Apple may face CCI probe over in-app payment issues

Debangana Ghosh Mumbai | Updated on September 03, 2021

Non-profit complains 30% fee on sale of goods/services hits developers, customers, and is an entry barrier, too

Apple will be facing an antitrust probe following a complaint registered with the Competition Commission of India (CCI) alleging that the tech giant has been misusing its dominant position through its App Store forcing start-ups and developers to use only its payment gateway and levying stiff commissions on in-app purchases.

The complaint filed by a Rajasthan-based non-profit organisation argued that Apple’s fee of up to 30 per cent on sale of digital goods and services or in-app purchases impacts developers and customers, while also acting as a barrier to market entry.

Indian start-ups, which had earlier raised concerns on this issue, could also join the proceedings once the CCI starts the probe.

Exploiting dominance

Apple App Store’s policy of not letting app developers use other payments gateways, which usually charge a commission of 1.8-2 per cent, impacts the revenue margins of smaller developers and start-ups.

“The ability of a company to behave and act independently of market conditions establishes its dominating position. In India, Apple is being sued for allegedly exploiting its dominant position in the app industry by requiring developers to use its proprietary in-app purchase mechanism.

“Because of the 30 per cent commission, some app creators will never see their products on the market. This could lead to long-term consumer dominance, and it is quite possible that the CCI will conduct a probe into the matter,” Sonam Chandwani, managing partner, KS Legal & Associates, told BusinessLine.

The development comes two days after South Korea passed a Bill to stop Google and Apple from compelling app developers to use their in-app payment systems. While Apple has been imposing 30 per cent commission, Google plans to do so from March 2022.

The CCI is still reviewing the complaint and is yet to start an investigation.

Apple declined to comment on BusinessLine’s queries, not having received any notice from the CCI.

Rakesh Deshmukh, Co-Founder and CEO, Indus App Bazaar, told BusinessLine: “This CCI probe gives us hope. It has started a conversation around fairness in in-app economy and platforms.

“In the short-term, there will be multiple investigations by various countries that will create a scenario of uncertainty depending on geographies. But, in the long term, this will help consumer choice and developer innovation.”

CA Shivani, President, Together We Fight, the NGO which has filed the plaint told BusinessLine, “Considering the Gatekeeper nature of Apple, we wanted to take the bull by the horns. In our fight against Apple, we seek the support of Indian start-ups/Atmanirbhar Digital India Foundation (ADIF), which counts the likes of Paytm, GOQii, Bharat Matrimony, MapMyIndia, etc so that the complaint can reach its logical conclusion.”

Apple App Store and Google Play Store together control more than 95 per cent of the app store market globally through iOS and Android. Both companies had cited high infrastructure cost of running the app stores, to adjust which they would need to pass on a part of the cost to the developers.

Deshmukh dismissed the claim saying, “Infrastructure cost is real. $100 million per year is what Apple has stated it costs to maintain and run the App Store. They earn billions from it through in-app commissions. Our point of view is that we can make a sustainable app distribution business without charging developers high commissions.”

Apple’s middle ground

Apple has been announcing several initiatives globally lately to counter similar allegations and probes faced across geographies.

Last week, in a court settlement with US developers, Apple said it would create a $100-million fund for payouts to small app developers.

Last year, it had reduced the commission to 15 per cent for smaller app developers earning up to $1 million in sales annually from the App Store.

Published on September 02, 2021

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