September 19, 2022
JAKARTA – Google and its subsidiary in Indonesia could potentially be fined a maximum of Rp 25 billion (US$1.67 million) if they are proven to have violated the country’s Antitrust Law, due to practicing the mandatory use of Google Pay Billing (GPB).
The Business Competition Supervisory Commission (KPPU) announced its plan to undertake a preliminary investigation into Google over the next 60 days or so, on suspicion of monopoly, product tying, abuse of dominant position and discrimination, all through the use of GPB.
The antitrust agency underscored that such practices were potentially in violation of Law No. 5/1999 on the prohibition of monopolistic practices and unfair business competition, with a maximum fine of Rp 25 billion, according to article 47 paragraph 2 letter g of the law.
Edmon Makarim, dean of the University of Indonesia’s Law School, explained that this law was in place to ensure a fair playing field.
“The goal [of the antimonopoly regulation] is to open equal business opportunities. Whenever there are business opportunities, they must be opened for newcomers, and more established players are not allowed to obstruct the competition,” Edmon explained on Friday.
“It wouldn’t be a problem if the monopoly was born through ‘naturalia’ or the law. However, if [the competition] is decided by the market, then the market needs to be regulated to ensure fairness. For the technology [sector], the competition is decided by the market,” he added, explaining that Google’s conduct of restricting market entries could be viewed as a monopoly attempt.
Global antitrust cases against Google have plagued the company in the past few years, with the most recent happening in the European Union, where the court handed down a penalty of $4.12 billion, making it the largest antitrust fine ever given out by the European Commission.
“If you are in the act of tying people just to Google and its products, that will barricade the growth of new businesses,” said Edmon, explaining the legal logic behind the Google cases.
“A new development may translate to growing industries and new players, so the opportunity must be equally available to everyone for the sake of people’s prosperity,” he added.
On Thursday, the KPPU announced that the preliminary investigation into Google had been initiated on Wednesday after months of research into Google’s policy of binding GPB use for certain applications, through which the multinational tech giant collects a service fee of 15 to 30 percent, substantially higher than other payment providers’ fees, which stand at 5 percent or lower.
“The KPPU found this situation to be encumbering for Indonesian app developers because of the high service fees. […] Besides causing an increase in production costs and prices, this [fee] obligation also results in disruption to consumers’ user experience,” stated the antitrust agency.
The agency further explained that, being subject to the policy, apps had no option but to comply, and they would be removed from the Google Play Store or their updates would not show up in the store if they declined to implement GPB as their transaction method.
“The policy of compulsory GPB use obliges applications downloaded from the Google Play Store to use GPB as their transaction method [for product purchasing and service payments] and content providers or app developers must meet the provisions within GPB,” the KPPU stated.
“Google also does not allow the use of alternative payment methods in GPB. This GPB use policy was effective on Jun. 1, 2022,” added the agency, highlighting the point of the monopoly in the fact that the United States company held 93 percent of the market share in Indonesian app platforms.
Furthermore, the KPPU also suspects that Google has been selling Google Play Store and GPB services as a means of product tying, the practice of selling one product or service as a mandatory addition to the purchase of a separate product or service.
“It has also been found that for in-app purchases, Google only partners with one provider of payment gateway/systems, while other providers in Indonesia cannot get equal opportunity in negotiating their payment method. [This is] different from Google’s treatment of global digital content providers, wherein Google is open to alternative payment systems,” the KPPU stated in a press statement released on Thursday.
Albeit not mentioning them specifically, the agency revealed that the types of apps that were subject to this policy consisted of those that offered cloud software, digital items that can be used in games, subscription services such as education, health, music or video as well as certain apps that provided content.
Abuse of dominant position
Meanwhile, Google argued that it did not see what it was doing as an abuse of dominant position — on the contrary, the giant enterprise saw that it was helping local developers.
“Google Play [store] has enabled Indonesian developers to become successful by providing them access to tools and capabilities that help them build successful apps and businesses, and support all the great things that they’re doing. We listen and continuously improve based on the feedback we receive from the Play community,” a Google spokesperson told The Jakarta Post on Friday.
“For example, earlier this month, we rolled out the next phase of our user choice billing pilot in Indonesia, allowing developers to offer users an alternative billing system alongside Google Play’s billing system. We look forward to working with the KPPU to demonstrate how Google Play supports developers,” they added.
Head of economic opportunities research at the Center for Indonesian Policy Studies (CIPS) Trissia Wijaya said that the KPPU must be careful about handling this particular antitrust case.
“This monopoly issue needs to be reassessed because there are many factors. Google itself may have faced the same case in other countries like the US, but even the US itself decided to suspend its assessment due to lacking validation; everything comes back to the users’ rights to pick which browser they want to use,” Trissia said.