Google slashes Play Store commission to 15% amid abuse of dominance investigation

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Google has announced slashing of its Play Store fees for all subscription-based services to 15 percent from the existing 30 percent from January 1, 2022. This comes as Apple and Google face increased scrutiny over their App Store and Play Store practices across the world. Google is facing an investigation by the Indian competition watchdog for abuse of dominance.

Popularly known as the ‘Play Store tax’ – the practice is under legal scrutiny

In September 2021, a federal judge for the Northern District of California disposed of a case filed by Fortnite creator Epic Games by permanently restraining Apple from mandating developers to only use the in-app purchase option managed by Apple. Epic Games, also sued Google, after the search giant removed the gaming unicorn’s Fortnite from Play Store for bypassing its payment system.

In June 2021, Google was sued by 36 US states and Washington D.C. alleging that the company illegally abused its power over the sale and distribution of apps through the Play Store on mobile devices. The lawsuit, filed in California federal court, challenges Google’s policy forcing Google Play app developers to pay a 30 percent commission fee on sales made through the app. It is mandatory for all android developers to use Play billing systems from April 1, 2022.

Play Store developers already under reduced rates

The company said that 99% of developers already qualify for a service fee of 15% or less under various programs. Starting July 1, the Company announced a reduced service fee of 15% — down from 30% — for the first $1 million of revenue developers earn using the Play billing system each year. Now, the reduced fee is applicable to all categories irrespective of the revenues.

Currently, the 15 percent fee is applicable after 12 months of recurring subscription. “We’ve heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate. So, we’re simplifying things to ensure they can” said Sameer Samat, Vice President, Product Management, Google in a blog post.

For e-books and on-demand music streaming services, where “content costs account for the majority of sales“, will be eligible for a further decrease in its service fee, which “can be as low as 10 percent,” the company said. This reduction is only applicable for apps forming part of the Media Experience program which is again an application-based offering and at the company’s discretion.

Concerns from industry on the ‘Play Store tax’

Recently, AIDF, a New Delhi-based think tank consisting of Indian entrepreneurs and startups, has reportedly approached the Competition Commission of India (CCI) to seek interim relief against the mandatory implementation of the Google payment systems till the investigation into the tech giant’s abuse of dominance is complete.

As per reports, AIDF said Google’s decision to reduce commissions for in-app purchases is a “deflect and district tactic”. AIDF representing various tech startups has explained that Google’s announcement might benefit developers who are already on the Play billing system but it fails to address the issues of developers who stand to be affected by Google’s earlier announcement of forced adoption of its billing system April 2022.

The fact that Google is able to unilaterally declare and dictate prices, as is evident from this announcement as well, lies at the heart of the issue. What developers are asking for is fairness and not benevolence in the form of “reduced” commission percentages,” Sijo Kuruvilla George, Executive Director, ADIF was quoted in media reports.