Indian startups are up in arms against the Google Play Store for forcing apps with in-app purchases to use its “expensive and unaffordable” billing system. Google levies a 30% commission against 1.5-2% levied by external gateways.
While the policy has always been in place, it’s only now being enforced in India. This will affect dating, education, video and music-on-demand, and other apps that rely on in-app purchases but not those for physical deliveries such ecommerce.
The startups say it’s unfair exploitation of the Play Store’s monopoly that stems from the dominance of Google’s Android operating system.
“It will badly affect us — 30% is tax, cannot be called commission!” said Snehil Khanor, CEO of TrulyMadly, a dating app. “They say we provide an ecosystem but we get the downloads through ads. For many small companies, it can be an existential threat.”
Google said developers can use websites to transact with consumers or opt for other app stores in the market.
“Let me clarify. There are other ways in which they can go find the subscription,” said Purnima Kochikar, director, business development, games and applications, Google India.
“They have multiple store options… multiple ways to sell the subscription option. There are several Indian developers who have websites where they sell subscriptions. There are people who are using multi-platform ways where they’re selling. All of that is possible.” She said the policy will only impact 3% of the apps on the Play Store.
Razorpay cofounder and CEO Harshil Mathur said the commission would make things tough.
“A 30% commission on in-app payments is exorbitant and could kill so many businesses in India,” he said. “While an Indian app store is a logical alternative, India requires a broader policy framework to find a more permanent resolution.”
Google has control over many layers between customers and their service providers as more than 90% use Android phones, the Internet and Mobile Association of India (IAMAI) said in a release.
“The Indian founders’ community is on fire at the announcement of the policy. IAMAI is seeking a meeting with its founder members to understand their concerns and to resolve them,” the lobby group said.
Enforcement of the new policy is contrary to Indian laws, according to Vishwas Patel, chairman, Payments Council of India.
“Just because Google owns the gate and the gateway to the digital ecosystem… they should not reject Indian apps who are using RBI-recognised payment aggregators and payment gateways,” he said. “Google should not use a dominant position, rather (it should) allow a level playing field for everyone in the ecosystem.”
Incidentally, Epic Games, which publishes the popular game Fortnite, has filed a lawsuit against Google and Apple for “anti-competitive conduct” after it was dropped from their stores for setting up its own payment system for in-app purchases.
The Apple App Store also charges a 30% commission on all in-app purchases. However, Android’s sway means that the Play Store accounts for the vast majority of downloads. According to Sensor Tower data, the Play Store generated 17 billion app downloads in India from January 1 to August 31 while the App Store accounted for 403 million.
Despite that, Google was only a little ahead of Apple in revenue from user spending. According to Sensor Tower’s calculations, Apple made $43 million and Google about $50 million during the period.
Interestingly, the move comes 11 days after Google removed the country’s largest fintech app Paytm from its Play Store for several hours before reinstating it. It had taken the view that Paytm’s UPI cashback campaign violated the Play Store’s anti-gambling policies.
The controversial move sparked uproar among Indian startups. Paytm CEO Vijay Shekhar Sharma told ET that Google’s dominance was “an ecosystem issue” and termed the move “arbitrary” and “biased.” Indian startup founders, including Sameer Nigam, CEO of rival PhonePe, came out in support of Paytm.
Digital India Foundation head Arvind Gupta said regulators supervising India’s internet landscape including the Competition Commission of India (CCI) should intervene as consumers, as well as app developers, rely heavily on Google’s platforms.
“India primarily uses Google’s Android operating system as it is a lower-cost option,” he said. “By virtue of pre-bundling, the Google Play Store comes preinstalled in most smartphones. Google has then an immense gatekeeping power. Now, they have become a gateway to any startup to connect with consumers.”
Bharat Matrimony CEO Murugavel Janakiraman told ET that the high commission would sound the “death knell” for Indian digital businesses.
“How can a company survive after paying 30% Google tax and Apple tax,” said Janakiraman. “Most businesses don’t have such margins. If enforced, this will spell an end to the startup dreams of a lot of Indian entrepreneurs.”
Tech folks such as Mohandas Pai and Cred founder Kunal Shah also took to Twitter to express their displeasure at the move, calling on Indian entrepreneurs to set up a local app store.
Antitrust lawyers said companies can approach CCI against Google, which is already facing an investigation for allegedly abusing its dominant position in the mobile operating systems market with Android. The antitrust regulator has fined Google once for unfair business practices in the local market in online search.
“I clearly see this as a huge issue from a competition perspective,” said Sarvada Legal founder Abir Roy. “If argued from Google, the Play Store is just one option. But we have to look at Google as an overall player who is dominant in search, advertising, Android. Every business needs Google.” Roy is an antitrust lawyer currently involved in multiple cases at CCI dealing with abuse of market position by internet firms.
“This practice is fit for investigation. Startups should look at CCI as an option. Google is abusing its dominance in search and advertising to enter and protect the payment gateway market,” he said.
A Google spokesperson said consumer spending on apps and games created by Indian developers had doubled in the year to date from the year earlier. Indian developers saw growth of more than 80% in spending by users outside India during the period.
(With inputs from Surabhi Agarwal)