Both Apple and Google will be able to breathe easier after the UK competition watchdog announced on Wednesday that it was closing two investigations into their respective mobile app ecosystems, citing administrative priorities.
The UK regulator has been investigating Apple's conduct regarding app distribution on iOS and iPadOS mobile devices since March 2021, focusing in particular on the terms of use governing developer access to the App Store. Since June 2022, a similar investigation has also been looking into Google's conduct regarding app distribution on Android devices, as well as the Play Store's rules regarding its own billing system for in-app purchases. The CMA said it was concerned that the companies' terms of use could unfairly restrict developer choice.
The Competition and Markets Authority (CMA) had previously found significant grounds for concern about the two companies' monopoly on the mobile phone industry.
Nevertheless, China has now halted both explorations without taking any action.
But this relief for Apple and Google is likely to be short-lived, as the CMA said a key reason for dropping the investigation was that it hopes to be able to use new competition powers to apply special abusive rules to tech giants with strategic market power.
In a press release, the CMA said it hoped the future digital market regime would “address app store concerns”.
The company also said that it “expects its initial efforts under the new digital marketplace competition regime to build on and leverage its experience in areas it has already explored, such as the mobile ecosystem, including app stores,” marking the clearest sign yet that Apple and Google will be at the forefront of special abuse management.
Will Hayter, the CMA's executive director for digital markets, added in a statement: “Once the new pro-competitive digital markets regime comes into force, we will be able to consider applying these new powers to areas of concern that we have already identified through our existing work.”
“It's vital that UK tech businesses, including app developers, have access to a fair and competitive app ecosystem that helps grow the industry, encourages investment and delivers better outcomes for UK consumers. These are all factors we are considering before we begin our first review under the new regime.”
The restructuring of the UK's digital market regime has been planned for years and was approved as early as November 2020, but has suffered legislative delays as a result of political turmoil caused by the change of Conservative government in recent years.
Eventually, the plans were resurrected in April last year, with the Digital Markets Competition and Consumer Bill being rushed through Parliament as part of a “clean-up” before the general election in May 2024, meaning the CMA is finally ready to use its powers to police Big Tech once the regime comes into force (expected to be “later this year”).
“In light of recent developments, in particular the passing of the Digital Markets, Competition and Consumer Act (DMCCA) in May, the CMA has assessed its existing competition law investigation into the Google Play Store and its parallel proceedings regarding Apple's App Store Rules against its administrative priorities and has decided to close those proceedings for now,” the CMA wrote.
“If either Apple or Google, or both, are designated as having 'strategic market status' in relation to their digital activities in the mobile sector, the CMA will be able to use its new powers to consider the range of issues raised by the parties more comprehensively than it can under these specific competition law investigations. This will also enable the CMA to consider what intervention, if any, would be required following the designation.”
But UK developers hoping the regulator will take swift action to reboot the Apple-Google duopoly will still have to wait a little longer. The DMCCA requires the CMA to carry out investigations to determine whether the market power of the tech giants meets the law's criteria for “strategic market status” (SMS), and if so, designate the companies for inclusion in the regime.
In January, the CMA said it planned to carry out three or four inspections to judge SMS in the first year of the scheme, so it could still be quite some time before any enforcement action is taken against big tech companies in the UK.
One sign of tougher operating conditions ahead for platform operators under the relaunched approach was the CMA's rejection of commitments made by Google in response to concerns about its Play Store terms under its (now closed) investigation. Had the CMA accepted the commitments, it could have limited the scope of remedies it could have ordered against Google under the digital markets regime, assuming Google were ultimately designated as holding SMS (as is highly likely).
The CMA said Google's proposals would give app developers the power to use different payment options to Play's billing system, proposals it called “developer-only billing” or “user-chosen billing”. But after consulting with developers and considering their feedback and available evidence, the CMA said it was not satisfied that Google's proposed commitments effectively addressed competition concerns and had decided to reject them.
“Feedback from app developers indicates that Google's proposal to allow users to use alternative payment methods for in-app purchases falls short and would effectively lock them into Google's payments system,” the company wrote. “Specifically, app developers cited the level of fees paid to Google and the proposed 'pop-up screen' that could discourage users from completing transactions.”
It will be interesting to see how the CMA plans future interventions against designated tech giants, as the DMCCA gives regulators discretion to make bespoke interventions tailored to the specific platforms and issues identified. This distinguishes the UK's approach from the Digital Markets Act, known as the DMA, a more prescriptive restructuring of competition already in place in the European Union.
But the DMA's fixed list of “dos and don'ts” has only applied to Apple and Google since early March, when the EU regime came into force for designated gatekeepers, so the UK remains well behind the EU when it comes to tackling platform power.