ETtech Explainer: will Apple meet the same fate as Google in CCI probe?

Allegations against Apple

In December 2021, the competition regulator opened an investigation against Apple’s business practices in India following allegations by Together We Fight Society, a not-for-profit organisation, of “high” commission the company charges and the lack of third-party payment options.

The CCI in its order stated that it has taken a prima facie view that Apple has violated provisions of Section 4 of the Competition Act, which deals with abuse of dominant position by an enterprise. It also directed the Director General to open an investigation into the company.

The CCI said the mandatory use of Apple’s in-app payment solution for paid apps and in-app purchases “restrict the choices available to app developers to select a payment processing system of their choice, especially considering when it charges a commission of up to 30% for app purchases and in-app purchases”.

Apple’s defence

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In December 2021, Apple had asked CCI to dismiss the case since it has an “insignificant” 0-5% market share in the country, where Google is dominant. CCI, however, said Apple’s argument was “completely misdirected” as the alleged anti-competitive restrictions were about the abuse of dominance by the company on app developers and not end-users.

The regulator said prima facie it is of view that Apple holds a monopoly position in the market for ‘iOS app stores in India’, which it believes is the relevant market for this case.

The Google precedence

Apple is anticipating that CCI will follow a similar trajectory in its case as the competition regulator did with Google. The company may be forced to reduce the commission it charges from developers, and provide third-party billing options. Google faced a similar investigation by CCI over the mandatory use of its Play Store’s payment system for paid apps and in-app purchases. On October 25, 2022, the CCI imposed a penalty of Rs 936.44 crore on the tech giant for abusing its dominant position in the Android market. In India, Android has a market share of 95.1%. In the ruling, CCI asked Google to change its billing process for Google Play Store and allow app developers to use a third-party payment processor.

Commission levied by Apple

Apple levies a 30% commission from the sale of paid apps and in-app purchases of digital goods and services. In 2020, Apple had said it would cut its App Store commission rate to 15% for software developers with less than $1 million in annual net sales on its platform. For some small app makers, the new policy could cut the amount they pay Apple in half.

Penalty norms of CCI

Apple may be subjected to a penalty, similar to the one imposed on Google. Currently, CCI imposes a penalty of up to 10% of a company’s average turnover. However, the government is evaluating an amendment– the Competition Amendment Bill 2022. It proposes that penalties on companies be calculated as a percentage of their global turnover instead of the current practice. Apple’s global turnover was $39.4 billion as of October 2022.