Why Vocal For Local Won’t Bother Google?

 

For several years, regulators, politicians, entrepreneurs and venture capitalists across the world have been whining about the seemingly limitless power wielded by America’s Big Tech, chiefly, Amazon, Apple, Facebook, Google and Microsoft.

In India, apart from Amazon, these companies mostly had a free run—until recently. First, Facebook became the centre of a political crisis in August after The Wall Street Journal reported that one of its top executives had favoured the Bharatiya Janata Party and opposed the removal of hate speech by a BJP politician.

Now, Google is facing an intense backlash from a group of companies led by Paytm, India’s most valuable startup. These companies have made a range of allegations against the American search giant: Google’s Play Store is exploiting its dominant position and enforcing unfair policies that punish local startups; Google makes too much money through advertising; and, Google’s power is a threat to India’s startup ecosystem.

“(Google is) a competitor, ecosystem provider and a monopoly, and there are serious implications of this if it doesn’t get addressed in the long term," said Murugavel Janakiraman, founder of Matrimony, one of the companies that is rallying entrepreneurs against Google.

“The internet today is the way of life. That being the case, one company controlling that ecosystem has implications on the economy and the consumer," he added.

Last week, US lawmakers, who had been investigating the practices of Amazon, Apple, Facebook and Google for 16 months, released a report which concluded that the tech giants had abused their dominance, and called for changes in antitrust regulation that would lead to a breakup of these firms.

In Europe as well, regulators are examining various antitrust complaints against these firms and have opened several formal investigations.

Smaller rivals of Big Tech are raising their voices, too. In the US, Spotify, Epic Games and a handful of other app makers, too, have recently complained against the commission rates and other policies of the App Store and the Play Store, owned by Apple and Google, respectively. Apple and Google are facing antitrust suits, while the app makers have formed a non-profit group Coalition for App Fairness to protect themselves against the two dominant platforms.

The Indian companies that are protesting against Google have gone a step further. Not only are they trying to form a united front against Google and complaining on antitrust grounds, they are tapping into jingoism that has become increasingly normalized in the corporate sector in India, especially after the India-China stand-off this year.

After troops from India and China clashed in Ladakh in June, the government banned TikTok and dozens of other Chinese apps, adding to its earlier restrictions on Chinese capital introduced in April. A wave of public backlash against Chinese companies followed.

Startups are now channeling this jingoism against powerful American firms. This is not only a questionable tactic to solve business disputes, its success is far from certain.

The timeline

The backlash against Google in India has built up in record time. It started on 18 September, when Google delisted the Paytm app from the Play Store for a few hours, alleging that the payments app was facilitating gambling, a violation of Google’s policies, by promoting its gaming app, Paytm First Games.

Paytm initially responded by complying with Google’s policies and stopped promoting the gaming platform on its app. Its app was back up on the Play Store by the evening of 18 September.

However, Paytm founder Vijay Shekhar Sharma soon went on the offensive. Sharma charged that Google’s takedown of its app was “against Prime Minister Narendra Modi’s vision of Atmanirbhar Bharat". Later, he said in an interview with The Economic Times that Google’s action was a “concern for our country and for the government" and called it “a sanction by an American company on an Indian one and, by extension, on Indian customers." He reiterated his stance in interviews with other publications including Mint over the next few days.

Separately, Google said in a blog post on 29 September that it would begin charging a 30% commission on each transaction from app developers selling digital products like gaming, online dating and streaming content. The policy was already in place, Google was merely announcing its enforcement globally from September 2021. (The policy only applies to digital products, not physical goods and services like e-commerce, cab rides, airline travel, food delivery and others).

Led by Paytm’s Sharma, dozens of startups and companies including Policy Bazaar, Razorpay, Matrimony.com and Goqii began to complain that the commission was excessive and would hurt the Indian startup ecosystem. Some of these companies called for the creation of an “Indian" app store as a rival to the Play Store and Apple’s App Store.

To placate these companies, Google said on 5 October that it would defer the enforcement of the 30% commission in India to April 2022 and extend the deadline for apps on alternative payment systems to comply with its billing system to 31 March 2022.

Google’s announcement, though, did little to stem the protests. In a tweet this week, Vishal Gondal, founder of Goqii, likened Google to India’s colonial rulers and the American firm’s proposed commission to the colonial era salt tax—repeating an analogy that had been drawn by Paytm’s Sharma earlier.

Mint reported this month that the heads of more than 120 startups were in talks to form a lobby group to represent the interests of local app developers against the likes of Google, Facebook and Amazon.

The rise of nationalism

The nationalist posturing deployed by Sharma, Gondal and others is not new. In December 2016, Sachin Bansal, then Flipkart executive chairman, exhorted the government to take China’s lead and enforce policies that would promote the interests of Indian startups and restrict the scope for ‘foreign’ internet companies like Flipkart rival Amazon to operate here.

Over the past two years, Mukesh Ambani, chairman of Reliance Industries, which is trying to transform itself into an internet conglomerate, has called for data localisation and other policies that would hamper the continued expansion of international internet firms.

Since late 2018, Amazon India and Flipkart, which was sold to Walmart in May 2018, have been hit with several hostile policies after vigorous protests by the Swadeshi Jagran Manch, an association of local traders which is associated with the Rashtriya Swayamsevak Sangh.

What’s different about the latest episode involving Google is that it represents the first major instance in the internet space where a specific business dispute, albeit one that has huge financial implications for local startups and internet companies, is being recast in jingoistic terms.

But in this case, too, there are self-serving interests at play. For instance, Paytm, which has been losing market share to Google Pay over the past two years, is attempting to build its own ecosystem and set up a Play Store-like platform.

Paytm’s attempt to give the dispute a nationalist spin also comes after the company has come under scrutiny for its shareholding structure: the company’s largest investor is China’s internet giant Alibaba, which is close to the communist regime there.

The success of this posturing by the local internet companies is far from certain. For starters, the concept of an ‘Indian’ app store is not only unclear, it is fanciful. In the internet space, network effects drive customers and app developers both towards giant platforms like Google, Apple, Facebook and Amazon. To set up a rival to Android, with all the requisite technology prowess, sophistication and capital, on demand looks impractical to say the least.

“There’s a lot of noise being made by some companies about an ‘Indian’ app store but it’s really just noise," a Bengaluru-based entrepreneur said, on condition of anonymity. “It’s not possible to replace Android overnight."

There are other complications involved. Will such an app store be owned by the government? If so, will companies be liable to share customer data with the government? Or will it be a public-private effort? Who will run it?

In addition, while the BJP government has adopted a protectionist stance on tariffs over recent years, it cannot afford to completely alienate platforms like Amazon, Google and Facebook, which are immensely popular with customers, and which invest much-needed capital.

In July, Google had announced a Google for India Digitization Fund and committed to investing $10 billion here over the next five to seven years.

The move was blessed by Modi, who had spoken with Google CEO Sundar Pichai then, and said on Twitter, “I was delighted to know more about the efforts of @Google in several sectors, be it in education, learning, @_DigitalIndia, furthering digital payments and more."

The case against Google

Experts said instead of drawing analogies with salt taxes and posing as freedom fighters, local internet companies would be on firmer footing if they made a case against Google on antitrust grounds.

Ideally, the dispute between the app developers and Google should be resolved through dialogue, but if that doesn’t work, developers would have no choice but to approach the government and regulators including the Competition Commission of India (CCI) for help, according to Rameesh Kailasam, CEO of IndiaTech.org, a lobby group for Indian startups.

“India’s is an emerging startup ecosystem; such levies should not be enforced at this stage because they can severely curtail the growth of the ecosystem. It’s a levy imposed by Google globally, but this one-size-fits-all approach doesn’t work for emerging ecosystems," Kailasam said.

Google exercises enormous influence over the internet business in the country. Its Android operating system and Play Store account for an overwhelming majority of smartphone and mobile internet users in India.

It has the highest share in digital advertising and owns the largest video platform (YouTube), the most popular mapping service (Google Maps) and the biggest payment app on the Unified Payments Interface system (Google Pay).

An imposition of a 30% commission on digital services on the Play Store could cripple the ability of new app makers to scale, discourage budding entrepreneurs from starting up and eat into the already thin margins of bigger companies, some of which are rivals of Google. All of these are potential antitrust violations, experts said.

The only regulation applicable in situations like the Play Store dispute is competition law, said N.S. Nappinai, a supreme court advocate and cyber-law expert.

“If it is an enterprise that is defined under the competition laws and if it abuses its dominant position, then it can be called up in India. But competition law doesn’t (discriminate) between Indian and international companies. It applies to any company which abuses its dominant position," Nappinai said.

Last week, a group of 15 companies including representatives of Paytm, Matromony.com and Goqi held talks with CCI officials to complain about Google’s policies, chiefly, the proposed imposition of the 30% commission. It is not clear if they will file a formal complaint.

To be sure, the CCI already keeps a close eye on Google. In February 2018, the antitrust regulator fined Google ₹136 crore for abusing its “dominant position" in search, in response to a complaint filed by Matrimony.com and Consumer Unity and Trust Society. It is looking into three other antitrust complaints against Google.

Antitrust laws in India are adequately equipped to deal with digital economy issues, said Nisha Kaur Uberoi, partner & national head, competition at Trilegal.

“Specifically, from an App Store perspective, if a player is not dominant, there is unlikely to be a violation. But if a platform is dominant, the CCI will likely investigate. The outcome will depend on the particulars of the case, particularly how the CCI delineates the relevant market," Uberoi said.

Sandip Ginodia , CEO

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