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App stores are core digital infrastructure that must be under government oversight

By virtue of being gatekeepers to the digital economy, policymakers should consider classifying app stores as core digital infrastructure that is brought under government oversight

March 31, 2022 / 11:48 AM IST
Representative Image

Representative Image

Sijo Kuruvilla George

The Netherlands’ competition authority (ACM) has ruled that certain policies of Apple’s App Store are anti-competitive and detrimental to the app developers’ rights. These problematic policies include anti-steering clauses, which required app developers to only use Apple’s proprietary payment system for in-app purchases (IAP), as well as charging commissions as high as 30 percent on IAPs.

In response to the judgment, Apple announced that it would allow app developers to use other payment systems, but reduced the commission by only 3 percent for developers choosing an alternative method. It also announced onerous administrative overheads, including asking developers to create separate app binaries for The Netherlands to be able to offer different payment systems.

Even as there was widespread outcry against these changes within the developer community, the ACM found these measures insufficient, and fined Apple another $5.7 million on February 28. This was the sixth such weekly fine levied by the ACM since Apple first missed a January 15 deadline to make changes that the watchdog had mandated.

Both the dominant app store players — Apple and Google — have sought to impose such policies on developers, reducing flexibility, and innovation in operations, and affecting bottom lines. Apple and Google have become ‘gatekeepers’ that control, and dictate terms for app distribution worldwide.

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Of course, app stores provide important services to both developers and customers, but despite the benefits, they are using their dominant position to impose anti-competitive policies.

Due to these restrictive policies, at stake is India's digitisation project.

If developers are required to pay high commissions, they will have no choice but to pass these costs on to consumers. A case in point is the subscription fee charged on ‘YouTube Premium’. Google, which owns YouTube, does not charge any commission for purchases on Android while Apple does. Consequently, a monthly subscription to YouTube Premium costs Rs 129 through Android, but it is priced at Rs 169 on the Apple App Store — that’s about a 30 percent increase.

For the Indian market, such increased costs will make apps less viable, and may force app developers to adopt other business models like ad monetisation. This can lower the quality of the user experience, and incentivise the collection and sharing of personal user data, which could be detrimental to user privacy.

Apple and Google also control the app review process. This puts them in a quasi-regulatory position; they get to decide which services/apps are allowed and which aren't, and which apps violate their policies. In June 2016, Spotify wrote to some legislators in the US complaining that Apple was “causing grave harm to Spotify and its customers” by rejecting an update to its iOS app. In September 2020, citing Paytm’s violation of Google Play’s policy against gambling, the app was abruptly removed from the Play Store. The removal from the store caused panic among users and Paytm had to rush to issue clarifications. While the app was later reinstated, Paytm complained that Google did not follow due process before taking such a drastic decision.

Apple has blocked the emergence of cloud gaming. A report by UK CMA notes that a switch to cloud-based applications can reduce dependence on mobile hardware, and may make it easier for users to switch away from Apple.

The good news is that regulators and policymakers around the world have taken notice. In the US, the EU, the UK, Japan, and India, antitrust authorities are investigating Apple and Google’s conduct. In August, South Korea became the first country to take legislative action on this issue by passing a law that disallows app stores from forcing developers to use proprietary billing systems. The US is also considering similar action through its Open App Markets Act.

It is unlikely that imbalances will get corrected through market forces. Moreover, by virtue of being gatekeepers to the digital economy, policymakers should consider classifying app stores as core digital infrastructure that is brought under government oversight. Among the solutions that could be considered are removing restrictions on developers, instituting fairer review processes, and unbundling of services offered by app stores so that it’s easier to determine the ‘fair’ value of each service. Users could also be offered a choice in third-party app stores, instead of being directed to default app stores to reduce their dependence on Apple and Google.

India has been a trendsetter in tech regulation. A balanced and long-term approach that promotes competition and protects stakeholders’ interests is the need of the hour.

Sijo Kuruvilla George is Executive Director, Alliance of Digital India Foundation. Views are personal, and do not represent the stand of this publication.



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Moneycontrol Contributor
first published: Mar 31, 2022 11:46 am
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