SUMMARY
In-app payments and platform fees have hampered small time developers and MSMEs: Hannah Rickets
Anti-competitive policies employed by Google and Apple, their policies are arbitrary and high-handed: AIDF’s Executive Director
Earlier last year, South Korean lawmakers had enacted an amendment that sought to force companies like Apple and Google to allow third-party payment options. The rules are due to be drawn up by March 15.
Critics have hit out at tech giants – Google and Apple, for ‘anti-competitive’ practices, accusing them of creating an ecosystem which cripples small app developers.
The Alliance of Digital India Foundation (ADIF) and Coalition for App Fairness (CAF) organised a roundtable discussion on the ‘App Store Regulations in India.’
The session saw participation from speakers across the domain including Dr Vikas Kathuria who is an Associate Professor at the BML Munjal University Law School, Hannah Rickets who is the Deputy Director of Coalition for App Fairness, Jai Vipra who is the Senior Resident Fellow at Vidhi Centre for Legal Policy, ADIF’s Executive Director Sijo Kuruvilla George and Match Group’s Senior Vice-President, Mark Buse.
In-App Payments: Mere Cash Cow For Marketplaces?
Realising the scope of the issue, Hannah Rickets said that the global app developers were facing a plethora of challenges. She specifically pointed out the two major players in the app marketplace segment – Google’s Play Store and Apple’s App Store.
Highlighting her concerns, Rickets said that the two players mandate in-app payments systems which make it difficult for the app developers to develop alternate streams of revenue. She also added that these app marketplaces charge a hefty fee of 30% for transactions on these apps.
According to her, this has created an ecosystem which hampered small developers and MSMEs involved in development of apps.
Predatory Behaviour By Google And Apple?
AIDF’s Executive Director, Sijo George, too lashed, saying that the two players together enjoyed near total duopoly. He also termed the practices by both Google and Apple as ‘anti-competitive’, accusing the two tech giants of being ‘high-handed’ and their policies ‘arbitrary.’
He also added that their market positioning had enabled them to make rules on the fly with many clauses in their App Store policies as sweeping, giving lesser wriggle room to app developers on their platforms.
Adding further, Rickets alleged that the two key players had indulged in preferencing behaviour – putting some products ahead of others. She also said that these platforms had stifled competition by a slew of measures which included higher ranking for their products on searches or by stalling bug fixes on competitor apps.
Rickets also drew attention to the practice employed by Play Store and App Store which limited information to app developers about their own customers, adding that this information was vital as it could enable developers to improve products to better compete with bigger players.
The panelists also reprimanded Play Store for developing apps that mimicked already existing popular apps on its platform and using the data of the competitor to improve their apps.
Slamming Google and Apple, Sijo said that many Indian developers had their apps taken down citing ‘vague’ notices. He further added that there was no standardised redressal mechanism for such issues and that such instances could, at times, lead to businesses going bust.
Remember, in September of 2020, Play Store had taken down Paytm’s app from the platform citing violation of community guidelines. The app was later restored but it had created quite a stir in the local app developers community.
Speaking about the India experience, panelists said that the Indian market was especially price-conscious, with wafer thin margins. They further added that the 30% transaction charges from app marketplaces could prove ‘debilitating’ for small startups that have just begun their journey.
The Global Example
Commenting about the regulatory aspect of the current regime, the panelists said that these erring marketplaces were indulging in alleged anti-competitive practices despite being reprimanded in several countries like South Korea and Netherlands. They further added that Google and Apple were okay with paying fines, considering it ‘cost of doing business.’
This comes on the heels of a recent amendment enacted by South Korean lawmakers last year that sought to force companies like Apple and Google to allow third-party payment options in their app stores. The rules, due to be drawn up by March 15, will lay out what constitutes compliance with the law.
In addition to this, the Dutch antitrust watchdog, Authority for Consumers and Markets (ACM), fined Apple $5.7 Mn on February 21 over access to non-Apple payment methods for subscriptions to dating apps. The ACM has been levying weekly fines of 5 million euros on Apple since the company missed a January 15 deadline to make changes ordered by the watchdog.
Dr Kathuria also added that there was a need for a new regulation that reflected the economic and technical realities of our times.
Taking the point further, Vipra said that this had led to the privatisation of the marketplace where the app store owners had more data than the app owners themselves. She further said that this issue was more pronounced for the app marketplace space where the two players together held majority of the landscape, adding that there was a need for government intervention.
The Domino Effect
The ‘app tax’ had had a domino effect on the market. This has been reflected in apps like TrulyMadly whose subscription prices on the App Store are higher than the prices on Play Store, owing to higher transaction charges on Apple’s platform.
The panelists said that the app developers were forced to pass on the cost to consumers, thereby, lowering their revenues and affecting their bottomline. The panelists also said that subscriptions for web based services were lower compared to their apps, owing to absence of these charges on web portals..
Questioning Google, the panelists said that the tech giant had deliberately benefited its services like YouTube by keeping it outside the ambit of such charges. As a result, YouTube had similar cost prices for both web and app based services. This in turn, as the speakers said, was hurting other players in the market and killing competition.
Mark Buse also highlighted the slow processing of payments by the players, especially Play Store. He said that sitting on payments for 90 days could spell doom for startups that have scrounge to pay salaries and could stifle innovation in the sector.
Jai Vipra also called for unbundling of marketplace apps from the Operating Systems. She said that legislation focusing on algorithm transparency was the need of the hour. She also advocated for specificity in legislation and deployment of non-fine penalties like restriction of market access to deter the erring players.
The tech giants have constantly been under the radar of governments across the globe for a slew of reasons. A host of reasons have been pointed out but app developers have been bearing the brunt of such royalty charges. This has rendered them toothless in the fight against big corporations with big pockets. As a result, strong steps need to be taken to placate app developers and curb any prevalent ‘anti-competitive’ practices.
