Apps and payments: What is the controversy about Google Play Billing System

Tech giant defends itself as Competition Commission fines it Rs 936.44 crore for unfair business practices

India’s antitrust regulator on Tuesday fined Google Rs 936.44 crore, announcing the second such action against the US tech giant for anti-competitive practices. The Competition Commission of India (CCI) said Google used its "dominant position" in the Play Store—the company’s app store—to force app developers to use its in-app payment system.

The CCI earlier on Thursday fined Google another Rs 1,338 crore for anticompetitive practices related to its Android operating system.

What is the Google Play Billing System?

The Google Play Billing System (GPBS) has to be used by app developers and for in-app purchases by customers. App developers not using GPBS cannot list their products on the Play Store. The policy was first announced in October 2020.

According to Google’s webpage, GPBS must be used for buying digital items (such as virtual currencies); subscription services; app functionality or content (such as an ad-free version of an app), and cloud software and services (such as data storage services).

CCI’s Tuesday order comes as Google is set to announce a payment policy coming into effect on October 31.

Developers protest Google's payment systems

Developers in India and other places have spoken against how Google and iPhone-make Apple use their dominant position to not allow third party billing systems. The companies say that if they allow third-party billing it will lead to revenue loss from their cut in app store and in-app sale. Google earlier had a default 30 per cent commission on transactions happening through its Play Store fee.

After criticism by developers and regulators, Google announced changes in 2021. It slashed its cut to 15 per cent from 30 per cent. 
 

Effective July 1, 2021, Google reduced the service fee on the first $1M (USD) in annual developer earnings to 15%. Every developer, regardless of annual revenue, is eligible for the benefit of this change. On October 21, 2021, Google announced further changes to Google Play’s service fee model, cutting fees for subscriptions from 30% to 15% and further reducing the fee for specific verticals of apps in the Play Media Experience Program to as low as 10%. 

Google claims that today, 99% of developers globally qualify for a service fee of 15% or less. 

The CCI investigation

In November 2020, the CCI ordered an investigation into Google making GPBS mandatory. It said that prima facie such a policy is “unfair as it restricts the ability of app developers to select a payment processing system of their choice.”

Based on the investigation, the commission declared that making GBPS mandatory "constitutes an imposition of unfair conditions on app developers" and violates the CCI’s provisions.

The CCI found that the GBPS prohibited app developers from redirecting links to any third-party as an alternative payment method, or even using language that might encourage users to purchase items outside the Play Store. Google does not use GPBS for its own applications like YouTube, said CCI’s order.

The CCI’s order

Given the findings of its investigations, the regulator has asked Alphabet-owned Google to not restrict app developers from using any third-party billing/ payment services, or discriminate against such apps in any manner.

Google was asked to stop imposing anti-steering provisions, so that developers could link their apps to external websites where users can purchase virtual currency or items without using the Play Store payments system.

Lastly, Google has been instructed to lay down a transparent policy on data collected on its platform and how such data is used, including what parts of such data are shared with app developers.

Google’s response

Google on Wednesday issued an official statement saying, “Indian developers have benefited from the technology, security, consumer protections, and unrivalled choice and flexibility that Android and Google Play provide. And by keeping costs low, our model has powered India's digital transformation and expanded access for hundreds of millions of Indians. We remain committed to our users and developers and are reviewing the decision to evaluate the next steps.”  

Google is running a pilot programme in India and a few other countries, wherein participating developers can offer additional billing systems to users, for a service fee between 6 to 11 percent. The pilot excludes game developers.

South Korea was the first country that last year made Google change its billing system and allow third party payment options.