India May Mandate Changes to Apple In-App Payments

Growing Scrutiny of In-App Payment Systems

Although summer continues, a developing situation concerning applications and their payment processes is gaining momentum. Recent reports indicate that India’s Competition Commission, the nation’s antitrust authority, is preparing to investigate a complaint lodged against Apple.

The Antitrust Complaint

The core of the issue revolves around Apple’s requirement for app developers to utilize its in-app payment system. This mandate results in Apple receiving a percentage of all transactions made within applications for subscriptions and digital goods. The lawsuit was initiated by “Together We Fight Society”, an Indian nonprofit organization.

A Global Trend of Regulatory Challenges

This action represents the latest in a series of challenges faced by app store operators, including Apple, Google, and WeChat, from various national regulatory bodies. These challenges center on concerns that their market positions are being leveraged to enforce practices deemed anti-competitive.

Japan, South Korea, and Australia have recently reached settlements or enacted legislation.
The U.S. and the European Union are also considering or implementing new laws.

Focus on the Indian Market

Currently, the Indian regulator is also examining in-app payment practices within Android applications, where Google similarly requires the use of its own payment system. Given Android’s dominance in India – operating on 98% of the country’s 520 million smartphones as of late 2020 – this investigation is particularly significant.

Potential for Policy Shifts

It remains to be seen if additional countries will intervene. However, these developments could compel app store operators to adopt more adaptable and universal policies to avoid increased regulatory oversight.

Recent Developments and Settlements

Changes are already occurring on a national level. Apple recently reached a settlement in Japan, permitting publishers of “reader” apps to direct users to external websites for payment options, bypassing Apple’s in-app payment system and associated fees.

South Korea's Legislative Action

Legislators in South Korea have approved a law prohibiting Apple and Google from collecting commissions on transactions processed through their proprietary payment systems.

Limited Concessions in the U.S.

Apple has made some adjustments in the U.S., allowing app publishers to mention alternative payment options, but currently does not permit offering them directly within the app.

Arguments for and Against Apple’s Policies

For years, developers and consumers have advocated for greater flexibility in Apple’s policies. Apple maintains that its policies are designed to enhance user experience and ensure security. However, critics argue that these policies should be reevaluated in light of evolving technology and consumer behavior.

Apple’s Market Share in India

Apple’s relatively small market share in India – approximately 2% of the 520 million smartphones in use as of the end of 2020 – may be a factor in its defense against antitrust claims. While its share has doubled in five years, it remains significantly smaller than Android’s.

Economic Impact of Commission Fees

The antitrust filing in India emphasizes that the 30% commission imposed by Apple can hinder the viability of app development for many publishers, potentially leading to reduced consumer choice. The filing suggests that the commission structure can prevent some apps from even entering the market, ultimately causing harm to consumers.

“The existence of the 30% commission means that some app developers will never make it to the market,” the filing stated, “This could also result in consumer harm.”