Secret Tax: The curious case of missing Three Dollars
Recently, Elon Musk was reported to charge $11 from Twitter users who pay for the Blue subscription from app downloaded from the App Store. However, same service would be available
at just $8, if the user subscribes to Blue Tick through Twitter’s website bypassing Apple’s App Store and thereby avoiding the usurious commission charged by Apple through its
payment processing services. Musk cited 30% secret tax levied by Apple for the same.This was exactly the issue before the Competition Commission of India (CCI) though in respect of
Play Store of Google. An investigation against Apple is pending before the CCI on similar issue of 30 per cent commission or ‘tax’. The CCI passed an order against Google on
October 25 last year and levied a penalty of ₹ 936.44 crore on Google for abusing its dominant position with respect to its Play Store policies. CCI also issued various
directions toGoogle which are required to be implemented within 3 months i.e., by January 25, 2023. App stores So, what was the whole issue before the CCI. App stores have
become a necessary medium for app developers to find and distribute their apps to the end users. App store operators (in this case Google) are using this dependence to impose their
terms and conditions. For example, Google’s Play Store policies require the app developers to exclusively use Google Play’s Billing System (GPBS) for processing payments for
paid apps as well as for in-app purchases i.e., purchases made by users of Apps after they have downloaded/ purchased the Apps from the Play Store. Through such imposition, the
dominant app store developers (Apple and Google) are able to extract an exorbitant fee of 30 per cent from the app developers in certain category of cases. Not only this, these
app store operators also restrict the app developers from communicating cheaper options to their users within the App either through a web link to alternative payment processing
facility or through any message in the App (anti-steering provision). Anti-steering provisions This is exactly what Musk was referring to in his tweets. If the subscription is
taken from the website of the app developers, they would be able to avoid this 30% tax. The benefit is ultimately passed on to the end users ($8 vis-à-vis $11). CCI found that
if the app developers do not comply with Google’s policy of using GPBS, they cannot use Play Store to distribute their apps and thus, would lose out the vast pool of Android
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customers. Through its payment processing policies, Google took away the inherent choice of the app developer to use payment processor of their liking from the open market –
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