Indian Startups Demand Probe on Google for Bypassing Antitrust Directive, Charging High Service Fee

Top startups in India have called on the country's competition watchdog to launch an inquiry into Alphabet's Google for allegedly bypassing an antitrust directive by charging a high service fee for in-app payments, a filing shows.

The Alliance of Digital India Foundation (ADIF) filing marks the latest tussle between Google and Indian startups, which have repeatedly criticized the U.S. company for imposing unfair business restrictions that hurt smaller players.

"Google's policy change of charging service fee even on transactions processed by third-party payment processors ... has detrimental consequences for users and app developers," the 15-page confidential March complaint by ADIF said.

Google, which declined to comment, has previously said the service fee supports investments in the Google Play app store and the Android mobile operating system, ensuring it distributes it for free and covers developer tools and analytic services.

The Competition Commission of India (CCI) in October imposed a $113 million (roughly Rs. 9,25,357,000) fine on Google and said it must allow the use of third-party billing and stop forcing developers to use its in-app payment system that charges a commission of 15 percent-30 percent.

Google later decided to start offering User Choice Billing (UCB) for allowing alternative payments alongside Google's when purchasing in-app digital content, but the ADIF said in its filing that this new system imposes a "service fee".

"The app developers will have to pay 1-3 percent for alternate payment service providers and 11 percent/ 26 percent to Google, which makes the entire ecosystem unsustainable," it said.

Details of the ADIF filing, which was reviewed by Reuters on Thursday, have not previously been reported. ADIF and the CCI did not respond to requests for comment.

Google, which counts India as a key growth market, faces other regulatory challenges, including a recent setback that forced it to change how it markets its Android system.

In its October order, the CCI said Google abused its market position and its mandatory imposition of the proprietary payment system hurts the ability of payment processors and app developers to undertake technical development and innovate.

Google has challenged this in an Indian tribunal.

ADIF, which represents Indian startups including digital payments firm Paytm and social media app ShareChat, in its March complaint, alleged that Google was using the new service fee system to bypass the antitrust directive that ordered it not to impose any "unfair and disproportionate" conditions.

"The policy of UCB is unfair and the same would lead to unjust enrichment to Google," the filing said. 

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