Making Sense Of Startups' 'Lagaan' Allegations Against Google

Startups, including Paytm and Matrimony.com Ltd., have termed Google LLC's hefty commissions for using its Play Store billing system a "feudal lagaan (tax)" as they fight it out against the tech giant's monopoly.

Ahead of an NCLAT hearing on April 17, after Google was declined interim relief on the Rs 936-crore fine, the startup think-tank Alliance of Digital India Foundation is drumming up support to voice concerns against what it calls Google's "exorbitant" commissions of 15% or 30% and the obligatory use of its billing systems.

"Why we're calling it lagaan is because Google is acting like the East India Company," Ritesh Malik, director of ADIF and founder of Innov8 Inc., told BQ Prime.

He refers to 200 years ago when the East India Company started buying up stocks of salt in a particular market. Once they got a monopoly, they started dictating terms on what price they will buy it at in the future, Malik said. "This is clear abuse and Google is behaving similarly."

"India has set global benchmarks in digital payments and the entire payment industry is working on 1–5% service fees," he said. "Google is demanding such (an) exorbitant commission, owing to its abusive dominance in (the) Android-based app store market."

The think-tank also urged the Competition Commission of India to evaluate Google's user choice billing system on an "urgent basis". Google has ushered in the new system for developers with effect from April 26, allowing developers to offer an alternative billing system alongside Google Play for their mobile and tablet users in India. 

If a user pays through their system, the Google Play service fee will be reduced by 4% to about 11%/26% from 15%/30%. The think-tank expects the new model to take away a huge chunk of the revenue made by Indian app developers.

"Unfortunately, there is no quorum at the CCI and Google is taking advantage of an institutional lacunae, bringing in user choice billing in haste and in the process, hurting the startup story and also disregarding the CCI order," the think-tank said in a statement.

From the April 17 hearing, Malik said the ADIF wants to hear "logical rationale from Google as to why are we charging such an exorbitant fee".

Malik said that in a country where only 22 of the 108 unicorns are profitable, there will be "innumerous backlash" against the rest that are striving for it.

Google declined to comment on specific queries sent by BQ Prime. The tech giant, however, has said that 97% of developers distribute their apps via Google Play at no charge.

"Of those developers that are subject to a service fee, 99% are eligible for a fee of 15% or less by participating in different programmes offered by Google Play."

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