Tech giants Apple and Google are ‘suffocating’ innovation and economic growth in the UK with their control over mobile app markets, according to a new appeal by the Coalition for App Fairness (CAF), a nonprofit organisation designed to promote competition and protect digital innovation.
In a move to tackle this issue, CAF has submitted new evidence highlighting the damage the Apple and Google duopoly on mobile app markets and browsers are doing to firms operating in the UK.
This comes days after an independent inquiry group of the Competition and Markets Authority (CMA) revealed that it believes “Apple’s policies are holding back innovation in the browsers we use to access the web on mobile phones”.
This independent group recommends that the CMA Board “consider the case for designating firms with strategic market status, taking account of the interplay between the specific markets that are the subject of this market investigation and Apple’s and Google’s wider mobile ecosystems” under the new digital markets competition regime, expected to be signed off by the government in early December.
CAF’s appeal also comes just before the UK government’s Industrial Strategy consultation closes on 24 November, which highlights its proposed 10-year plan for the UK economy, aiming to deliver the certainty and stability businesses need to invest in the high-growth sectors and drive long-term economic growth.
“The UK’s mobile app ecosystem is a critical growth engine for the UK economy, generating at least £74billion in GVA in 2021 and supporting over 400,000 jobs,” states CAF in its submission. “However, this vibrant ecosystem is being held back by significant market failures.”
In March, the European Commission ruled that Apple violated the EU’s antitrust laws and fined them over €1.8billion after music streaming giant Spotify filed a complaint against the company, claiming that the App Store’s cut of subscription fees harmed consumer choice and innovation.
Highlighting unfair practices
According to Checkatrade, the UK’s leading platform for home improvements, facilitating over £7billion of work annually for British SMEs, Apple and Google “control access” to the digital marketplace.
In the latest CAF submission, Checkatrade explains: “Through app stores, they [Apple and Google] act as gatekeepers to the internet, dictating terms to businesses like ours. They can demand up to 30 per cent of every transaction made through our app, ultimately forcing us to pass costs onto hard-working trades and/or limiting our ability to operate and grow.”
Checkatrade also highlights how “Google’s Local Service Ads product benefits from the prime location in the search results page even when a user specifically searches for Checkatrade, and when other results would have been more relevant to the user’s search.”
Cornwall-based audiobook innovator, xigxag, also revealed how the duopoly was damaging its growth: “xigxag launched the app before our website, so in-app purchase was the only option available to us. We were forced to implement Apple and Google payment systems, neither of which are fit for purpose for an e-commerce a-la-carte retailer with a catalogue approaching 100,000 titles.”
CAF explains that as a smaller developer, xigxag currently pays 15 per cent commission, but warns: “Once the business is big enough, we will face a doubling of transaction fees to 30 per cent. When this occurs, the business becomes unviable without forcing customers to the web to make their purchases.”
xigxag details how Apple and Google’s mandatory payment systems:
- Have six times higher failure rates than alternatives like Stripe
- Charge 15 times more than standard payment processors
- Withhold revenue for up to 68 days – versus the industry standard of seven days
- Lack basic retail functionality like shopping carts and detailed receipts
Calling for change
CAF’s submission details how Apple and Google’s “substantial and entrenched market power” enables them to set the “‘rules of the game’ for app developers, who rely on their app stores to reach customers and have little or no ability to negotiate over terms”.
Now, CAF is calling for specific actions to unlock growth in the UK’s £74billion app economy. In its latest submission, it urges the UK government and CMA to quickly implement the DMCC regime, prioritising designation for Apple and Google’s mobile app ecosystems. It also urges the CMA to consult on Conduct Requirements focusing on the most harmful practices identified in the CMA’s studies.
It also suggests that designating mobile app ecosystems as a specific subsector in the final Industrial Strategy and collecting appropriate data to monitor its health and growth would help resolve this issue.
By coordinating internationally with other regulators, especially in the EU, to maximise effectiveness, it could also become easier to implement rules that benefit smaller firms operating in these ecosystems, while improving consumer choice.
In February, Apple argued that Spotify’s complaint against it was an attempt to get “limitless access” to all of its tools without paying anything for the value Apple provides. Now, Apple has told CNBC that
“Apple believes in thriving and dynamic markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users.”
The post Apple and Google Mobile App Duopoly is ‘Suffocating’ UK Innovation and Growth, Says CAF appeared first on The Fintech Times.
