Mobile phone users could be losing out because Apple Inc (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG) subsidiary Google have too much control over operating systems, app stores and web browsers, the Competition and Markets Authority (CMA) has found.
Publishing its interim report into its probe of Apple and Google, the watchdog said it is concerned that the two companies’ duopoly is leading to less competition and meaningful choice for customers.
It said people could be facing higher prices than they would in a more competitive market, including for Apple phones, app subscriptions and purchases made within apps.
“Apple and Google have developed a vice-like grip over how we use mobile phones and we’re concerned that it’s causing millions of people across the UK to lose out,” said CMA chief executive Andrea Coscelli.
In the UK, over 95% of downloads through mobile app stores in 2020 were made via the App Store or the Play Store, while Apple’s and Google’s browsers account for 90% of browser usage on mobile devices.
The CMA said it has provisionally found that Apple and Google have been able to leverage their market power to create largely self-contained “ecosystems” of operating systems, app stores and web browsers. 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 its rules limit the functionality of other browsers.
Meanwhile, although Google offers its Android platform on an open source basis, it has contracts with Android device manufacturers that encourage the pre-installation of Play Store and Chrome, which means they are used by the overwhelming majority of Android customers.
In addition, app developers must comply with Apple’s and Google’s rules for access to their app stores, and in some cases they are paying 30% commissions to Apple and Google.
The companies argue that these controls are needed to maintain the security and quality of their service, but the CMA said it is concerned that Apple and Google are favouring their own services and limiting meaningful choice, when other approaches are available.
“Most people know that Apple and Google are the main players when it comes to choosing a phone. But it can be easy to forget that they set all the rules too – from determining which apps are available on their app stores, to making it difficult for us to switch to alternative browsers on our phones. This control can limit innovation and choice, and lead to higher prices – none of which is good news for users,” said Coscelli.
The CMA proposed a range of actions that could be taken to address these issues, such as making it easier for users to switch between iOS and Android phones and making it easier to install apps through methods other than the App Store or Play Store, including so-called “web apps”.
Potential actions also include allowing users to choose alternatives to Apple’s and Google’s browsers and enabling apps to give users a choice of how they pay for things in-app.
The CMA said it believes Apple and Google would meet the criteria for Strategic Market Status (SMS) designation, as set out in the government’s recent proposals to create a new pro-competition regime for digital markets.
If the proposals become law, the Digital Markets Unit (DMU) – which will sit within the CMA – will be responsible for deciding which big tech firms get SMS status. Firms with SMS status will face legally enforceable codes of conduct to prevent them from exploiting their powerful positions.
The CMA said it believes Apple’s and Google’s market power will be best dealt with through the DMU, which the government has recently proposed powers for.
“Any intervention must tackle the firms’ substantial market power across the key areas of operating systems, app stores and browsers. We think that the best way to do this is through the Digital Markets Unit when it receives powers from government,” said Coscelli.
The watchdog said it is consulting on its initial findings and welcomes responses by 7 February 2022. It expects to issue a final report in June 2022.
