Google’s googly has confounded digital companies and the government

By Dr. Jaijit Bhattacharya

A googly is a deceptive delivery in cricket where the ball spins in the opposite direction to that of a traditional leg-spin delivery. Google’s stance on charging the apps on its store for a significant percentage of their business has left digital companies and the government in the same state as a batsman facing a googly.

The issue started with Google charging 30% of revenues (not profits) earned by digital companies through the apps hosted on the Google Play Store. As per, Google Play Store has almost 75% market share of mobile app stores, and much of the balance is controlled by Apple App Store. Therefore, there is clearly a monopoly play happening, especially in the Android handset space.

Such a situation is challenging for the healthy growth of India’s domestic digital industry. Therefore, digital companies had dragged Google to the Competition Commission of India (CCI) for Play Store policies that require app developers to exclusively and mandatorily use the Google Play Billing System (GPBS) for receiving payments for apps.

GPBS was also mandated by Google for other purchases on the Play Store, including audio, video, and games, and for certain in-app purchases. Also, Google Play Store conditions stop app developers from providing users with a link from their app to a web page that allows them to pay using payment gateways other than Google’s.

Google Play Store’s 30% charge is 15 times more than the usual 2% for such a payment service. To be sure, Google Play Store provides more services than just payment services. It also hosts the app and helps in searching for the app.

But does that extra service justify such a high charge? Why should we not leave it to the market economics to determine the pricing? Unfortunately, the market economics breaks down in a monopolistic situation.

Therefore, the CCI had put non-monetary directions on Google. The directions included requiring Google to allow and not restrict app developers from using any third-party billing/payment processing services, either for in-app purchases or for purchasing apps.

Also, Google should not impose any anti-steering provisions on app developers and should not restrict them from communicating with their users to promote their apps and offerings in any manner. Google should not restrict end users, in any manner, to access and use within apps, the features and services offered by app developers.

Google should not impose any condition (including price-related conditions) on app developers, which is unfair, unreasonable, discriminatory, or disproportionate to the services provided to the app developers.

The CCI has also directed Google not to discriminate against other apps facilitating payment through UPI in India vis-à-vis its own UPI app in any manner. CCI also imposed a monetary penalty of 1,340 crore on Google and issued a cease and desist order to remove its monopolistic practices.

India is not the only jurisdiction where Google’s Play Store is facing accusations of monopolistic practices. Last December, Google’s Play Store and billing service faced charges of being an illegal monopoly at a US district court. A fine of $700 million was slapped on Google. Europe has also slapped large fines on Google for its anti-competitive practices.

Google challenged the directives from India’s CCI, and dragged the case to the Supreme Court with the contention that CCI overstepped its jurisdiction and is in violation of the Competition Act 2002.

Even as the case remains sub-judice in the Supreme Court, things came to a head this week when Google unilaterally decided to delist a bunch of popular Indian apps from its store, on charges of the apps no paying Google’s charges, which have since then been brought down to under 15% of revenues.

However, it is widely believed that this is a usurious charge, as 15% of revenues will destroy business models of companies. Such a move also deprives Indians of access to various digital tools, and hence is a much deeper impact on the country.

The issue becomes even more challenging for the government, as taking any action on Google Play store will actually harm the Indian digital ecosystem. If Google Play Store stops today, billions of dollars worth of economic activity will stop. So, it in fact challenges the sovereignty of the nation on matters of the digital economy.

Deft handling by the government, and the intervention of IT minister Ashwini Vaishnaw, led to Google backtracking on its removal of Indian apps from its digital store.

Unfortunately, this is not the end of the battle. In the absence of any visible competition to Google Play Store, we will continue to see this battle between digital monopolies and the fast-rising Indian digital ecosystem. Perhaps it is time to accelerate the adoption of the government’s app store, Mseva, and other Indian app stores, for India to continue to grow its digital economy in line with the government’s vision.

This article first appeared in livemint,