Startups Vs Google's Billing Policy: Battle for Market Fairness

Indian startups are eagerly anticipating the Madras High Court's ruling on June 19 regarding Google Play's new billing system. These startups have accused Google of leveraging its monopoly in the app store market to impose exorbitant commissions, rendering them non-competitive. The court's decision will determine the fate of these startups and shed light on the ongoing battle between tech giants and small businesses over fair practices in the digital marketplace.

The Madras High Court issued an interim order on June 8, providing relief to a group of Indian startups facing delisting from the Google Play Store due to non-compliance with Google Play's new billing policy. 

This decision extends the court's previous interim injunction granted to Matrimony.com and Shaadi.com in April to all petitioners involved in the Google Play Billing case, which includes Matrimony.com, Shaadi.com, Unacademy, Kuku FM, TrulyMadly, QuackQuack, Aha, Stage, and Kutumb. 

Startups required to pay 4% commission to Google based on downloads

However, the court mandated that these companies must submit a report to Google on the total number of downloads in June and pay a 4% commission to the company based on these downloads, as opposed to the 15% to 30% commission applicable under Play Billing. The court, reportedly, made this concession to Google after the company's counsel argued that a complete injunction would result in Google earning no revenue from listing these apps on the Play Store. The next hearing for the case is scheduled for June 19.

What is Google's Latest Billing Policy?

Google Play's latest billing policy, User Choice Billing, announced by the company in January 2023, allows developers to incorporate a third-party billing system alongside Google's billing system. However, developers are required to pay Google an 11% to 26% commission if users choose to pay through the third-party billing system, and a 15% to 30% commission if users opt for Google's billing system. In other words, developers cannot solely utilize a third-party billing system.

Court Grants Respite to Indian Startups

The Madras High Court's recent decision brings relief to several Indian startups who were at risk of being delisted from the Google Play Store for refusing to accept Google's User Choice Billing system. As an interim arrangement, these startups will be required to pay 4% of their gross revenue from downloads on the Play Store to Google. Additionally, they must submit download data to Google on the 15th of each month.

During the proceedings, Senior Counsel PS Raman represented Google and contended that a complete injunction in favor of the startups would result in Google losing revenue from listing them on the Play Store. 

On the other hand, Senior Counsel Sriram Panchu appeared for the startups and argued that delisting them would leave these companies without income as they heavily rely on their app store presence. Consequently, the court ordered the companies to pay 4% of their gross revenue from Play Store downloads. Google has also filed an application questioning the validity of the startups' pleas.

What Is The Background of The Case and What Are The Allegations?

The Competition Commission of India (CCI) imposed a penalty of Rs 936.44 crore on Google in October 2022 for abusing its dominant position in the Play Store ecosystem through its billing policy. The CCI directed Google not to restrict app developers from using third-party billing or payment processing services. However, Indian startups have accused Google of circumventing this order by introducing the "alternative billing system/user choice billing" as its new policy. Under this new policy, transactions made through third-party billing systems are still subject to a service fee, albeit at a 4% discount.

The startups argue that this approach forces developers to pay a service fee ranging from 6% to 26% to Google for in-app purchases, subscriptions, and annual revenue generated on Google Play, deviating from the typical 10% to 30% service fee.

The Madras High Court's upcoming hearing on June 19 will further address the matter and determine the future course of action.