together We Fight on issues highlighted in its complaint
- South Korea Sets Precedent By Forcing Google, Apple To Allow Alternative In-App Payment Systems
- Here’s How India Can Take A Cue From US And S. Korea And Regulate The App Store Market
- What The Unredacted Epic Games Lawsuit Reveals About Google’s Antitrust Practices
- CCI Orders Investigation Into Google Over Android TV Licensing Deals
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