Google has proposed letting developers offering apps through its U.K. Play mobile app store to have the option to use alternative payment processors for in-app transactions, rather than being locked to its own billing system (GPB), following an antitrust intervention by the U.K.’s Competition and Markets Authority (CMA).
“Google’s proposed commitments would give app developers the freedom to offer a different billing system of their choosing, known as ‘Developer-only Billing’ (DOB), or offer users a choice between an alternative billing system or Google Play’s billing system, known as ‘User Choice Billing’ (UCB),” the regulator explains in an update on the enforcement.
The CMA has opened a consultation on Google’s proposal which it says it’s minded to accept — inviting developers and other interested stakeholders to respond by May 19. After considering responses it will take a decision on whether to accept the commitments and resolve the case.
Last summer, the regulator concluded a year-long study of the mobile ecosystem which identified substantial concerns with the market power of the duopoly (Google with Android and Apple with iOS). At that time, in addition to opening certain other in-depth probes into aspects of the two tech giant’s operations, it announced it that was taking enforcement action against Google in relation to its app store payment practices. The CMA’s concern here focused on conditions it sets on developers for in-app payments. So Google’s proposal aims to settle those concerns.
In a blog post detailing Google’s offer, legal director, Oliver Bethell, writes:
Under the commitments, developers will be able to add an alternative in-app billing system, alongside Google Play’s billing system, for their mobile and tablet users in the U.K. At checkout, users will be able to choose which billing system to use. These options will be presented in a neutral manner allowing users to make an informed and engaged choice.
“Developers can alternatively choose to not offer Google Play billing at all when their users in the U.K. are paying for digital content and services,” he adds.
In the blog post, the company also notes that its U.K. proposal would extend the choice of an alternative billing system that it already offers in the European Economic Area (EEA) — where Google has faced a number of antitrust enforcements over the past several years — and in other parts of the world; such as South Korea where, back in 2021, lawmakers intervened to force Google’s hand on billing. India is another country where Google is gearing up to offer alternative billing — after being slapped with a $162 million fine for antitrust practices last fall.
For its U.K. offer, Google is proposing to reduce what it bills as the per transaction “service fee” it charges developers for in-app digital sales — aka its cut/commission (or the app store tax, as some critique such fees) — by 4% where a developer offers users a choice that includes GPB but the user selects alternative billing. But if developers opt not to offer Google’s own payment processing system the proposed stick is a slightly lower reduction in Google’s cut — reduced to 3% in that scenario, seemingly incentivizing developers to keep offerings users the option to select its own payment tech.
(NB: Google’s baseline service fee for the Play Store starts at 15% for the first $1 million in revenue earned per year, rising to 30% for any annual earnings over that threshold — so, under the alt billing proposal, its fee would remain above 10% in almost all scenarios. For automatically recurring subscriptions Google’s standard cut is 15%. Although it says some types of media content apps may attract a fee that’s lower than 15% under its Play Media Experience Program.)
Here it seems to be offering a blend of what it has already rolled out elsewhere — with developers in South Korea and India getting a 4% fee reduction when using alternative billing, while devs in the EEA were given a 3% reduction last summer.
“For both options, developers are still required to meet appropriate user protection requirements, and service fees and conditions will continue to apply in order to support our investments in Android and Play,” Google adds.
It also wants to be able to phase in the proposed commitments, arguing this will allow time “for the necessary changes to be made” to its systems — initially making them available to developers of non-gaming apps; and then bringing them to gaming apps “no later than October 2023”.
Whether Google gets its way will be up to the CMA which will decide whether to accept the proposal — and that may depend on the kind of feedback it gets.
The regulators says it’s especially keen on feedback about Google’s suggested service fee reduction (“under each of UCB and DOB); as well as additional elements including the proposed process for reporting in-app purchase-related turnover to Google (either manually or using APIs) for the service fee to be calculated; the use of information screens and, for UCB, a billing choice screen; and the process it’s proposing for monitoring Google’s compliance with the commitments, especially a commitment it has made not to retaliate against app developers choosing to use UCB or DOB.
“Based on the information the CMA has received to date, and for the reasons set out below, the CMA provisionally considers the Proposed Commitments to be appropriate to address the particular Competition Concerns resulting from the Conduct that the CMA has investigated in this case,” the regulator writes in the Executive Summary of its Notice of Intent to accept the commitments
“Both DOB and UCB would allow app developers the opportunity to use billing systems of their choosing (and DOB would allow them to choose not to offer GPB at all), breaking the link that the GPB requirement currently creates between access to Google Play and the use of Google’s proprietary billing system for in-app sales of access to digital content or services.”
“Those app developers opting to use an alternative billing system will have the possibility of establishing direct relationships with customers and overseeing their own transactions. They may also be able to offer pricing deals which are different to prices where GPB is used. Moreover, third party payment processors will be able to offer their services to potential app developer customers for in-app purchases of digital content or services within an app distributed on Google Play, allowing app developers to benefit from increased choice and competition,” the CMA also suggests.
Update: The Coalition for App Fairness, an app industry group that’s been pushing for reform of app stores since 2020, has responded to Google’s UK proposal with scepticism — accusing the company of seeking to reallocate fees so it can continue taking what they argue is an unfair cut. In a statement Rick VanMeter, the group’s exec director, said:
We support the CMA’s work to hold gatekeepers accountable and create a free and fair mobile app ecosystem. Google’s proposal to allow third party payment options is nothing more than a reallocation of fees. This proposal would enable them to continue taking a massive cut on services they do not even provide. This solution will not create meaningful competition and is a bad deal for developers and consumers. We will continue working with the CMA to bring real competition to the mobile app ecosystem.