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Madras High Court To decide fate of civil suits filed against service fees levied on owners of mobile apps featured on Google Play

People eagerly turn to Google for answers to all their questions. But if there’s something that the American multinational technology company, Google LLC, is eagerly waiting to know, it is the result of a batch of 13 civil appeals pending against it and its subsidiaries before the Madras High Court.

The cases before the first Division Bench of Chief Justice S.V. Gangapurwala and Justice P.D. Audikesavalu relate to the service fee levied on business establishments which use Google Play to feature their Android applications that offer digital goods/services to customers. 

While a battery of senior counsel, including P. Chidambaram, Sriram Panchu, Satish Parasaran and Srinath Sridevan, are representing the litigants against Google, the latter and its parent company, Alphabet Inc, are being defended by senior counsel P.S. Raman and Sajan Poovayya. 

The litigants have accused Google of abusing its dominant position in the market, since 96% of the mobile phones in India run on the Android operating system, to impose “unconscionable and arbitrary” conditions on those who want their apps to be listed on Google Play.

‘One-sided’ terms 

They claim to have no choice but to accept all “one-sided” and non-negotiable terms of Google Play Developer Distribution Agreement. They said that in 2020, Google Play Billing System (GPBS) was made mandatory for processing payments made by customers for paid apps as well as in-app purchases. 

Under GPBS, Google floated a sister concern to act as a payment aggregator which collects all online payments made by the customers of digital goods/services, consolidate them and then transfer the money to the app owners concerned after deduction of necessary charges and after a considerable period of time. 

However, the Competition Commission of India (CCI) on October 25, 2022, directed Google not to prevent the app owners from using third-party payment aggregators like RazorPay. Therefore, it came up with an alternative, titled User Choice Billing System (UCBS), in addition to GPBS. 

Now, a service fee of 15% is being charged for up to $1 million dollar in revenue earned by an app owner per year and any earnings beyond $1 million are being charged 30% under the GBPS. However, the corresponding charge under UCBS had been reduced to 11% and 26% respectively, the litigants claimed. 

Such a payment policy violates the provisions of the Payment and Settlement Systems (PSS) Act, 2007, they contended, urging the court to declare the charges levied under GPBS as well as UCBS illegal, void and unenforceable in so far as the litigants’ mobile applications are concerned. 

Google’s stand 

On the other hand, Google has argued that the civil suits filed against it under the provisions of the Commercial Courts Act, 2015, are not maintainable at all since they are barred under Section 61 of the Competition Act, 2002. It has contended that the issue can be agitated only before the CCI and not before the High Court. When the Chief Justice wanted to know whether the argument related to violation of the PSS Act can also be raised before the CCI, Mr. Raman replied that the Reserve Bank of India (RBI) is the right authority to adjudicate upon such a violation and the CCI can always refer the issue to the RBI. 

The senior counsel pointed out that one of the litigants before the High Court had, indeed, approached the RBI with a complaint but ended up filing the civil suit within three days thereafter. 

Mr. Poovayya said 97% of the mobile apps available on Google Play were free apps, which get listed on one-time payment of $25. No service charge was levied on them. The remaining 3% apps were either paid apps (those that could be downloaded on payment) or free as well as paid apps which provide for in-app purchases. 

“Google Play levies service fees only on those 3% of the apps. A small minority of the 3% pay service fees at the rate of 30% and the rest pay somewhere between 10% and 15% What they pay me is not for processing their financial payments. It is much more than that. Google Play is like a shopping mall where various mobile apps are featured. It provides them a worldwide distribution platform. Google Play distributes the apps in 160 countries in the world. We charge them for providing this service,” Mr. Poovayya clarified. 

Once the litigants complete their arguments in the batch of cases, the judgment to be delivered by the Bench can be accessed by downloading the National Informatics Centre’s eCourts Services app from Google Play!

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