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CCI investigates Google's user choice billing system
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Startups argue excessive service fees hinder app development and market access
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CCI finds Google charging developers four to five times more than costs
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Key observations include entry barriers, lack of competition, network effect, unequal bargaining power, and monopoly
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Google's delisting of Indian apps leads to app reinstatement discussions
In a recent clash between Indian startups and Google, the Competition Commission of India (CCI) has set its sights on Google's controversial user choice billing system. This move follows allegations of antitrust violations, prompting the CCI to order a thorough investigation into the matter. Here’s a breakdown of the unfolding saga:
The CCI Order
The CCI, after preliminary examination, has instructed its director general to conduct a thorough investigation and submit a detailed report within two months. The commission's order cited Google's potential violation of Sections 4(2)(a), 4(2)(b), and 4(2)(c) of the Act, prompting the need for further scrutiny.
Image Source: The Economic Times
Legal Background
Three separate cases filed by key players including People Interactive India (parent company of Shaadi.com), Mebigo Labs (owner of Kuku FM), and industry bodies Indian Broadcasting and Digital Foundation (IBDF) and Indian Digital Media Industry Foundation (IDMIF) triggered the investigation. Allegations primarily revolve around Google's alleged infringement of Section 4 of the Competition Act, particularly focusing on the substantial commission fees ranging from 11% to 26% imposed on app developers, even for transactions conducted through alternative billing systems.
Image Source: The Daily Guardian
Startup Allegations
Startups contend that these exorbitant service fees hamper their ability to invest in app development, potentially leading to closures due to heightened operational costs. This, they argue, restricts market access for smaller developers.
The Fine Print
In its ruling, the CCI acknowledges Google's dominant position in the app market. Despite Google's claim that it requires only 6% of revenue share from paid downloads and in-app purchases to cover the costs of its services, the commission found that Google is charging app developers four to five times more than its purported costs. This discrepancy raises concerns about Google's abuse of its dominant position.
Image Source: Inc42
Key Observations Made by CCI:
- Entry barriers and lack of competition characterize the Android app marketplace.
- Google benefits from a substantial network effect, solidifying its dominance.
- The ecosystem lacks self-correction mechanisms, hindering fair pricing.
- App developers face unequal bargaining power and must accept Google's terms.
- Lack of alternatives forces developers to comply with Google's unilateral conditions.
- Google leverages its monopoly to gain unfair advantages.
- Dependency on Google Play underscores the unfairness of its pricing.
- Revenue distribution within Google Play appears skewed, favoring Google.
- Allegations of discriminatory practices against certain app developers, notably in the OTT space, have also been considered.
Recent Developments
The CCI's order follows Google's delisting of several Indian apps from its Play Store on March 1 for non-compliance with its billing system. In response, affected startups engaged with union ministers and senior officials of the Ministry of Electronics and Information Technology. Subsequent discussions led to Google reinstating the delisted apps on March 5.
The CCI's decision to investigate Google's billing practices marks a significant step in addressing concerns raised by Indian startups. It underscores the importance of fair competition and consumer choice in the digital marketplace, setting the stage for potential regulatory interventions to ensure a level playing field for all stakeholders.
Read here for more details: Shaadi.Com To Naukri.Com, Google Removes 10 Indian Apps From Play Store Over Fee Dispute
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