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UK Competition and Markets Authority to take a bite out of Apple?

Being a global behemoth brings with it the likelihood of extra regulatory oversight. There has been much debate over whether the ubiquity of companies such as Facebook, Google and Apple in our daily lives is a good thing overall.

In any network based industry, with market power comes not only the ability to influence consumers’ purchasing decisions, but also to directly impact the livelihoods of a great many companies who rely on access to that network to sell their wares to consumers.

So it is that the UK Competition and Markets Authority has added to the growing scrutiny of Apple’s business practices by announcing last week a formal investigation into whether Apple’s terms and conditions for app developers are unfair and anti-competitive - Click here

As is well known, in addition to selling electronic devices, Apple also operates the ‘App Store’ which it ensures is the only way developers can distribute third-party apps on its iPhones and iPads, and, correspondingly, the only way for Apple customers to gain access to those apps. All apps available via the App Store have to be pre-approved by Apple and can only ‘go-live’ upon developers agreeing to certain T&Cs.

For some time, developers have complained that Apple’s T&Cs are unfair and applied discriminatorily. This is particularly true of developers who offer ‘in-app’ features, add-ons or upgrades (ie a means by which they can charge consumers for ‘extras’), as they are required to use Apple’s payment system, rather than any alternatives. Apple charges royalties of up to 30% on the value of these transactions or any time a consumer pays for their app. Such issues have recently come to the fore in connection with a dispute between Epic Games (publisher of the Fortnite video game) and Apple over Epic’s attempt to by-pass the App Store for in-app purchases, which led to the app being removed by Apple – that dispute has headed to the courts.

The European Commission currently has four open antitrust investigations into Apple, of which three relate specifically to the App Store, thereby giving the CMA ample opportunity to co-ordinate its activities with the rest of Europe.

The CMA’s investigation will consider whether Apple has a dominant position in connection with the distribution of apps on Apple devices in the UK. If so, whether Apple imposes unfair or anti-competitive terms on developers using the App Store, such that users have less choice and/or pay higher prices for apps and add-ons.

The investigation also comes against the background of the CMA’s market study into online platforms and digital advertising, which concluded last year, and the CMA’s advice to the UK government in December 2020 on the shape of a new pro-competition regulatory regime for digital markets.

The CMA will now begin sourcing information from Apple and other affected parties to decide where it should focus its attentions. With so much clearly at stake, any interested third parties are well advised to start considering how they might play an active role in the investigation.

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