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Google has announced that non-gaming apps that operate in the European Economic Area (EEA) may allow customers to use alternative billing systems to pay for digital goods and services via the Google Play store, pre-empting forthcoming regulations.
Following the EU’s provisional agreement on the Digital Markets Act in March this year, Google has said it has already begun to adjust the current operating model of Google Play to comply with the new law.
In a statement published on Tuesday (July 19), Google said the move will open up new freedoms and unlock higher revenues for developers of non-gaming apps on Android.
“As part of our efforts to comply with these new rules, we are announcing a new programme to support billing alternatives for EEA users,” said Google.
“This will mean developers of non-gaming apps can offer their users in the EEA an alternative to Google Play's billing system when they are paying for digital content and services.
“Developers who choose to use an alternative billing system will need to meet appropriate user protection requirements, and service fees and conditions will continue to apply in order to support our investments in Android and Play.”
Under Google’s new rules, if an app customer opts to use an alternative billing system, the service fee the developer pays to Google will be reduced by 3 percent.
As reported by VIXIO, this concession is similar to the one that Android app developers enjoy in South Korea, where apps have been able to offer a choice of billing systems since last year.
In South Korea, developers receive a 4 percent discount per transaction when customers use an alternative billing system.
Google points out that 99 percent of Android app developers worldwide currently qualify for a service fee of 15 percent or less per transaction.
Therefore, under the new rules, those developers marketing to the EEA would pay a service fee of 12 percent or less for transactions processed outside Google Play’s own billing system.
Getting ahead of the European Commission
Since Tuesday, Google no longer removes or rejects updates to non-gaming apps from developers that offer alternative billing systems for EEA users. This preempts the adoption of the Digital Markets Act, which is expected to be effective from September or October this year.
According to the European Commission, the Digital Markets Act is aimed at making the EU’s digital economy fairer and more contestable, to ensure freedom of entry for new participants and freedom of exit for incumbents.
To do so, the Digital Markets Act establishes a set of narrowly defined objective criteria for qualifying a large online platform as a so-called “gatekeeper”.
These gatekeepers, such as Google and Apple, must comply with the provisions of the Digital Markets Act, whereas non-gatekeepers are unimpacted.
For Google, Article 43 of the act speaks directly to its in-app payments policy and explains why the commission judged it to be unfair and anti-competitive.
“In order to avoid a situation in which gatekeepers indirectly impose on business users their own services", these designated firms should be “prohibited from requiring end users to use such services, when that requirement would be imposed in the context of the service provided to end users by the business user using the core platform service of the gatekeeper”, the act states.
“That prohibition aims to protect the freedom of the business user to choose alternative services to the ones of the gatekeeper, but should not be construed as obliging the business user to offer such alternatives to its end users.”
The commission has said the Digital Markets Act is among the first initiatives worldwide to comprehensively regulate the gatekeeper power of the largest digital companies; however, a similar law was passed in South Korea in August last year.
Although Google’s changes specifically relate to non-gaming apps, it said it is working to expand free choice billing to developers of gaming apps within the EEA, but could not confirm when the expansion will take place.
However, Google did say that by the time the Digital Markets Act comes into force, such gaming apps will be subject to the same rules as non-gaming apps.
Despite loosening its control of in-app billing, Google has reiterated that Google Play has enabled millions of developer businesses to connect with consumers worldwide.
In the EU alone, for example, Google said that in 2021 the Android ecosystem supported more than 1.1m jobs and Android developers generated €7.9bn in revenue.
Reasons to be cheerful
The news of Google’s in-app payments liberalisation will be well received by developers such as Match Group, owner of dating apps Tinder, Match and OKCupid, as well as Epic Games, owner of Fortnite.
Both companies have sued Google over what they believe to be its monopolistic and rent-seeking practices with regard to the compulsory use of Google Play’s own billing system.
As reported by VIXIO, Google was sued by Match Group in California in May this year, but the case reached a truce several weeks later when Google said it would allow Match Group to offer free choice billing.
However, Google has broken this truce and is now countersuing Match Group in California.
In the Netherlands, another Match Group complaint against Google led to an investigation by the Authority for Consumers and Markets (ACM) in May this year.
