Spotify users make in-app purchases and are billed by Google’s billing service, thereby earning Google a lower commission from these purchases.
It was noted by an executive at Epic vs Google trial that Google allowed Spotify to circumvent the mandatory Play Store fees. The Verge is reporting on these details based on a secret contract that enables Spotify to pay for itself and save on commissions to Google. When Google was initially trying to maintain this arrangement with Spotify in the lawsuit involving Fortnite’s developer, Epic Games, it had tried to keep this confidential.
As per the report in the Epic versus Google suit, Don Harrison, the chief executive of partnership at Google, said that Spotify was never compensated for any transaction fee that Google paid for processing the customer payments on its own. But whenever customers paid for Spotify using Google’s in-app billing, 4% commission went directly to Google.
What does Google say about it?
Google normally charges 15% commission from app and in-app purchase through its platform. On the other hand, in South Korea, India and 35 additional countries, they prefer ‘user choice billing’ which minimizes this commission at 4%.
A report mentioned that the Google executive told a court that apart from Spotify’s popularity on Android, the two companies had a “success fund” that they both agreed upon. The parties gave each other fifty million dollars which translates into approximately Rs. 410 crore.
It is important to note that although Spotify may have some special deal with Google, it still pays the Apple App Stores in-app purchase fee up to 30% per transaction. Like Netflix and other such services, Spotify does not allow direct payment through its iOS app so as to avoid these fees.
The implications of these exposures to the suit of Epic Games against Google is yet to be determined. Epic Games is suing both Apple and Google, claiming that these are antitrust practices, involving limitation of alternative billing systems and application stores on iOS and Android. This trial has provided several interesting facts concerning Google as well as other companies such as a multi-billion dollars contract with Samsung to pre-load Galaxy smartphones with the Play Store, Assistant and Search applications as default.
Epic versus apple ended early in this year, by Ninth Circuits Court of appeal confirming a former ruling that in 2021, it was established that it is legal for apple to restrict its software developer kit and therefore does not contravene US antitrust laws. On the single count of liability, Apple will be restricted only to allow links for external payment system in the application. Epic has appealed the verdict to the US Supreme Court. However, while this is being taken care of, Apple has moved to the Supreme Court seeking to overturn the judgment that had barred Apple’s anti-steering rules.
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