In recent years, a legal tussle has emerged between domestic startups and tech giant Google over the latter’s app billing practices.

At the heart of this dispute lies the issue of fair competition, revenue sharing, and control over app distribution channels.

The controversy — which had its genesis in year 2020–revolves around Google’s imposition of a mandatory 30 percent commission on app downloads and in-app purchases made through the Google Play Store.

While this practice has been in place for years, it has increasingly drawn criticism from domestic startups, alleging high commissions on account of monopolistic behavior and unfair treatment.

These startups argue that the high commission rate (which Google calls as service fee) severely impacts their profitability and ability to compete in the market.

One of the primary concerns initially raised by domestic startups is the lack of alternative app distribution channels on Android devices. Google brought some changes to its payment policy ushering in updated User Choice Billing (UCB) from April 26 last year and brought down its service fee to maximum of 26 percent from 30 percent on the in-App purchases and other App downloads..

Unlike Apple’s ecosystem, where users can sideload apps or use third-party app stores, Android users predominantly rely on the Google Play Store for app downloads. This gives Google significant control over app distribution and monetization, creating a perceived imbalance of power, domestic Startups argued.

Moreover, startups argue that Google’s dominance in the app market stifles innovation and limits consumer choice. The high commission (service fees) force developers to either absorb the additional costs, thereby reducing their profit margins, or pass them on to consumers, potentially making their apps less competitive in the market. This, in turn, hampers the growth of domestic startups and discourages new entrants from entering the market.

The legal battle between domestic startups and Google has taken various forms, including antitrust investigations and lawsuits, and has now reached the doors of the Supreme Court. In some cases, startups have formed coalitions to collectively challenge Google’s policies and advocate for fairer terms. These efforts have garnered attention from regulators and policymakers, prompting inquiries into Google’s business practices and potential violations of antitrust laws.

A notable legal showdown has been the move of 16 Startups to move Madras High Court last year against Google on its payments policy.

With Madras High Court division bench dismissing the Startups’ appeal, the Startups are now before the Supreme Court in appeal against the High Court order. The apex court has already refused any interim protection for domestic Startups, leaving them exposed to possible delisting actions by Google for non compliance to tech giant’s payment policy.

In approaching the apex court directly, the Startups have ignored the directions of Madras High Court to approach CCI for legal remedy. Startups have contended that CCI has not acted upon their earlier complaint of non compliance by Google on the CCI’s October 25, 2022 order in the Google Play Store case.

CCI had on October 25, 2022 imposed fine of ₹ 936.4 crore on the tech giant and directed it to allow third party billing system to App developers; not to restrict app developers from communicating with their users to promote their apps and offerings.

Google was also required to set out a clear and transparent policy on data that is collected on its platform, use of such data. Google shall not leverage transaction/ consumer data of apps generated and acquired through its billing system, to further its competitive advantage. Lastly, Google was directed not to impose any condition (including price related condition) on app developers, which is unfair, unreasonable, discriminatory or disproportionate to the services provided to the app developers, etc.

The outcome of the ongoing legal battle in the Supreme Court between domestic startups and Google remains uncertain, with implications that extend beyond the realm of app billing.

At stake is not only the future of app monetization but also the broader dynamics of competition in the tech industry. The resolution of this dispute could shape the regulatory landscape for years to come, influencing how platforms like Google operate and interact with developers and consumers.

In conclusion, the ongoing legal tussle between domestic startups and Google over latter’s app billing practices underscores the complexities of competition in the digital age.

As the tech industry grapples with issues of market dominance and fair play, the outcome of this battle will undoubtedly have far-reaching implications for App developers, consumers, and regulators alike.

Listen in to the BL State of the Economy Podcast with Competition Law Expert M M Sharma.

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