Why does Google find itself in CCI's crosshairs?

Arcade game “Snake,” which first featured in Nokia 6110 phones in 1997 and went on to become a sensation, hooking an entire generation, is believed to be the first app. And in just over two decades, apps have become an integral part of our daily life, be it 10-minute groceries or finding a date.

And in India, nine out of ten smartphone users access these apps over the Google-owned Android operating system.

Now, the Competition Commission of India’s recent decisions could change the way they use and experience apps.

Let us start with the latest order. CCI has slapped a penalty of about 936 crore rupees on Google. Why? For allegedly abusing its dominant position with respect to its Play Store policies. CCI has also issued a cease-and-desist order and suggested eight corrective measures.

These include allowing Play Store apps to use third-party billing service providers. To date, Google has required app developers to exclusively use its Google Play Billing System, or GPBS, for all customer billings. Using GPBS was made mandatory for paid apps and in-app purchases. Not using GPBS meant that app developers would not be allowed to list their products on the Google Play Store. CCI has said that this was an unfair condition on app developers.

Not being listed on the Google Play Store would be a death blow for any app in India. Google’s Android mobile operating system dominates in India with a market share of about 95 per cent. Apple's iOS has close to a 4 per cent share.

Google was also found to be not using GPBS for its own applications such as YouTube. The CCI called this a discriminatory practice. Google’s policy was also denying market access to competing mobile wallets and apps facilitating payment through UPI.
 

Coming back to Tuesday’s order, what are the other corrective measures? Let us say a condition is unfair, unreasonable, discriminatory or disproportionate to the services provided to app developers. Then, it cannot be imposed by Google. This includes price-related conditions. To app developers, Google says it offers services like hosting and distribution, discovery and technical infrastructure, among others.

The search giant must also publish its payment policy in an "unambiguous manner". And, the policy should not discriminate against other apps that allow payments through UPI in favour of their Google counterpart.

Now, let's come to the impact.

Both Google and Apple charge developers between 15 and 30 per cent in commissions on the purchase of paid apps and in-app purchases. A number of Indian developers have objected, saying that high commissions could significantly dent their profit margins. This would then erode business viability and stifle innovation.

Indian app developers have hailed CCI’s latest decision as a collective win for start-ups. This is despite the fact that Google had launched a pilot programme in March, allowing a few developers to offer an additional billing system. Google had also announced a cut in commissions to 15 per cent from 30 per cent for the first 1 million dollars in revenue that developers earned each year, following a similar move by Apple.

Start-up founders and CEOs have said that CCI’s decision would protect Indian entrepreneurs from “digital colonialism”. They also say that a precedent has been set for how other tech companies will treat Indian developers and consumers.

South Korea is the only other country that has fined Google for its pricing strategy. The country amended its telecommunications Act last year to prohibit app store operators from forcing the use of only their proprietary billing systems.

While Indian app developers rejoice, one expert has said that CCI’s remedies relating to Google’s Play Store policies were excessive. He added that they would raise significant challenges and impact Google's incentive to innovate.

After CCI’s second penalty, Google said that Indian developers had benefited from the technology and flexibility of Google Play and its Android OS. The tech giant also said that it was reviewing the decision to evaluate its next steps.

Last week, CCI imposed a penalty of about 1,338 crore rupees on Google. Why? For allegedly abusing its dominant position in multiple markets in the Android mobile device ecosystem. In that instance too, the CCI issued a cease and desist order and asked Google to modify its conduct within a defined timeline.

Under the Android OS licensing terms, manufacturers have to pre-install the entire Google Mobile Suite on their device. And, there is no option to uninstall the apps. Now, CCI's order will give device makers the freedom to opt for app ecosystems other than Android.

However, experts have pointed out that there is a dearth of popular substitutes. You don't need to look beyond the likes of YouTube and Google Maps to verify that fact. As such, many manufacturers will have little incentive to switch from popular Google apps to alternatives. Not to mention, device makers have saved millions in R&D costs by using Google's OS.