In-App Payment Restrictions of Google and Apple are Monopolistic

The Competition Commission probe into Google’s in-app payment condition is timely. But it is surprising that Apple is being spared.

It is learnt that the CCI, the national anti-trust regulator has received complaints about Google’s insistence on Google Pay and a 30% commission on in-app payment mechanisms set up by developers. It has ordered an investigation by the Director-General of the Competition Commission.

However, it is Apple that should be considered to be investigated at par with Google. All developers that use an iOS system have to necessarily use the in-app payment mechanism of Apple. Apple currently forbids apps from linking out to the web to offer an alternate payment system, outside of Apple's purview. So, all fees are moderated by Apple, then all fee changes are subject to approval from Apple and most significantly, Apple charges a 30% commission in the sales. In fact, start-ups are most likely to begin with an operating loss as it were. To compound that with a 30% commission is to bleed them – this practically demolishes any operating margin that a small developer may hope to retain – and leads them to early death.

It is only recently that Apple has, under international pressure, introduced a scheme for Small Businesses under which they reduce the 30 % commission to 15%. A detailed agreement is signed between the developer and Apple. And there is a rider. This reduced commission is applicable only if the business revenues are within 1 million USD. After that, it is back to 30% commission. The agreement takes a few weeks to be approved. 

Clearly, both Google and Apple are using their duopolistic stranglehold over the mobile operating system market to dictate their terms. This is an unfair business practice that should not only be challenged but also undone because it stifles innovation and is an entry barrier to new competitors.

The plea that is being taken is that they provide advanced security to the payment system and therefore they are within their rights to charge a special and enhance commission. This is a flawed argument, because nobody is asking them to take responsibility for security of payment transactions. Besides, this technology is well developed and there are sophisticated models and fool proof techniques being deployed by frontline fintech companies. What is the guarantee that Google and Apple payment mechanisms are infallible?

It is only now that a federal judge in the United States has issued a permanent injunction in the celebrated Epic v. Apple case, putting new restrictions on Apple’s App Store rules and bringing months of bitter legal jousting to a conclusion.

Under the new order, Apple is:

"permanently restrained and enjoined from prohibiting developers from including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and communicating with customers through points of contact obtained voluntarily from customers through account registration within the app."

In short, iOS apps must be allowed to direct users to payment options beyond those offered by Apple.

The Competition Commission of India is believed to be harbouring the premise that since android systems command more than 85% of the Indian mobile market, it is only Google that is exercising its dominant position. But even though Apple may have only a 10 % market share, in volume terms this turns out to be huge number of people, many of them in important positions whose participation in any new app is especially important to carry it to productive and meaningful fruition.

So how much should these platforms charge for in-app purchases? Today, fintech payment gateway companies like Razorpay and PayTM charge between 1-2.5 % of the sale price per transaction depending on the modality  used -- debit card, netbanking, credit card etc. For UPI transactions the fee is negligible. Anything within these margins should be acceptable and reasonable as a support service or transaction fee for in-app purchases, of course, presuming that in-app purchase through the Google or Apple (i-tunes) mechanism was considered unavoidable. Clearly 30% is stark and exploitative compared to 2.5% and is grossly unfair and anti-competition.

The goal of any anti-trust body should be to prevent and neutralize trade practices that enable any business entity to take unfair advantage of their dominant market position. In that light, it is indeed reasonable for Indian developers to ask that watchdog of fair business practices, the Competition Commission of India: is it fair that infant Indian developers are being levied an exploitative Apple or Google tax?