Apple and Google can momentarily exhale as the UK’s Competition and Markets Authority (CMA) announced on Wednesday that it is closing two significant investigations into the companies’ mobile app ecosystems. These probes, which had been a looming threat over the tech giants, have been dropped as the CMA shifts its focus toward broader regulatory strategies. However, any sense of relief may be fleeting, as the regulator has signaled its intention to use incoming powers to address the same concerns in a more comprehensive manner.
Background: A Scrutiny of Mobile App Ecosystems
The CMA’s interest in Apple and Google’s mobile ecosystems is not new. Since March 2021, the regulator has been examining Apple’s practices related to app distribution on iOS and iPadOS devices. The investigation focused on whether Apple’s terms and conditions, particularly those governing developers’ access to the App Store, unfairly restricted competition.
Similarly, a probe into Google’s practices began in June 2022. This investigation scrutinized the tech giant’s conduct around app distribution on Android devices, with particular attention to the Play Store’s rules and its billing system for in-app purchases. The CMA expressed concerns that the terms and conditions imposed by both Apple and Google might unduly limit developers’ choices, potentially stifling innovation and harming consumers.
Despite finding substantial grounds for concern over the dominance of Apple and Google in the mobile ecosystem, the CMA has now decided to close both investigations without taking direct action.
A Strategic Pivot: Preparing for New Powers
While Apple and Google may breathe easier for now, the CMA’s decision to close these probes is less a victory for the tech giants and more a strategic recalibration. The regulator’s move is driven by the anticipation of new competition powers that will soon come into force under the UK’s Digital Markets, Competition and Consumers Act (DMCCA).
In its press release, the CMA made it clear that it plans to use these new powers to “resolve app store concerns” more effectively than would have been possible under the current regulatory framework. The CMA anticipates that its early work under the new digital markets regime will build upon its previous investigations into mobile ecosystems, with Apple and Google likely to be the first targets of these enhanced regulatory tools.
Will Hayter, the CMA’s executive director for digital markets, emphasized the importance of these forthcoming powers, stating, “Once the new pro-competition digital markets regime comes into force, we’ll be able to consider applying those new powers to concerns we have already identified through our existing work.” He further highlighted the need for a fair and competitive app ecosystem in the UK, one that fosters growth, boosts investment, and ultimately benefits consumers.
The Long Road to the Digital Markets Regime
The UK’s digital markets regime has been a long time coming. Initially greenlit in November 2020, the plan faced delays due to the political turbulence that has characterized recent years in the UK. However, the proposal was revived in April of last year, and the DMCCA was eventually expedited through parliament in the run-up to the May 2024 general election.
With the regime expected to come into force later this year, the CMA will soon have the authority to impose special abuse controls on tech giants with “strategic market status” (SMS). However, the process of determining which companies will be designated as having SMS — a status that subjects them to stricter regulations — will take time. The CMA has indicated that it expects to conduct three to four investigations in the first year of the regime’s implementation.
Google’s Rejected Proposals: A Glimpse of What’s to Come?
One indication of the CMA’s future approach under the DMCCA is its recent rejection of commitments submitted by Google in response to concerns about the Play Store’s terms. Google had proposed allowing app developers to use alternative payment methods for in-app purchases, known as ‘Developer-only Billing’ and ‘User Choice Billing’. However, after consulting with developers and reviewing feedback, the CMA concluded that Google’s proposals did not go far enough in addressing its competition concerns.
Developers expressed that these alternative payment options would still leave them largely dependent on Google’s payment system, particularly due to the high commissions and the ‘pop-up screens’ that could deter users from completing transactions. The CMA’s decision to reject Google’s proposals suggests that the regulator is prepared to take a hard line when it comes to enforcing fair competition in digital markets.
The UK vs. the EU: Diverging Approaches to Big Tech
The UK’s approach under the DMCCA is expected to differ from the European Union’s Digital Markets Act (DMA), which has already begun to impose a fixed list of ‘dos and don’ts’ on designated gatekeepers, including Apple and Google. While the EU’s approach is more prescriptive, the UK’s new regime allows the CMA greater flexibility to design bespoke interventions tailored to the specific challenges posed by different platforms.
However, the UK’s regulatory efforts are still playing catch-up with the EU. The DMA has been in force since early March, and Apple and Google have already been subjected to its rules. As the UK prepares to implement its own regime, the CMA’s ability to impose tailored remedies on tech giants will be closely watched.
Conclusion: A Temporary Reprieve, A Looming Reckoning
For now, Apple and Google may enjoy a brief respite from regulatory scrutiny in the UK. But the closure of the CMA’s investigations is not an end, but rather a prelude to a more robust regulatory framework that is poised to take effect later this year. With new powers on the horizon, the CMA is gearing up to tackle the concerns it has identified with renewed vigor, setting the stage for a potentially significant shake-up in the digital markets landscape. Tech giants operating in the UK should brace themselves for the challenges that lie ahead.
