The Indian Competition Commission on Friday conducted an investigation into Apple’s App Store policies regarding allegations of unfair business practices in India raised by a non-governmental organization, Together We Fight Society.
Allegations raised by the informant
The informant alleged that –
“Apple uses a barrage of anti-competitive conversions and abuses dominate the markets of distributing apps for smartphone and tablet users, and processing consumer payments for digital content used in the iOS mobile app. . “
It has been argued that Apple places unreasonable and illegal restrictions on application developers to reach users of its mobile devices unless they go through the “App Store”, which is controlled by Apple itself. -same. To sell in-app digital content, app developers are supposed to use a single payment processing option offered by Apple with a 30% commission. However, it was pointed out that there is no such restriction for Macs or MacBooks, which are Apple’s personal computers. In such cases, application developers may make their products available to Apple personal computer users on an open market, through a variety of stores, or even through direct downloads from a developer website, with a variety of payment options and competitive processing fees that average 2% to 5%, which is 10 times lower than the exorbitant 30% fee charged by Apple for in-app purchases on mobile devices. According to the informant, this is a flagrant violation of section 4 of the Competition Act (âActâ), which amounts to an abuse of his dominant position. It has been specifically stated that:
- The App Store guidelines are determined by Apple and are one-sided contracts, which Apple uses in an arbitrary and discriminatory manner in violation of section 4 (2) (a) (i).
- As previously reported, Apple charges app developers an excessive 30% commission on in-app purchase, which would increase the cost of Apple’s competitors and affect their competitiveness. vis Ã vis The own verticals of apples. Such practices adopted by Apple would discourage the entry of new players into the market and would therefore be in violation of Article 4 (2) (c). It would also result margin squeeze and overall in violation of Article 4.
- Apple’s policy of enforcing in-app purchases and restricting app developers to select the payment process system of their choice is also in violation of sections 4 (2) (d) and 4 (2) ( e) of the Act.
- Apple conditions the use of its App Store on the use of its In-App Purchase to the exclusion of alternative solutions through illicit linked sales agreements. Such anti-competitive reconciliation agreements violate Article 4 (2) (d) and Article 4 (2) (e).
Submissions made by Apple
Initially, Apple indicated that it strives to make its devices as attractive as possible by developing all components in-house, in an integrated ecosystem that can be differentiated from its competitors. The claims made by Apple are as follows:
- The definition of the relevant market put forward by the informant was excessively narrow.
- Apple’s market share is 0-5% of the relevant relevant market suitable for smartphones in India. Therefore, the informant’s claim regarding the use of a dominant position does not stand.
- No evidence has been provided to show that Apple’s practices are abusive.
- The App Store guidelines are not unfair or arbitrary and have been formulated to ensure that the App Store is a safe and secure place for consumers to browse and download apps and purchase digital content.
- Most developers using the App Store pay no commission and those who do pay at the rate of 15%.
- He quoted Epic Games Inc v Apple INC, a judgment handed down by the United States District Court to show that it made findings regarding the App Store’s business model, which undermine the allegations made by informants.
- The informants are working closely with parties with whom Apple has ongoing contractual disputes.
The Commission considered that –
“â¦ Apple’s mandatory use of IPA for paid apps and in-app purchases restricts the choice available to app developers to select a payment processing system of their choice, especially when charging a commission. up to 30% for app developers and app purchases. “
The Commission observed that in many cases Apple’s proprietary applications compete with third-party applications on the iOS platform. Therefore, such a high commission would effectively increase the cost of Apple’s competitors and ultimately affect competitiveness. vis Ã vis Apple’s own apps. He further noted that the conditions imposed by Apple were to prevent developers from offering the payment process solutions of their choice. The Commission considered that Apple could have access to data collected from the users of downstream competitors, which would allow it to improve its own services by giving it an advantage over its competitors. Thus, the Commission considered that At first glance, the imposition of such conditions is unfair under section 4 (2) (a) of the Act. The Commission observed that such behavior also results in linking its in-app purchase payment processing service to the App Store and the fact that Apple conditions the provision of application distribution services to the application developer in accepting obligations that are unrelated to the distribution service contract violate section 4 (2) (d). He noted –
“This also has the effect, at first glance, of exploiting Apple’s dominant position in the App Store market to enter / protect its market from in-app purchase payment procedures, in violation of Article 4 ( 2) (e) of the law. “
The Commission found that the restrictions imposed by Apple block the App Store for iOS market for potential app distributors and result in denial of market access for potential app distributors / app developers, by flagrant violation of section 492) (b) of the act. In light of the informant’s allegations and observations and Apple’s response, the Commission found:
“â¦ The Commission is of the prima facie view that Apple has violated the provision of Article 4 (2) (a). 4 (2) (b), 4 (2) (c), 4 (2) ( d) and 4 (2) (e) of the Actâ¦ which warrants a detailed investigation â
The Commission further ordered the Director General to investigate the matter under section 26 of the Act, complete the investigation and submit the report within 60 days.
[Case Title: Together We Fight Society v. Apple Inc. And Another, Case No. 24 of 2021]
Click here to read / download the order