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Apple and Google’s app stores aren’t yet abusing market power

App Store and Google Play Store both charge app developers, who use these facilities to host apps for users to download, 30% of any fees paid, and prohibit in-app purchases that circumvent this commission to the operating system provider (AFP)Premium
App Store and Google Play Store both charge app developers, who use these facilities to host apps for users to download, 30% of any fees paid, and prohibit in-app purchases that circumvent this commission to the operating system provider (AFP)

  • Apple and Google charge app developers their 30% commission in return for one, providing access to vast armies of consumers and, two, ensuring that the apps hosted on these stores are free of malware

The Competition Commission of India has ordered an inquiry into Apple’s App Store policies, based on a complaint by a Non-Governmental Organisation (NGO), Together We Fight Society. It has found prima facie merit in the charge of abuse of market dominance, and initiated a detailed review.

App Store and Google Play Store both charge app developers, who use these facilities to host apps for users to download, 30% of any fees paid, and prohibit in-app purchases that circumvent this commission to the operating system provider. Google and Apple have offered steep discounts to smaller players, after challenges in their home market, the US, and in India. Do the charges of abuse of market power stick?

Suppose you really like a neighbourhood store, appreciate its look and feel, the display on store shelves, and the assurance that you would get authentic stuff, no knockoffs. You regularly buy your groceries there. Then you discover that it is charging you a little more than another store down the street, one whose overall ambience you do not really care for. How strong is your case for insisting that the owner of your favourite store sell you his wares at a price that is competitive with that of his rival down the road?

If you went to consumer court or even the Competition Commission of India with your demand, would you be entertained? Absolutely not, you would be told to shop from other stores whose prices suit you. This is straightforward. Is the case analogous, with Apple’s App Store or Google’s Play Store?

Not entirely. If you use a mobile phone, your choice essentially boils down to the Android operating system or the Apple’s i-operating system. Once you have chosen either, you are constrained to limit your app purchases from their respective stores. You are a captive consumer. You are entitled to protection from being abused.

It is like you are in an isolated town, far away from other places of civilisation. Your town has just one store. You have no choice but to buy your produce from that store. The situation is ripe for the store to fleece you. You do need regulatory protection against abuse of market dominance by the store.

Again, the App Store and Play Store are not entirely analogous. These are not just stores but also a market for vast armies of consumers, consumers, whom app developers would have had a tough time accessing, but for their being hosted on the App Store/Play Store.

In the case of Google’s Android, the system allows apps to be downloaded from non-Play Store marketplaces. But there is no guarantee of these apps being free of malware, as there is when an app is hosted on Play Store.

Apple and Google charge app developers their 30% commission in return for one, providing access to vast armies of consumers and, two, ensuring that the apps hosted on these stores are free of malware. It has worked fine, so far and allowed thousands of app developers to create a business that would have been still-born but for the consumers who assemble at these stores.

However, that does not testify to the institutional fairness of the system. Suppose Apple and Google decide to raise their commission from 30% to 70% or 90%. Surely, the need for a regulator to step in and cap prices would be beyond dispute.

Those who campaign against Big Tech because they see large businesses with trillions of dollars in valuation and an enormous influence on how people live and think, and are repelled by Big Tech’s power, miss the point. So far, Big Tech has done more good than harm for society. Many of the good things they do will be aborted if they are broken up. But there is a case for monitoring how they use their market power.

With respect to Google and Facebook cornering the giant’s share of online advertising, serving as aggregators of content developed by others, without sharing the revenue with the content developers, that is indeed an abuse of dominance. There should be regulatory action to correct that.

Witch hunts against the likes of Google and Apple are misplaced, but there is a case for competition and fair business practice regulators to keep their eyes peeled, and step in to apply correctives, as and when their need surfaces.

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