In-App Payment Mechanisms Of Google And Apple

Apps are changing the world, enriching people’s lives, and enabling developers to innovate like never before. Both Apple and Google enthusiastically endorse this thinking and approach. Yet, they place their commercial gains ahead of any public interest in promoting startups and innovation.  

When the Competition Commission of India, the national anti-trust regulator received complaints about Google’s insistence on Google Pay and a 30 per cent commission on in-app payment mechanisms set up by developers, it ordered an investigation by the Director-General of the Competition Commission. 

In fact, it is Apple that should be considered for investigation first. 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. Firstly, all fees/user-charges are moderated by Apple, then all fee changes are subject to approval from Apple and most significantly, Apple charges a 30 per cent commission on the sales. In fact, startups are most likely to begin with an operating loss as it were. To compound that with a 30 per cent 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 per cent commission to 15 per cent. But there is a rider. This reduced commission is applicable only if the business revenues are within $1 million. After that, it is back to 30 per cent commission. 

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. 

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

Not surprisingly, in the United States a Federal Judge 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 restrained 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 per cent of the Indian mobile market, it is only Google that is exercising its dominant position. But even though Apple may have only a 10 per cent market share, in volume terms this turns out to be huge number of people. Most iOS users hold important positions and for their participation in any new app, it is especially important to carry it to productive and meaningful fruition.  

In that light, why shouldn’t Indian developers question and hope for the removal of a special Apple or Google tax? 

The author is a former Secretary Government of India