Indonesian antitrust watchdog investigates Google

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The commission for the supervision of business competition in Indonesia, Komisi Pengawas Persaingan Usaha (KPPU), has started an investigation into alleged violations conducted by Google and its subsidiaries in Indonesia. According to KPPU, from its analysis and information from different opinions from various parties, it suspects that Google carried out monopolistic practices, such as conditional sales, discriminatory practices, and unfair competition in the distribution of digital applications in Indonesia.

The decision was made on 14 September 2022 in following up on the results of research initiatives conducted by the KPPU Secretariat. The investigation process will be carried out for the next 60 working days, in order to obtain sufficient evidence, clarity, and completeness of alleged violations of Indonesia's law. For the past few months, the agency conducted research on initiatives related to Google - the research is focused on Google's policy that requires the use of Google Pay Billing in certain applications.

Google Pay Billing is a method of purchase of digital products and services in applications (in-app purchases) distributed on the Google Play Store.

The various types of applications subject to the use of the Google Pay Billing include:

Applications that offer subscriptions, such as education, fitness, music, or videos.
Applications which offer digital items that can be used in games.
Applications that are providing content or benefits, such as an ad-free version of the app.
Applications that offer cloud software and services, such as data storage services, productivity apps, and more.

The Google Pay Billing usage policy requires the application to be downloaded from the Google Play Store and must use Google Pay Billing as the transaction method - content providers or application developers must comply with the provisions contained in the Google Pay Billing . Google also does not allow the use of other payment alternatives in Google Pay Billing. This policy on the use of Google Pay Billing became effective on 1 June 2022.

The research found that Google Play Store is the largest application distribution platform in Indonesia with a market share of 93%. There are several other platforms that also distribute applications, such as Galaxy Store, Mi Store, or Huawei App Gallery - but are not a substitute for the Google Play Store. However, the Google Play Store is difficult to be replaced because the majority of end users or consumers in Indonesia download their applications from it.

KPPU also found that Google enforced a policy to require the use of Google Pay Billing for the purchase of digital products and services in applications distributed on the Google Play Store. Applications subjected to this obligation cannot refuse the obligation, because Google may impose sanctions for deleting the application from the Google Play Store or not being allowed to update the application. This means that the application will lose its customers.

It was founded that this obligation to be very burdensome for application developers in Indonesia due to the imposition of high tariffs, namely around 15% to 30% of the price of digital content sold. Before the mandatory use of Google Pay Billing, the developer or application developer can use other payment methods with rates below 5%. In addition, it was Google Pay Billing was causing an increase in production costs and prices, this obligation also results in disruption of the user experience of consumers or application end users.

When it comes to the practice of conditional sales (tying) for services, there were two different business models, namely requiring application developers to purchase in bundling, the Google Play Store application (digital application marketplace) and Google Play Billing (payment service).

As for in-app purchases, Google only cooperated with one payment gateway/system provider, while several other providers in Indonesia did not receive equal opportunities in negotiating the financing method. In contrast to the treatment aimed at global digital content providers, where Google opens providers to cooperate with alternative payment systems.

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