CCI’s Google Orders: How it Impacts Innovation for Apps | So Good News

An overview of the app economy, assessing Google’s response to two penalties recently imposed by the Competition Commission of India (CCI).

Apps are the bread and butter of mobile operating systems. According to Deloitte, India has the second largest number of mobile phone downloads at around 27 billion in 2021. Accounting for 11.6 percent of global app downloads, an Indian smartphone user spends more than 4 hours a day on apps. By 2026, app revenue is expected to reach $2.3 billion domestically.

Google’s Android operating system (OS) powers 95 percent of this app ecosystem. The CCI alleged that Alphabet-owned Google abused its “dominant position” in the ecosystem. It imposed a penalty of Rs 936.44 crore and also ordered the tech giant to cease and desist its policies on the Play Store.

Earlier, the antitrust regulator fined Google another Rs 1,338 crore for anti-competitive practices related to its Android operating system.

In its response, Google said “Indian (app) developers have benefited from the technology, security, consumer protection, and unmatched choice and flexibility offered by Android and Google Play.”

As expected, CCI’s order on the Play Store and Google Play Billing System (GPBS) has its supporters, and there are those who feel it will stifle innovation in the Indian app ecosystem.

“The order is not related to Google’s long history of development that has made Android the dominant operating system in the Indian market. Unlike its main competitors, the basic Android operating system is available for free on smartphones in this price segment. This has benefited India’s digital ecosystem,” said Gowri Gokhale, partner, Nishith Desai Associates.

Gokhale claims that given the operating system itself is free, Google can use a business model where some apps can be made available for free, while other monetized apps are promoted to maintain a steady stream of investment. This, in turn, is necessary to support a continuous innovation ecosystem for both Google and other app developers.

Gokhale said, “There seems to be no detailed investigation by CCI, such as a survey of end users and startups, comparing the quality of products offered by competitors and the quality offered by Google. Additionally, the CCI should consider the overall impact of Google’s app services, including how the massive availability of the Android operating system and the Play Store helped make education and logistics services easily accessible during the pandemic years. Section 19 of the Competition Act requires a holistic approach to be taken. It doesn’t seem to be in the order.”

The Alliance for Digital India Foundation (ADIF) agrees with the CCI orders. The organization, which has been pushing for legislation to rein in app defenders like Google and Apple, argues that both firms have used their dominance to grab more market and revenue share from app developers.

For example, a few months ago, Google only allowed app developers and users to use a payment system for in-app purchases or any payments. Mandatory usage came with a hefty fee, reduced from 30 percent to 15 percent. The company is also testing third-party payment options, but in a measured manner.

When the CCI asks Google to suspend its policies, app users can use third-party payment platforms like Paytm, PhonePay or UPI. This will lead to market competition, where many will decide on commissions – which could come down to 3-4 percent, industry players say.

Barnik Chitran Maitra, managing partner at Arthur D. Little India & South Asia, called the CCI order a “welcome step”. “Despite what tech majors like Google or Apple claim, this encourages more innovation and encourages players to create products. In an era where we’re moving toward a decentralized ecosystem like Web3, it doesn’t make sense for one company to have a market position that blocks 90 percent of searches, most premium devices, or even a dominant operating system. on premium devices,” he says.

Maitra believes the orders are a sign that Indian regulators are monitoring the “monopolistic practices of technology majors.” While he agrees that Android OS is indeed a cheap operating system, more affordable than its direct competitors, he points out that Google’s revenue from search as well as ad services exceeds its investment in the app store.

“App developers welcome the scope for increased competition among app provider services, diversifying their offerings and thereby increasing the range of options for developers to choose from.”

App developers seem to be equally sensible. The co-founder of a US-based startup that makes health tracking devices, who did not want to identify himself or the app, said, “India is one of the largest markets in the world for any mobile technology and a prime target for many up-and-coming tech developers. While the Google Play Store is easy to access and gives you access to a large share of this market, as new players in the app and wearables space, we felt the need for more options and flexibility.

The startup’s leader welcomed the idea of ​​third-party payment options, saying GPBS would hinder a developer’s ability to balance payment options so that premium services are not too expensive for users. “For new start-ups like ours, our premium offerings become an important source of revenue. But we want to keep the prices of these services at a manageable level. Even a 15 percent reduction in GPBS increases the cost to the customer for these services, often to an unsatisfying range.”

While a similar situation with Apple is on the horizon, the CCI mandate, as well as the welcome app developers have received, is a clear indication that app store services need to quickly simplify their payment and subscription policies, as well as diversify their offerings.