The UK’s Competition And Markets Authority has announced that Apple and Google’s mobile platforms - iOS and Android - both now have ‘strategic market status’ designation. That’s important because it informs how the CMA goes about enforcing the 2024 Digital Markets, Competition And Consumers Act.
In particular, the ‘strategic market status’ designation potentially opens the door to a CMA intervention on both Apple and Google’s in-app payment rules that Spotify has been openly critical of, and which it has been trying to get changed for some time.
The regulator is keen to stress that the SMS designation does not suggest any “wrongdoing” on the part of Google or Apple, but it does allow the CMA to now “consider proportionate, targeted interventions” to ensure “effective competition” in the mobile app marketplace.
Will Hayter, Executive Director for Digital Markets at the CMA, says that “thousands of businesses right across the economy” use the Apple and Google mobile platforms “to market and sell products and services to millions of customers”, and “the platforms’ rules may be limiting innovation and competition”.
The ‘strategic market status’ basically increases the power of the CMA to force changes to Apple and Google’s rules under the Digital Markets, Competition And Consumers Act.
Needless to say, neither Apple nor Google want to be more heavily regulated, with both fearing the UK will now introduce regulations similar to those that are already in place in the European Union, which has forced both companies to make changes to their app store rules, including around in-app payments.
An Apple spokesperson told the BBC, “Apple faces fierce competition in every market where we operate, and we work tirelessly to create the best products, services and user experience. The UK’s adoption of EU-style rules would undermine that, leaving users with weaker privacy and security, delayed access to new features, and a fragmented, less seamless experience”.
The fact Apple and Google have been designated with ‘strategic market status’ is not surprising. The two companies have an effective duopoly in the mobile platform space, and the CMA’s consultation concluded that “ongoing technological developments, particularly involving AI, are unlikely to eliminate Apple or Google’s market power” over the five-year period that is covered by the SMS designation.
Spotify has long moaned about Apple’s rules around in-app payments, which originally forced Spotify to always use Apple’s commission charging payments system if selling subscriptions or other digital products through its app. And also banned it from sign-posting alternative payment options elsewhere on the internet, such as on Spotify's website, where the commissions could be avoided.
Plenty of other app developers have likewise complained about those rules, with ‘Fortnite’ owner Epic Games another high profile critic. Lobbying and litigation by Spotify, Epic and others in various countries around the world have forced both Apple and Google to relax and change their rules in some markets. Spotify et al are hoping the CMA will do the same - or go even further - in the UK.
A previous CMA investigation into the app store rules was closed because of the passing of the Digital Markets, Competition And Consumers Act, which increased the CMA’s regulatory powers. Back in July the CMA published a road map setting out its plans to investigate Apple and Google’s rules, including in relation to in-app payments.
That work was dependent on both companies being designated as having ‘strategic market status’. With that now done, those investigations can begin.
