ICC Initiate Investigation on Google For Alleged Monopoly Practices and Unfair Business Competition.

Friday, September 16, 2022

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ICC | Google

Jakarta (15/9) – The Indonesia Competition Commission (ICC/KPPU) is initiating an investigation into alleged violations of Law No. 5/1999 conducted by Google and its subsidiaries in Indonesia. The Commission suspects that Google has abused its dominant position, conducted conditional sales and discriminatory practices in the distribution of digital applications in Indonesia. The decision was made at the Board of Commissioners Meeting on September 14, 2022 as a result of the Commission’s initiative research. The investigation process will be carried out for the next 60 (sixty) working days in order to obtain sufficient evidence, clarity, and completeness of alleged violations of the law.

For the past few months, ICC has been initiating research on Google, a multinational company from the United States that specializes in Internet services and products. The research focused on Google’s policies that require the use of Google Pay Billing (GPB) in certain applications. GBP is a method or purchase of in-app digital products and services (in-app purchases) distributed on the Google Play Store. For the use of the GBP, Google charges the application a service rate or fee of 15-30 % of the purchase.

The various types of applications subject to the users of the GPB include (i) applications that offer subscriptions (such as education, fitness, music, or video); (ii) applications that offer digital items that can be used in games; (iii) applications that provide content or benefits (such as an ad-free version of the application); and (iv) applications that offer cloud software and services (such as data storage services, productivity applications, and others). The GPB usage policy requires that applications downloaded from the Google Play Store must use GPB as the transaction method, and content providers or application developers must comply with the provisions contained in the GPB. Google also does not allow to use other payment alternatives in GPB. The policy on the use of GPB is effective on June 1, 2022.

From the research, ICC found that the Google Play Store is the largest application distribution platform in Indonesia with a market share of 93% (ninety-three percent). There are several other platforms that also distribute apps (such as the Galaxy Store, Mi Store, or Huawei App Gallery), but they are not perfect substitutes for the Google Play Store. For developers or application developers, the Google Play Store is difficult to substitute because the majority of end users or consumers in Indonesia download their applications using the Google Play Store.

ICC also found that Google enforced a policy to require the use of GBP for the purchase of digital products and services in applications distributed on the Google Play Store. Applications that are subject to this obligation cannot refuse the obligations because Google can impose sanctions by removing the application from the Google Play Store or not allowing the application to be updated. This means that the application will lose its customers.

ICC found this obligation to be very burdensome for application developers in Indonesia due to the imposition of high tariffs, namely 15-30 % of the price of digital content sold. Prior to the mandatory use of GPB, developers or application developers could use other payment methods at rates below 5%. In addition to causing an increase in production costs and prices, this obligation also results in disruption of the consumers’ user experience or the application’s end users.

Furthermore, ICC also suspects that Google has practiced conditional sales (tying) for services in two different business models, namely by requiring application developers to purchase in bundle the Google Play Store application (digital application marketplace) and Google Play Billing (payment service). It was also found that for in-app purchases, Google only cooperated with one payment gateway/system provider, whereas several other providers in Indonesia did not have the same opportunity to negotiate the financing method. This is different from the treatment intended for global digital content providers, where Google gives opportunities to providers to cooperate with alternative payment systems.

Thus, based on ICC’s analysis, Google’s various practice may have an impact on the efforts to develop local content which is being promoted by the Indonesian government. In the research process, ICC listened to the opinions of various parties and conclude that Google’s policy is a form of unfair business competition in the digital application distribution market. The ICC suspects Google of engaging in monopolistic practices and unfair business competition such as abuse of dominant position, conditional sales (tying), and discriminatory practices. Therefore, based on the Board of Commissioners’ Meeting on September 14, 2022, ICC decided to escalate the research into investigation on the alleged violations of Law Number 5 year 1999.