The UK’s competition regulator is preparing to loosen Apple and Google’s hold over the mobile economy, proposing rules that would let app developers point customers towards cheaper ways to pay outside the two companies’ app stores.
The Competition and Markets Authority (CMA) argues that consumers and the businesses that build apps are being short-changed by restrictions stopping people from spending money outside Apple’s App Store and Google’s Play Store. With at least 90 per cent of UK mobile devices running on one of the two platforms, the regulator has branded the pair an “effective duopoly”, a description it has used repeatedly as it ramps up scrutiny of the sector.
At the heart of the proposals is “steering”, the practice of letting an app guide users to a website where they can subscribe or buy directly, sidestepping the platforms entirely. The CMA is consulting on lifting the curbs that currently block this, a change it says would let apps bypass the “mandatory fees” the two companies impose. Both Apple and Google charge commission of up to 30 per cent on purchases made inside apps, including subscriptions, a levy that has long irritated developers and the focus of the regulator’s proposed action to drive more competition on mobile platforms.
The restrictions have real consequences for how people use everyday apps. Spotify, for instance, does not let UK users buy a monthly subscription through the Apple App Store, because it does not want to absorb the fees and pass them on to customers. Would-be subscribers must instead sign up via the desktop website, an awkward workaround that the CMA believes typifies a market lacking competitive pressure.
Will Hayter, executive director at the CMA, said it was important to give apps and their users more choice over how they transact and communicate. “This is not only because choice is inherently valuable but also because we see this as the best way to introduce some competitive pressure in a vital part of the mobile ecosystem that is otherwise sorely lacking such pressure,” he said.
Crucially, the watchdog is not proposing to strip the platforms of all revenue. Apple and Google would still be able to charge fees for allowing steering, provided those charges are applied fairly. Google said it had already made the required changes, including letting apps steer users outside the Play Store to complete transactions, and has introduced new fees this week covering, among other things, charges for steering users to alternative payment methods.
The CMA is also weighing whether to force Apple to open up access to its near-field communication (NFC) technology, the chip behind contactless payments. Doing so could allow developers to offer their own tap-to-pay services inside iOS apps rather than routing everything through Apple Pay, a move that would hand more room to challengers. British fintech Curve is among those that have already set out plans to take on Apple Wallet with a rival payment system.
The proposals build on the CMA’s decision last October to award Apple and Google “strategic market status” over their dominance of the mobile market, a designation that allows the regulator to set bespoke conduct rules for each company. That ruling has already prompted both firms to agree a series of UK app store changes, and the latest package of measures aimed at opening up the mobile market goes further still. The full consultation on the new requirements for Apple and Google’s mobile platforms is now open.
Apple, predictably, is unhappy. The company warned that the steering changes undermine protections for users and open the door to scams and the circumventing of parental controls. “When users are directed away from Apple’s trusted payment infrastructure, they lose the protections they rely on Apple to provide. We will continue to make our concerns clear in our ongoing dialogue with the CMA,” a spokesperson said.
For the UK’s small and medium-sized app businesses, the prize is straightforward: lower fees, a more direct relationship with customers and, the CMA hopes, savings that can be reinvested into the kind of innovation an entrenched duopoly has tended to discourage.