The Madras High Court dismissed an appeal from 14 startup apps on an order dated January 19, 2024, against Google’s billing policy, upholding the judgement pronounced by the Single Bench of the same High Court on August 3, 2023, which held that the High court lacks jurisdiction on the original side to admit a civil declaration or declaration against the terms and conditions of the payment/billing arrangements between the App developers and Google.
Case Timeline and Facts
Google Play’s billing system is mandatory for developers selling in-app goods and services on the Play Store. This includes selling one-time products or subscriptions on a recurring basis. Apps using alternative in-app billing systems are required to remove them to comply with Google’s policy. For Indian systems, Google mandates the use of an alternative billing system alongside its own. However, utilizing third-party billing systems incurs a service fee ranging from 11% to 26%. As of February 22, 2023, developers have the option to offer in-app billings.
In summary, Google enforces its billing system for in-app purchases on the Play Store, requiring compliance from developers, especially those in India. Developers may choose to use third-party billing systems, but this comes with additional costs in the form of service fees.
Events Leading to Google’s Removal of Apps From PlayStore
On March 1st, Google announced the removal of apps from its Play Store for non-compliance with its payment policy. At least 23 apps from nine Indian developers, including Matrimony.com, InfoEdge, People’s Interactive, Alt Balaji, Aha, and Stage, were delisted. This affected around 95% of Indian smartphone users, as they couldn’t search or download these apps from the Play Store. This action occurred after the Supreme Court declined to restrain Google from removing apps that don’t comply with its billing policy.
However, Google reinstated dozens of apps in a spirit of cooperation, which were delisted on March 1 for resisting the platform’s fees on in-app payments.
On October 20, CCI fined Google Rs 1,337.76 Crore for misusing its dominant position in various markets through its Android mobile operating system. Additionally, it provided a list of about twelve measures that Google must follow.
This directive required Google to stop engaging in anti-competitive practices that violate the Competition Act, 2002, and make necessary changes by a specified deadline. Despite contesting the penalty in different forums, Google eventually paid the entire fine imposed by the CCI in the Android case. Subsequently, on October 25, 2023, CCI imposed a fine of Rs. 936.44 crore on Google for engaging in anti-competitive practices related to its Play Store policies. This marked the second ongoing case against the tech giant by the CCI.
The Competition Commission of India (CCI) found Google guilty of abusing its dominant position and issued a cease-and-desist order. As part of the order, the commission has mandated eight corrective measures that Google Play must implement to address the anti-competitive practices.
To circumvent the CCI’s order, Google expanded its User Choice Billing (UCB) policy to all developers in India and updated its UCB policy. Google began permitting developers in India to utilize alternative billing systems, reducing their service fee to Google by 4%. Developers were presented with three options to comply with the policy: adopt Google Play Billing System (GPBS), implement an alternative billing system, or operate on a consumption-only basis without incurring a service fee.
However, Indian app developers expressed dissatisfaction for two primary reasons. Firstly, even after opting for an alternative billing system, they were still required to pay Google either an 11% or 26% fee, which they deemed unfair. Secondly, they argued that this practice violated the Competition Commission of India’s (CCI) order. The service fee charged remained as high as 26%, representing only a marginal decrease from Google’s previous policy.
Following this, Novi Digital, the owner of Disney+ Hotstar, filed a plea against Google’s new billing systems contending that as per the new billing policy app developers have to pay 11% fee to Google Pay even if they opt for a third-party payment system. Novi Digital has been directed to pay 4% commission on Play Store downloads.
Appeal Before Madras HC
In August 2023, the Madras High Court dismissed petitions by 14 companies, including matchmaking website Bharat Matrimony and edtech firm Unacademy, against Google’s in-app billing policy and said the issue fell in the ambit of the Competition Commission of India (CCI). The startups had appealed against this decision. Now that their appeal has been dismissed by the division bench, they can approach the Supreme Court.
Contentions of The Parties
Indian startups have alleged before the High Court that Google introduced the User Choice Billing (UCB) system as a means to circumvent the order issued by the Competition Commission of India (CCI). The startups argued that the charges imposed under the UCB system are illegal and contravene the CCI’s directives. By petitioning the court to declare the charges under the UCB system as illegal, Indian startups seek to challenge Google’s billing practices and ensure compliance with the CCI’s order. They argue that Google’s introduction of the UCB system constitutes an attempt to bypass regulatory scrutiny and maintain its dominance in the app store market.
Court’s Observation & Order
The court emphasized that the remedy available under the Competition Act provides a more comprehensive avenue for addressing issues related to competition law violations compared to civil court proceedings. By stating this, the court highlighted the significance of the Competition Commission of India (CCI) and its authority in adjudicating matters related to competition law.
Under the Competition Act, parties aggrieved by decisions of the CCI have the option to challenge these decisions through an appeal process before the National Company Law Appellate Tribunal (NCLAT). This appellate tribunal serves as a specialized forum for reviewing and adjudicating appeals related to competition law matters.
Analysis
This legal challenge highlights the ongoing tensions between tech giants like Google and smaller startups over issues of market dominance, fair competition, and regulatory compliance in India’s digital ecosystem.
By this order, the court has directed the parties to pursue appeals through the NCLAT, the court reinforced the importance of specialized tribunals in addressing complex legal issues related to competition law. This approach ensures that matters involving competition law violations are adjudicated by expert bodies equipped with the necessary expertise and understanding of competition law principles.
Overall, the court’s statement underscores the significance of the Competition Act and specialized tribunals like the NCLAT in providing effective remedies for addressing competition law violations and promoting fair competition in the marketplace.
Conclusion
In conclusion, if Google’s current app billing system remains unchanged, it will present a significant challenge for Indian companies associated with the Play Store. The ongoing fees and restrictions imposed by Google on app developers could hinder the growth and competitiveness of Indian businesses in the digital marketplace. Furthermore, the lack of flexibility and transparency in Google’s billing practices may deter new startups from entering the market or discourage existing developers from expanding their offerings. This could have broader implications for the Indian economy, as the tech sector plays a crucial role in driving innovation and employment opportunities.
Moreover, the removal of apps from the Play Store due to non-compliance with Google’s billing policy system could have wide-ranging consequences for developers, users, and the mobile app ecosystem as a whole.
Author: Saurojit Barua