As Google assesses its response to two recent sanctions imposed by the Competition Commission of India (ICC), here’s a look at the app economy.
Applications are the daily bread of mobile operating systems. India ranks second in the number of mobile downloads, with nearly 27 billion downloads in 2021, according to Deloitte. Accounting for 11.6% of app downloads globally, the Indian smartphone user spends more than 4 hours a day on apps. App revenue is expected to reach $2.3 billion in the country by 2026.
Google’s Android operating system (OS) controls 95% of this app ecosystem. The CCI said Google, owned by Alphabet, had abused its “dominant position” in the ecosystem. It imposed a fine of Rs 936.44 crore, as well as a cease and desist order on the tech giant over its policies for Play Store.
Prior to this, the anti-trust regulator fined Google an additional Rs 1,338 crore for anti-competitive practices related to the Android operating system.
In its response, Google said that “Indian (app) developers have benefited from the unparalleled technology, security, consumer protection, choice and flexibility that Android and Google Play offer.” .
As expected, the CCI order regarding Play Store and Google Play Billing System (GPBS) has supporters and those who believe it will stifle innovation in India’s app ecosystem.
“The order ignores the long history of developments that have made Google’s Android the dominant operating system in Indian markets. Unlike its main competitors, the basic Android operating system is available for free on smartphones in all price segments. This has benefited India’s digital ecosystem,” said Gowree Gokhale, Partner at Nishith Desai Associates.
Gokhale said that since the operating system itself is free, Google says it can benefit from a business model where some apps can be made available for free, while other apps can be monetized are promoted to maintain a constant flow of investments. This in turn is necessary to maintain a continuous ecosystem of innovation for Google and other app developers.
Gokhale said that there “does not seem to be any in-depth investigation by the CCI, for example a survey of end users and start-ups, the quality of products offered by competitors compared to the quality offered by Google. Additionally, the CCI should consider the overall impact of Google’s application services, including how the massive availability of the Android operating system and Play Store has helped make educational services and logistics more readily available during the pandemic years Section 19 of the Competition Act requires a holistic approach This appears to be missing in the order.
The Alliance of Digital India Foundation (ADIF) agrees with the CCI orders. The organization, which has lobbied for legislation to rein in app gatekeepers like Google and Apple, believes the two companies have used their dominance to amass more market share and revenue from app developers.
For example, a few months ago, Google only allowed its payment system for app developers and users for in-app purchases or any payment. Compulsory use came with a hefty commission, which was reduced from 30% to 15%. The company is also testing third-party payment options, but in a measured way.
With CCI asking Google to end its policies, app users can use third-party payment platforms such as Paytm, PhonePay or UPI. This often leads to competition-defining commission fees in the marketplace – which can go as low as 3-4%, industry players said.
Barnik Chitran Maitra, managing partner at Arthur D. Little India & South Asia, called CCI’s order a “welcome move.” “Contrary to what tech majors like Google or Apple might claim, this will further drive innovation and incentivize players to build products. In an era where we are increasingly moving towards a decentralized ecosystem like Web3 , it doesn’t make sense to have a market situation where one company owns 90% of search, a majority of high-end devices, or even the dominant operating system prevents on high-end devices” , he said.
Maitra believes the orders are a sign that Indian regulators are serious about monitoring the “monopolistic practices of tech majors”. While he agrees that the Android operating system is indeed a low-cost operating system, much more affordable than its immediate competitors, he points out that Google’s revenue from search as well as advertising services more than makes up for it. its investments in its app store.
“App developers will appreciate the opportunity to increase competition among app provider services, diversify their offerings, and thereby increase the range of options developers can choose from.”
App developers seem to agree. The co-founder of a US-based start-up that develops wearable health monitoring devices who declined to identify herself or the app, said: “India is the “one of the largest marketplaces in the world for all mobile technology, and a prime target for most upcoming tech developers. Although it’s easy to get to the Google Play Store and you get access to a massive share of the cake in this market, as new players in the app and wearable space, we also felt the need for more options and flexibility.
The start-up leader welcomed the idea of third-party payment options, where GPBS hinders the developer’s ability to balance payment options so premium services aren’t too expensive for users. “For new start-ups, like ours, our premium offerings are becoming an important source of returns. But we want to keep the prices of these services at manageable levels. consumer for these services, often at a daunting level.”
With a similar case for Apple looming on the horizon, the ICC’s mandate as well as the reception it has received from app developers make it clear that App Store services need to quickly relax their payment policies. and subscription while diversifying their offers.
