Mint Primer| Google vs Indian startups row: its global implications

The fundamental reason for Google suspending Indian apps was the non-payment of its Play Store service fee, a charge that Google levies on apps that earn through subscriptions.
The fundamental reason for Google suspending Indian apps was the non-payment of its Play Store service fee, a charge that Google levies on apps that earn through subscriptions.

Summary

  • Google has dashed off notices to startups suspending their apps from Play Store, sending these firms into a tizzy. As they look to the Supreme Court and the Competition Commission of India (CCI) for a possible resolution, Mint asks: could this row have a wider impact?

Why did Google make such a move?

The fundamental reason for Google suspending Indian apps was the non-payment of its Play Store “service fee"—a charge that Google levies on apps that earn through subscriptions. At the moment, this fee ranges from 11% to 30%. Startups, including Bharat Matrimony and Shaadi.com, have refused to pay up. Since Indian startups also failed to win an injunction against this fee in an appeal against Google at the Supreme Court, the American tech major has decided to suspend over 10 Indian apps with over 100 million cumulative downloads. At the same time, it has restored the apps that paid the fee.

In what way did this affect India’s startups?

Founders of all major suspended apps told Mint that Play Store is their primary discovery platform. It thus contributes to most of their revenue, and this suspension could reduce their earnings by half. The founders also said that they spend heavily to rank in Google’s search, too. Therefore, adding the service fee to it means Google could get as much as 80% of the revenue earned by these Indian startups. This would make their businesses unviable. Startups won’t need to pay any service fee if they accept payments outside of their app but startups say this process disrupts their user experience.

How soon could a resolution be worked out?

The competition commission is reviewing Google’s compliance of its 2022 order on alleged anti-competitive practices, and a report on this could be published soon. The Supreme Court is expected to hear this matter and IT minister Ashwini Vaishnaw has stepped in. So, a resolution is expected either way. Google has temporarily restored the apps.

What are the key arguments?

Startups say the service fee amounts to abusing market dominance. Of the 700 million smartphone users in India, 85% use Google’s Android, which also makes these startups dependent on Google for a vast part of their businesses. They claim Google’s success is due to them. Google claims the policy of service fee was always clear, and that the fee isn’t illegal. CCI’s 2022 verdict pointed out it’s not a pricing regulator. Lawyers said the startups’ outreach to customers is because of Play Store’s network.

Could this row have a wider impact?

Yes. Google’s anti-competition lawsuits and regulatory scrutiny in the US influenced the CCI’s inspection of the company’s India practices. What precedent the dispute lays down will depend on the ministry of electronics and IT’s interpretation, the CCI’s follow-up order and the Supreme Court’s verdict. With India being one of the largest markets alongside the US, the outcome could be key to deciding how anti-competition allegations are investigated around the world. A precedent is likely to be set for other app marketplaces.

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