By Abhiraam Shukla, Third Year Law Student, B.A. LL.B. (Hons.), The National Law Institute University, Bhopal.
Introduction
Recently, the parliament of South Korea enacted monumental legislation, dubbed as ‘Anti-Google law’, which inherently alters how tech giants like Google and Apple operate their app stores, i.e., Google Play and App Store respectively in the nation. While the law has been informally called the ‘Anti-Google law’, it will restrict both tech companies from forcing developers to use the in-app payment systems of Google and Apple when developing apps from the stores.
This momentous advance in the realm of technology law in South Korea required the aforementioned companies to open up their app stores to alternate ways of payment, and it is the first law to impose such restrictions on digital corporations. The ‘Anti-Google law’ sets a landmark precedent for other jurisdictions of the world, including India, where an application has already been filed in the national competition and antitrust regulatory body (Competition Commission of India) against Apple for its policies regarding the Apple app store. The Commission has entertained the application and issued notice to Apple.
This article seeks to analyze the Indian legal framework governing the In-App purchases and how the amendment by South Korea can act as a precedent for regulating competitive behavior in the Indian scenario. The author shall first peruse the practices of Google and Apple regarding the In-App payments and their commissions in relation to it. Furthermore, the author shall analyze the Anti-Google law of South Korea and the laws in other parts of the world. Lastly, the author peruses the Indian legal Framework regarding market competition and suggests amendments to it in order to restrict the monopolies exercised by Google and Apple in taxing the In-App purchases which occur on the apps featured in their webstores.
In-App Policies and Commissions of the Tech Giants
Both Apple and Google earn a significant amount of revenue from the app ecosystem. The majority of apps, which function on Android or IOS software are hosted on the app stores of these two tech giants. The majority of the apps have a feature called In-App payments which means buying certain special goods, services, or special features, from inside of an application. The revenue generated from In-App purchases or payments allows the developers to provide the apps for free.
Apple and Google force the developers of the apps featured on their stores to conduct the In-App payments through the processing systems owned by these companies, i.e., Google Play’s Billing System in the case of Google and Apple Pay for Apple. Both the companies charge commissions on such transactions which may extend to 30 percent of the amount the customer pays for an In-App purchase. Google specifically charges commissions of 30 percent on transactions that happen on its store Google Play. On the other hand, Apple also currently takes a cut of 30 percent on the In-App purchase which happens through its App Store.
This practice of restricting the developers and taxing the purchases has been opposed by various app developers. In 2020, Epic Games, the developer of one of the most globally popular games ‘Fortnite’ established its payment system apart from Apple Pay. Apple retaliated by taking down ‘Fortnite’ from its webstore, whereas Epic Games filed a suit against Apple in the US District of North Carolina terming the action ‘anti-competitive. Recently, the Court while deciding in favor of Epic Games held that:
“While Apple is not considered a monopoly and did not engage in anti-trust behavior on nine of ten counts, Apple’s conduct in enforcing anti-steering restrictions is anticompetitive.”
Thus, the US Courts took cognizance of the anti-competitive nature of such commissions and ordered Apple to change its policies and enable developers to use alternative payment systems in their apps.
In the same way in the European Union, Spotify had filed a complaint against Apple for engaging in unfair policies. In the preliminary hearing EU observed that: “According to our first findings, Apple acts as a gatekeeper for iPhone and iPad customers via the App Store. Apple competes with music streaming services with Apple Music. Apple deprives users of cheaper music streaming options and hinders competition by imposing rigid standards on the App Store that harm competing music streaming services. This is accomplished by charging rivals large commission fees on each transaction in the App store and prohibiting them from alerting their customers about other subscription options.”
Law to Restricting the Monopolies of Google and Apple vis-à-vis In-App Payments
Since August 2020, lawmakers in South Korea had proposed bills to prohibit the global tech companies from wielding their dominance in the app payment market. The amendment prohibits app store operators with dominant market positions from forcing payment systems on content suppliers and “inappropriately” delaying or deleting mobile material from app markets, according to South Korean parliament records. It also permits the South Korean government to demand that an app market operator “avoid damage to users and defend their rights and interests,” investigate app market operators and mediate disputes about app market payment, cancellations, or refunds.
Apart from South Korea, European Union has also introduced the Digital Markets Act, as per which large tech companies could attract massive fines for offenses that include giving priority to their services and products over smaller competitors.
In the USA, Senators in the US Congress have also introduced a new bipartisan measure to prohibit Apple and Google from imposing limitations on app developers. Senators Richard Blumenthal, Amy Klobuchar, and Marsha Blackburn have introduced legislation that would prohibit app developers from accepting certain contractual commitments from major app shops in order to reach customers.
Indian Legal Framework Regarding the Activities of Google and Apple
In India, the Competition Commission of India is the regulatory body that is responsible for enforcing the provisions of the Competition Act, 2002, encouraging competition, and preventing acts that have a significant negative impact on competition in India.
Indian Competition Law proscribes the use of a dominant position by an entity to cause loss to other entities or to negatively influence competition in the market. Since, only Apple and Google are the two owners of the app stores on which developers would have to feature their apps, the positions of both these entities are dominant in nature. Apart from that, forcing the app developers to use only their payment methods in anti-steering activity as has been pointed out in the Epic Games case in the US Court.
Section 4(2) of the Competition Act specifically proscribes the activity of Google and Apple by outlawing any activity which
“(i) directly or indirectly imposing unfair or discriminatory condition in purchase or sale of goods or service; or (ii) directly or indirectly imposing unfair or discriminatory price in purchase or sale (including predatory price) of goods or service;”
As per the Indian legal framework, the acts of Apple and Google are specifically barred and ultra vires of the Competition Act, 2002. The author that the case currently filed in the Competition Commission of India results in the commission ordering investigation against the entities and giving a judgment restricting the practices of both of the companies.
Conclusion
Vijay Shekhar Sharma, the founder, and CEO of India’s largest payments app Paytm has repeatedly referred to commission as a “tax,” citing the need for Indian developers to have their app store. Sharma has also asked the government and regulators to intervene to help resolve the problem. Thus, the situation in India is certainly dire.
Apart from provisions of the Competition Act, 2002, the Indian Parliament should observe the provisions of the Anti-Google law and try to amend the Information and Technology Act, 2000. The amendment of the Information and Technology Act, 2000 is necessary in order to empower the Government to demand that an app market operator “avoid damage to users and defend their rights and interests,” investigate app market operators and mediate disputes about app market payment, cancellations, or refunds, exactly like what has been done in South Korea. Since Apple Webstore and Google Play are “intermediaries” as per the definition given in section 2(w) of the Information and Technology Act, 2000, the provisions of the same are applicable to them.
Hence, in the author’s opinion, the Government should constitute a committee to strictly determine the percentage of “cut” which can be taken by Google and Apple from the transactions which are conducted through their payment systems. On the basis of such a report, the Government must amend Chapter XI of the IT Act, which states the offences under the Act, and add the offence of charging unreasonable taxes on in-app purchases by intermediaries. This shall curb the monopoly of tech giants on such markets and shall ensure that both of these tech giants do not abuse power in their hands to their monetary benefits.