Google signals that it will dig its heals in over payment for content at Commission workshop

On Monday, March 8th, the Commission hosted its third workshop on the subject of app store related provisions in the DMA. 

The relevant section framing the discussion was Article 6 (12), which requires that gatekeepers must ‘apply fair, reasonable, and non-discriminatory general conditions of access for business users to its software application stores’. 

Much of the day’s debate centred on the excessive fees developers incur as a condition of using the gatekeepers’ app stores, particularly the (up to) 30% Apple and Google charge for all in-app payments. A representative of Match Group, revealed that the dating conglomerate had paid a staggering 600 million dollars in app store fees in 2022 alone. 

Match Group’s concrete framework for reform was interesting, particularly as much of the discussion was otherwise pitched at quite a high level. Match Group proposed that the excessive charge on in-app payments give way to a standard 3% fee. Instead, app store providers would be remunerated in proportion to usage with developers paying a FRAND rate based on monthly active users (MAU). 

Our observation at MOW is that the valuation of content needs to take account of the following:

  • Essentially, the platforms benefit from products that consumers want to use – such as the apps in their apps stores, or news – and monopolise the data gathered from all user interactions.
  • Each platform bundles its own and others’ products with its owned technologies, such as billing systems, and restricts switching to alternatives.  
  • The platforms obtain and exploit consumer information in conditions where they have restricted rivals in their ability to compete.

Each platform is currently funded either in whole or in part by advertising. Those that currently supply apps, whether news, dating, music etc., have thus contributed to the value and market position of the platforms.

Much of that value will have been accumulated over time and could be claimed back in damages.

Going forward, the value generated by content rather than conduit needs to be properly compensated.

The broad consensus of the panel that the current fees are excessive and should be restructured was not shared however by Google’s representative. Responding to the closing remarks of Professor Rupprecht, who stated categorically that we can expect fee structure reform under the DMA, Google’s representative suggested that “it seems a leap to say that there will be reform; there will be more workshops”.

Google also insisted that in order to determine FRAND terms, first an assessment of the value of the service being provided is needed. They suggested this value be determined by benchmarking against the wider industry, observing that the Play Store policies are not out of line with those of competitors. This is obviously unconvincing. Clearly, benchmarking in a monopolised market will not reveal the fair price of access in a competitive market. 

Moreover, in an effort to justify the value the Play Store creates, Google’s presentation belaboured the point that the app store must be trusted by users. It was suggested that the job of the gatekeeper is accordingly to ensure that its channel to market is free from any form of malware. This is intended to support increased investment, and thus, justifies the current (up to) 30% charge. It is worth bearing in mind, however, that Google’s profit margins on the app store are consistently between 50 and 75% and the cost of security drops per user with the deployment of software across a wide base. In these circumstances it is unlikely that much investment is being incurred to make the app store safer.

More heal dragging can be expected when it comes to changes that are needed to enable consumers to switch to alternative platforms and distribution systems such as the Open Web. Google suggested that it allows app sideloading and alternative app stores on Android devices. Whilst technically permitted, Google adds friction which in practice limits this freedom meaning very few progressive web apps are actually sideloaded.

From MOW’s perspective the workshop contained interesting discussions, but, unfortunately, in spite of a friendly presentational tone, it was clear Google are prepared to resist the changes that the law requires.