Apple and Google duopoly limits competition and choice, says CMA

December 16, 2021

Earlier this year, the CMA launched an inquiry following concerns that Apple and Google have too much control over operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome) that together form their ecosystems. It has now issued its interim report.

The term “mobile ecosystems” refers to the collection of gateways through which consumers can access a variety of products, content and services, such as music, TV and video streaming, as well as fitness tracking, shopping and banking. 

The CMA has considered whether the two organisations’ control over mobile ecosystems is stifling competition across a range of digital markets. The CMA is concerned this could lead to reduced innovation across the sector and consumers paying higher prices for devices and apps, or for other goods and services due to higher advertising prices. 

Mobile eco-systems

The CMA has provisionally found that Apple and Google have been able to leverage their market power to create largely self-contained ecosystems. As a result, it is extremely difficult for any other firm to enter and compete meaningfully with a new system.

Apple does not allow alternative app stores to its own and has rules in place which limit the functionality of other browsers. According to the CMA, a similar situation appears to arise with Google through its contracts with Android device manufacturers, despite offering its Android platform on an open source basis. These agreements encourage the pre-installation of Play Store and Chrome, which means that they are used by the overwhelming majority of Android customers.

App developers are also required to comply with Apple and Google’s rules for access to their app stores, which some say are overly restrictive. Developers are required to accept these terms to reach users, which can include paying 30% commissions to Apple and Google.

Both Apple and Google argue that many of these controls are needed to maintain the security and quality of the overall service to their users, and in some cases to safeguard users’ personal information. The CMA agrees that these considerations are very important but is concerned that Apple and Google are making decisions on these grounds that favour their own services and limit meaningful choice, when other approaches are available.

The report sets out a range of actions that could be taken to address these issues, including:

  • Making it easier for users to switch between iOS and Android phones when they want to replace their device without losing functionality or data.
  • Making it easier to install apps through methods other than the App Store or Play Store, including so-called “web apps”.
  • Enabling all apps to give users a choice of how they pay in-app for things like game credits or subscriptions, rather than being tied to Apple’s and Google’s payment systems.
  • Making it easier for users to choose alternatives to Apple and Google for services like browsers, in particular, by making sure they can easily set which browser they have as default.

Strategic Market Status

The CMA’s work so far suggests, that Apple and Google would meet the criteria for ‘Strategic Market Status’ (SMS) designation for several of their ecosystem activities, as set out in the government’s recent proposals to create a new pro-competition regime for digital markets. These proposals may change as a result of the consultation process and any subsequent legislative process, and so will be subject to ongoing review.

If those proposals become law, the Digital Markets Unit (DMU), which will sit within the CMA, will ultimately be responsible for deciding which ‘big tech’ firms get SMS status. This status will lead to these firms facing legally enforceable codes of conduct to govern their behaviour and to prevent them from exploiting their powerful positions.

With this in mind, the CMA’s current view is that the firms’ market power in this area will be best dealt with through the DMU, for which the government has recently proposed powers. The CMA is also awaiting stronger competition and consumer law powers, on which the government also recently consulted.

Next steps

In the meantime, the CMA has been investigating Apple’s App Store and Google’s Privacy Sandbox proposals over competition concerns. While both examine issues falling within the scope of the mobile ecosystems study, the work into mobile ecosystems is much broader. The CMA says that it will adopt a joined-up approach across all these related cases, with the aim of ensuring the best outcomes for customers and other businesses.

The CMA is consulting on its initial findings and the consultation ends on 7 February 2022. It will be continuing with the second half of the study and expects to issue a final report in June 2022.