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UK’s antitrust watchdog finally eyes action on Apple, Google mobile duopoly

The UK’s competition watchdog has published its final report on a comprehensive, year-long mobile ecosystem market study — cementing its view that there are substantial concerns about the market power of Apple and Google which require regulatory intervention. Back in December, its preli…

  • Posted on 10th Jun, 2022 14:03 PM
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The UK’s competition watchdog has published its final report on a comprehensive, year-long mobile ecosystem market study — cementing its view that there are substantial concerns about the market power of Apple and Google which require regulatory intervention.

Back in December, its preliminary report on the market study also identified concerns and discussed potential remedies for tackling lock-in and opening up the pair’s “largely self-contained ecosystems”, such as by making it easier for consumers to switch and reducing barriers for app developers.

The Competition and Markets Authority (CMA)’s 356-page final report goes into greater depth and detail on all fronts, analyzing a smorgasbord of competition concerns attached to how Apple and Google operate their respective, dominant mobile ecosystems, iOS and Android — and digging into topics as varied as Apple’s App Tracking Transparency feature; a Google developer revenue-sharing agreement codenamed ‘Project Hug’; and the merits of developing web apps that features a chat with the maker of popular puzzle game, Wordle, to pull out a few highlights — but with the regulator pointing to the pair’s sustained profitability, and profits it assess as “high in absolute terms”, as an indelible, top-line signal that market distortion is afoot.

In a press release accompanying the report, the CMA sums up its conclusions by asserting that Apple and Google “hold all the cards” in the mobile ecosystems market — and that interventions are needed “to give innovators and competitors a fair chance to compete”.

While there’s likely to be a fair degree of déjà vu for industry watchers — given the CMA’s preliminary report last year also flagged some of the same problems and discussed potential remedies — this time the UK regulator is taking action. Albeit, the processes this will entail are not quick so it could be years before it’s in a position to actually intervene and order changes to how the tech giants operate in relation to concerns its report has identified. But, well, the train is now starting to leave the station at least.

Specifically, the CMA is now proposing to open an in-depth probe with two points of focus: One on Apple and Google’s market power in mobile browsers; and another on Apple’s restrictions on cloud gaming through its App Store. (NB: The regulator has a duty to consult before it opens what’s called a market investigation reference, or MIR, relying on its existing competition powers.)

On mobile browsing, the CMA is concerned about Apple’s ban on non WebKit-based browsers on iOS — which it suspects severely limits rival browsers from being able to differentiate vs Apple’s Safari, as well as suggesting the restriction limits Apple’s incentive to further develop its own browser.

The CMA is further worried about how Apple’s ban on non WebKit-based browsers on iOS limits the capabilities of web apps on its platform — hampering their ability to compete with native apps (which Apple of course monetizes via its App Store fees).

Mobile browser defaults also appear to be in scope of the proposed MIR, with the CMA noting that mobile devices typically have either Google’s Chrome or Apple’s Safari pre-installed and set as default at purchase — “giving them a key advantage over other rival browsers”.

On cloud gaming, the CMA says it wants to look into Apple blocking these services on its App Store and how that might be harming consumers, such as if its action is hampering the sector from growing. It further notes that gaming apps are a key source of revenue for the iPhone maker, suggesting the tech could also pose a threat to Apple’s strong position in app distribution.

Its consultation on the proposed MIR will run until July 22.

In parallel, the regulator is also announcing that it’s taking enforcement action against Google in relation to its app store payment practices — where it says it suspects the adtech giant of anti-competitive practices.

This competition law investigation will focus on Google’s rules governing apps’ access to listing on its Play Store — looking at conditions it sets for how users can make in-app payments for certain digital products. (NB: The CMA has an open investigation into Apple’s App Store, announced in March last year — so this looks like a mirror action to address Google’s practices but one that’s likely to lag the more advanced investigation into Apple’s mobile app store terms.)

According to its report, the CMA has decided to step up a gear now because mobile developers have been complaining to it in the months since its preliminary report also flagged a grab-bag of competition concerns.

But the regulator is also acting now using its existing powers because it’s essentially being forced to as a result of the UK government’s decision to decelerate a planned ex ante reboot of digital competition rules (which the CMA had previously envisaged as the best vehicle to address antitrust concerns linked to Big Tech market power, including in mobile) — hence its report acknowledging (with quasi regret) “we now understand this [legislation to empower the Digital Markets Unit] will not be in the current parliamentary session (ie within the next year)”, adding: “Based on these developments, we now consider it to be the right time to consult on making a market investigation reference [MIR] into mobile browsers and cloud gaming.”

So the bottom line is that the UK’s competition regulator is having to make do with its current (ex post) competition powers to address substantial and sustained antitrust concerns attached to fast-moving digital giants — because the UK government has failed to prioritize the necessary ex ante reforms.

The CMA’s report acknowledges that European Union regulation could, therefore, end up having a first mover impact on strategic digital market power — since the bloc has already agreed its own ex ante competition reform (the Digital Markets Act; DMA), which is likely to come into force early next year.  So, er, so much for Brexit taking back regulatory control then!

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