Google’s update to Play Store billing policy will now come into effect from October 2022 instead of March 2022 for India, Economic Times reported on Friday.
Why this matters? The new policy, which was announced in September 2020, makes Google’s in-app billing system mandatory for all in-app purchases, which, in turn, means that developers have to pay the company 10 to 30 percent of their revenue as commission. This delay in implementation is a reprieve for start-ups as they can continue to use their existing billing systems for longer.
Why is Google delaying the policy change?
The reason for the extension is because of the complications posed by RBI’s new rules on recurring payments, Google indicated. A company spokesperson told ET:
“We are extending this to 31st October 2022 to provide developers in India the required product support for recurring payments through convenient user payment systems, including UPI and wallets, and also provide them more time in light of the changes to India’s recurring digital payments guidelines.”
What is the new policy?
According to Google, there is no real change in policy, but rather a clarification on the applicability of its billing rules. In its blog post published in September last year, the company said:
“We’ve always required developers who distribute their apps on Play to use Google Play’s billing system if they offer in-app purchases of digital goods, and pay a service fee from a percentage of the purchase. […] But we have heard feedback that our policy language could be more clear regarding which types of transactions require the use of Google Play’s billing system, and that the current language was causing confusion. We want to be sure our policies are clear and up to date so they can be applied consistently and fairly to all developers, and so we have clarified the language in our Payments Policy to be more explicit that all developers selling digital goods in their apps are required to use Google Play’s billing system.” (emphasis ours)
Google likely issued this clarification because many apps, particularly gaming apps, used alternative payment systems and avoided paying commission to the company because of loose wording in the policy and lack of strict enforcement by Google.
Reaction to new Play Store policy in India
Google’s announcement last year kicked up a storm in India as many start-ups and developers objected to the high rate of commission. Bowing to pressure, Google deferred the enforcement of its billing system policy to March 2022. Notwithstanding this, start-ups approached the Competition Commission of India (CCI), which ordered a detailed investigation into the Play Store in November 2020.
In launching its investigation, 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
In October this year, the Alliance of Digital India Foundation (ADIF), filed a petition with CCI seeking interim relief from Google’s billing system mandate until the antitrust watchdog’s investigation is complete.
Separately, CCI is also reviewing an antitrust complaint filed against Apple App Store in September.
Regulatory scrutiny likely major reason for extension: MediaNama’s Take
While Google’s stated reason is RBI’s new policy on recurring payments, another major reason could be the pressure from developers and regulatory authorities around the world. Because of this pressure, Google has:
- Reduced commission for smaller developers: In March this year, Google reduced the commission from 30 percent to 15 percent on the first $1 million developers earn.
- Reduced commission for subscriptions and music streaming services: In October, Google reduced commissions on subscriptions reduced to 15 percent and commissions on ebook and music streaming services to 10 percent for eligible apps.
- Allowed alternative payment systems in South Korea: A South Korean law passed in August requires app stores to allow alternative in-app purchase mechanisms allowing developers to use their own billing system and avoid paying Google’s or Apple’s service fees. Google in November complied with this new law but has still found a way to charge developers a commission albeit at a reduced rate.
Additionally, both Google Play Store and Apple Store are facing scrutiny in the following countries:
- Epic lawsuit in the US: Epic Games, maker of the popular Fortnite game, filed lawsuits against both Apple and Google in August 2020 after both platforms terminated Epic’s developer account for implementing an alternative payment system on the Fortnite app. While a verdict has been reached in the Epic vs Apple case, both the companies appealed it and Apple won a stay on December 9, possibly delaying changes to App Store policies for years. Meanwhile, the hearing is yet to begin in the Epic vs Google case, but Google recently filed a counterlawsuit against Epic.
- Japan: Earlier in September Apple made a concession to settle an investigation by Japan’s Fair Trade Commission into the Apple App Store. The concession allows developers of “reader apps” like Netflix and Spotify to include an in-app link to their website for users to set up or manage an account.
- Netherlands: The Dutch antitrust authority has found that Apple’s rules requiring app developers to use its own payment system are anti-competitive. While the Netherlands’ Authority for Consumers and Markets has not fined Apple, it has demanded changes in the company’s in-app payment policies.
- China: China’s Supreme Court in September dismissed Apple’s plea and ruled that an antitrust lawsuit filed by a consumer against the company’s China entity can proceed. In its plea, Apple had argued that the lawsuit should not be allowed because its China entity does not deal with App Store operations. The court, however, said that Apple had potentially abused its market position and undermined competition, and hence the case can be heard.
- US proposed bill: 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 with the same access to developer tools
- EU and UK: The European Union has launched an investigation into Apple App Store following a complaint from Spotify and the United Kingdom has launched a broad 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). Both investigations are ongoing.
- Russia: Russia’s Federal Antimonopoly Service (FAS) on October 27 launched an antitrust investigation into Apple’s App Store for not allowing developers to link to third-party payment systems.
- Apple Wins Stay In Epic Case, Possibly Delaying Changes To App Store For Years
- Indian Startup Founders Gear Up To Take On Google’s Play Store Policies
- Taking Cue From The Apple Verdict, Google Countersues Epic Games Arguing Breach Of Contract
- Google Slashes Play Store Commissions For Apps In Certain Categories
- Google Play Store Will Allow Alternative Billing Systems In South Korea, But Developers Still Have To Pay Commission