Recently, Elon Musk was reported to charge $11 from Twitter users who pay for the Blue subscription from app downloaded from the App Store. However, same service would be available at just $8, if the user subscribes to Blue Tick through Twitter’s website bypassing Apple’s App Store and thereby avoiding the usurious commission charged by Apple through its payment processing services. Musk cited 30% secret tax levied by Apple for the same.
This was exactly the issue before the Competition Commission of India (CCI) though in respect of Play Store of Google. An investigation against Apple is pending before the CCI on similar issue of 30 per cent commission or ‘tax’. The CCI passed an order against Google on October 25 last year and levied a penalty of ₹ 936.44 crore on Google for abusing its dominant position with respect to its Play Store policies. CCI also issued various directions toGoogle which are required to be implemented within 3 months i.e., by January 25, 2023.
App stores
So, what was the whole issue before the CCI. App stores have become a necessary medium for app developers to find and distribute their apps to the end users. App store operators (in this case Google) are using this dependence to impose their terms and conditions. For example, Google’s Play Store policies require the app developers to exclusively use Google Play’s Billing System (GPBS) for processing payments for paid apps as well as for in-app purchases i.e., purchases made by users of Apps after they have downloaded/ purchased the Apps from the Play Store. Through such imposition, the dominant app store developers (Apple and Google) are able to extract an exorbitant fee of 30 per cent from the app developers in certain category of cases.
Not only this, these app store operators also restrict the app developers from communicating cheaper options to their users within the App either through a web link to alternative payment processing facility or through any message in the App (anti-steering provision).
Anti-steering provisions
This is exactly what Musk was referring to in his tweets. If the subscription is taken from the website of the app developers, they would be able to avoid this 30% tax. The benefit is ultimately passed on to the end users ($8 vis-à-vis $11).
CCI found that if the app developers do not comply with Google’s policy of using GPBS, they cannot use Play Store to distribute their apps and thus, would lose out the vast pool of Android customers. Through its payment processing policies, Google took away the inherent choice of the app developer to use payment processor of their liking from the open market – which ultimately resulted in consumer harm to end-consumers.
To solve this problem, the CCI directed Google to allow app developers to use third-party billing/ payment processing services. CCI also restricted Google from imposing the anti-steering provisions on the app developers. Thus, Google cannot impose its requirement of exclusive use of GPBS. This move by CCI would allow the app developers to pass on the cost saving to the end users or to invest the savings in innovation as the third party billing/payment processing service providers are charging a fraction of what Apple and Google are imposing upon app developers.
Google has reportedly challenged the order of the CCI before the NCLAT and the appeal is expected to be considered on January 11, 2023.
