Briefing on CMA’s Final Report on Market Study into Mobile Ecosystems

by Editor

The CMA has published its final report on its market study into mobile ecosystems today.¹

“The CMA’s study into mobile ecosystems – i.e., operating systems, app stores and
web browsers – has concluded that Apple and Google’s duopoly means they have a
stranglehold over these key gateways”. The CMA found: “Apple and Google have a tight grip over these increasingly crucial ecosystems”… “Both companies unilaterally determine the ‘rules of the game’, making it difficult for rival businesses such as browsers or alternative app stores to compete.”²

The CMA is acting now to tackle concerns where possible, using its existing powers,
as part of a wide portfolio of digital cases already underway. It is:

consulting on a market investigation into mobile browsers
consulting on a market investigation into cloud gaming
taking further enforcement actions including opening a new investigation into
Google’s app store payment practices, alongside the current Apple case.
launching further digital cases beyond the study.

The market study considered:

Mobile devices and operating systems. The CMA found most devices use Apple’s iOS or
Google’s Android operating system, which determine and control key features such as the interface, speed and technical performance, and what software can run on the device.

Distribution of apps. Most apps are ‘native’. Some come pre-installed. App stores are the key gateways. The only app store on Apple is Apple’s. Over 90% of Android downloads are from Google’s Play Store. Open web apps could be ‘sideloaded’.

Mobile browsers and browser engines. These are another key gateway: over 55 million weekly active UK users. In 2021, 97% of all mobile web browsing in the UK was powered by either Apple’s or Google’s browser engines.

Issues:

Apple and Google’s role over competition between app developers. Apple and Google set the rules for competition between app developers, whilst also directly competing with their own apps. They unilaterally determine what apps are allowed; how they are ranked and discovered; and set commission rates and many other rules.

The positions of Apple and Google are unassailable without steps to level the playing field. Where it will be more difficult to unlock competition, safeguards for users and businesses may also be needed. Measures by both Apple and Google include:

Apple’s tight grip with many restrictions. Apple imposes many restrictions, such as prohibiting any other app store on its devices, blocking direct downloads from the web, and restricting other ways to access services. These may have some benefits for security or user privacy. However, they can also limit competition. Apple’s restrictions have effectively blocked cloud gaming services from its app store and hampered the development of web apps through its restrictions on browser engines.
Apple restricts the functionality and use of other browsers, as it does not allow
competing browser engines. This means all iOS-based browsers must use Apple’s
own engine, including even Chrome. This materially affects the functionality of web apps, limiting the constraint these could have on native apps and Apple’s market power from its App Store. Apple also receives a significant share of revenue from Google Search traffic on iOS devices.

Google’s agreements with Android device manufacturers. They pay to ensure that Chrome and the Play Store come pre-installed, and that Google is the default search engine. Manufacturers can only use Google’s version of the Android OS if they pre-install and prominently place the Play Store. Google shares a percentage of its significant search advertising revenues (and in some cases, revenue from Play Store) with other Android manufacturers in return for placing and promoting Google apps. These agreements enable Google to use its products and services to reinforce each other, protecting its position.
Google limits alternative app stores. They cannot be downloaded through Google’s Play Store; instead, they are either pre-installed by manufacturers or must be directly downloaded by the user (i.e., sideloaded – a process involving several steps and security warnings). These only place a limited constraint on Google, as their usage is lower, and they are not considered to be a viable substitute by app developers.
Google is less restrictive than Apple on access to hardware functionality, like contactless payments. However, there are some signs that Google’s approach is tightening in certain respects, for example in relation to the need for particular apps to use Google’s payment systems for in-app purchases

Requirements to use their app store payment systems and high commission rates. They collect up to 30% commission on subscriptions and ‘in-app’ digital purchases (like gaming, dating, music streaming apps). This does not apply to physical goods and services like a grocery delivery or a taxi journey. Both companies say this is necessary so they can collect a commission from sales made through their app stores, though we found there may be other, less restrictive ways for them to do this. These commissions are high and are set above a competitive level. Apple and Google’s apps do not pay this commission (e.g., Google’s YouTube Premium is priced higher on iOS than Android, where it pays no commission). App developers do not get to choose the right payment systems for their app or users, and it breaks the link between developers and their customers. Developers should be allowed to handle payments directly and be given a meaningful choice in payment systems.

Interventions are needed to tackle their market power and harmful practices

These include measures to:

Open up these markets, removing and revising existing restrictions, and measures to enable users to make active and effective choices (e.g., tackling the power of defaults);
Prevent Apple and Google from exploiting their power by introducing a number of changes to:

ensure they cannot unfairly favour their own businesses – particularly where they are offering their own apps and browsers;
provide greater transparency and information about their decision-making (e.g., app review process, app store rankings); and
ensure others can access their platforms on fair and reasonable terms – including fair commission rates.

Considerations on remedies need to take into account what can be done under a further enforcement action, market investigation and future legislation while respecting the need for international coordination.

Immediate actions:

“Some issues are suited to our existing powers where we can take action now. Apple’s restriction on new cloud gaming services is an area where a targeted intervention could be introduced. We are proposing this is explored further through a market investigation, alongside our concerns on browsers.

…

We will take enforcement action, where appropriate, in relation to specific conduct or practices (or example, into Apple’s in-app purchasing systems), and we are announcing the launch of an investigation into Google’s in-app purchase rules in the Play Store.”³

Opening up competition and addressing harms in app distribution.

“Many stakeholders called for changes to allow alternative app stores and sideloading. But these are not straightforward interventions. Significant concerns have been raised about their implications, particularly on security and privacy. We agree that these are important and that sufficient safeguards need to be in place. Our view is that these security concerns are likely to be surmountable, although will need to be given further consideration.”⁴

Improving choice and quality in browsers aka competition between browsers

Opening Apple up to other browsers and increasing browser competition. Security and technical implications and costs are described by the CMA as “manageable and that greater competition would drive not only significant benefits in terms of innovation, investment, and improved quality, but could potentially also drive even better security. In the longer term, greater competition could spur browsers to invest more in security to win more security-conscious users from each other.” ⁵

The CMA also heard concerns that removing Apple’s restrictions could tip the market even further in favour of Google’s browser engine (the other engine most used). The CMA “do not consider this risk is a strong reason for not allowing greater competition and it could in fact spur Apple to invest and innovate more, meaning improvements for web developers and ultimately consumers when browsing the web on their phones (e.g., faster content loading, new and improved web formats etc)”. Instead, the CMA sees “a strong case for using our existing powers and launching a market investigation to explore them further.”⁶

Protecting security, safety and privacy remains important

Both firms argue that many of their controls are needed to maintain the security and quality of the overall service for people and businesses, and in some cases to safeguard personal information. The CMA agrees these factors are very important.

Apple, in particular, argue that many of its restrictions make its devices safer and more secure, which is what attracts people to its products and differentiates it from others. The CMA has “carefully looked at these factors and obtained expert advice to understand these issues in more depth. We found there is likely to be significant scope for allowing more competition and removing or revising many of the current restrictions, without compromising safety, security or the privacy of people’s data.”⁷

The CMA is “concerned that privacy, security and safety decisions could be skewed by the interests of Apple and Google, which in essence often act as quasi-regulators in their roles as ecosystem stewards. Both companies have made important positive changes for consumers in this regard, and this is something we support. But in some cases we have found that Apple and Google are making decisions that could benefit their own services over others and mean that users may not make effective choices.”⁸

Apple’s ATT

The CMA states at page 17:

“We have engaged closely with the Information Commissioner’s Office (ICO) – the UK’s authority responsible for upholding data privacy – in considering privacy issues alongside competition. We support market developments that promote greater control and choice for consumers while also ensuring these are ‘competition neutral’, ie do not favour some companies over others. It is important that Apple and Google apply the same standards to themselves as to others.”

“We are concerned that this is not the case in relation to Apple’s App Tracking Transparency (ATT) framework. ATT requires apps to show a specific prompt to request users’ permission for the app to ‘track’ them. It is clear there are significant privacy benefits from this. However, Apple has implemented different choice architecture design and language in this prompt to the ones it uses for its own apps, even though they serve similar purposes. The way this has been implemented may also distort user choice, potentially tilting the playing field in Apple’s favour and impacting the ability for developers to attract users and monetise their apps.”

“In 2021, the CMA raised competition concerns with Google in relation to its proposed Privacy Sandbox changes on its Chrome browser, and recently accepted legally binding commitments from Google to address those concerns. Google recently announced it is developing similar changes for apps. This could also raise potential competition concerns, although Google has indicated that it intends voluntarily to apply the principles of its commitments to these changes as well. We will continue to monitor this development.

After this study, and in partnership with the ICO, we hope to work constructively with
Apple on its ATT framework to explore our competition concerns while upholding the
privacy benefits for users. “

¹The final report and its appendices can be found here.