The UK’s competition watchdog has published its final report on a comprehensive, year-long mobile ecosystem market study — cementing its view that there are substantial concerns about the market power of Apple and Google which require regulatory intervention.

Back in December, its preliminary report on the market study also identified concerns and discussed potential remedies for tackling lock-in and opening up the pair’s “largely self-contained ecosystems”, such as by making it easier for consumers to switch and reducing barriers for app developers.

The Competition and Markets Authority (CMA)’s 356-page final report goes into greater depth and detail on all fronts, analyzing a smorgasbord of competition concerns attached to how Apple and Google operate their respective, dominant mobile ecosystems, iOS and Android — and digging into topics as varied as Apple’s App Tracking Transparency feature; a Google developer revenue-sharing agreement codenamed ‘Project Hug’; and the merits of developing web apps that features a chat with the maker of popular puzzle game, Wordle, to pull out a few highlights — but with the regulator pointing to the pair’s sustained profitability, and profits it assess as “high in absolute terms”, as an indelible, top-line signal that market distortion is afoot.

In a press release accompanying the report, the CMA sums up its conclusions by asserting that Apple and Google “hold all the cards” in the mobile ecosystems market — and that interventions are needed “to give innovators and competitors a fair chance to compete”.

While there’s likely to be a fair degree of déjà vu for industry watchers — given the CMA’s preliminary report last year also flagged some of the same problems and discussed potential remedies — this time the UK regulator is taking action. Albeit, the processes this will entail are not quick so it could be years before it’s in a position to actually intervene and order changes to how the tech giants operate in relation to concerns its report has identified. But, well, the train is now starting to leave the station at least.

Specifically, the CMA is now proposing to open an in-depth probe with two points of focus: One on Apple and Google’s market power in mobile browsers; and another on Apple’s restrictions on cloud gaming through its App Store. (NB: The regulator has a duty to consult before it opens what’s called a market investigation reference, or MIR, relying on its existing competition powers.)

On mobile browsing, the CMA is concerned about Apple’s ban on non WebKit-based browsers on iOS — which it suspects severely limits rival browsers from being able to differentiate vs Apple’s Safari, as well as suggesting the restriction limits Apple’s incentive to further develop its own browser.

The CMA is further worried about how Apple’s ban on non WebKit-based browsers on iOS limits the capabilities of web apps on its platform — hampering their ability to compete with native apps (which Apple of course monetizes via its App Store fees).

Mobile browser defaults also appear to be in scope of the proposed MIR, with the CMA noting that mobile devices typically have either Google’s Chrome or Apple’s Safari pre-installed and set as default at purchase — “giving them a key advantage over other rival browsers”.

On cloud gaming, the CMA says it wants to look into Apple blocking these services on its App Store and how that might be harming consumers, such as if its action is hampering the sector from growing. It further notes that gaming apps are a key source of revenue for the iPhone maker, suggesting the tech could also pose a threat to Apple’s strong position in app distribution.

Its consultation on the proposed MIR will run until July 22.

In parallel, the regulator is also announcing that it’s taking enforcement action against Google in relation to its app store payment practices — where it says it suspects the adtech giant of anti-competitive practices.

This competition law investigation will focus on Google’s rules governing apps’ access to listing on its Play Store — looking at conditions it sets for how users can make in-app payments for certain digital products. (NB: The CMA has an open investigation into Apple’s App Store, announced in March last year — so this looks like a mirror action to address Google’s practices but one that’s likely to lag the more advanced investigation into Apple’s mobile app store terms.)

According to its report, the CMA has decided to step up a gear now because mobile developers have been complaining to it in the months since its preliminary report also flagged a grab-bag of competition concerns.

But the regulator is also acting now using its existing powers because it’s essentially being forced to as a result of the UK government’s decision to decelerate a planned ex ante reboot of digital competition rules (which the CMA had previously envisaged as the best vehicle to address antitrust concerns linked to Big Tech market power, including in mobile) — hence its report acknowledging (with quasi regret) “we now understand this [legislation to empower the Digital Markets Unit] will not be in the current parliamentary session (ie within the next year)”, adding: “Based on these developments, we now consider it to be the right time to consult on making a market investigation reference [MIR] into mobile browsers and cloud gaming.”

So the bottom line is that the UK’s competition regulator is having to make do with its current (ex post) competition powers to address substantial and sustained antitrust concerns attached to fast-moving digital giants — because the UK government has failed to prioritize the necessary ex ante reforms.

The CMA’s report acknowledges that European Union regulation could, therefore, end up having a first mover impact on strategic digital market power — since the bloc has already agreed its own ex ante competition reform (the Digital Markets Act; DMA), which is likely to come into force early next year.  So, er, so much for Brexit taking back regulatory control then!

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“[T]he DMA will be one starting point for Apple and Google when deciding how to address these international competition concerns, many of which are similar to ours,” the CMA writes in a chapter of the report discussing international developments. “As a result, Apple and Google may make changes to the mobile ecosystem that will address some of the current restrictions on effective competition on a global basis, which could resolve the competition concerns that have been raised in a number of jurisdictions, including the UK.”

One slight potential upside of the UK’s legislative delay on digital competition reform is that the CMA has at least used this interim period to undertake detailed scrutiny of the mobile market — the consequences of which are likely to be long and deep, as the regulator suggests its conclusions will feed future interventions by the DMU, aka the dedicated unit established inside the regulator last year to oversee a “pro-competition” regime in digital markets that’s intended to target the most powerful platforms (but sill lacks the necessary legislation).

“We expect the findings of this market study to be an input into any DMU assessment of whether Apple and Google should be designated with SMS in particular activities,” the CMA writes, making a reference to Strategic Market Status; aka the status in the planned reform that would mean they are in-scope of the future ex ante code of conduct (and also able to be subject to so-called ‘pro-competition interventions’ which are set to be tailored per entity, not one-sized fits all). “The study will also inform the appropriate range and design of potential interventions that the DMU could put in place, were it to find either Apple or Google to have SMS.”

“Our expectation based on the findings in this study and the evidence to date, is that Apple and Google would meet the criteria (as currently outlined in the government’s consultation response) to be found to have SMS in respect of the following activities within their ecosystems; mobile operating systems (and for Apple, together with the mobile device on which it is installed, to the extent these are inextricably linked), native app distribution, and mobile browsers and browser engines. As a result, we expect that the interventions which we have considered in this study would generally be in scope of the new regime,” it adds.

The UK regulator will surely be hoping that time spent waiting for the government to empower the DMU can — eventually — turn into future enforcement gains, i.e. once the DMU is on a proper legal footing, and as a result of it undertaking all this comprehensive market analysis in the meanwhile. (The CMA has previously done a deep dive into the digital advertising market — where it also concluded there are major structural problems with Google but, similarly, opted to wait for the government to legislate.)

But there’s no doubt the government’s decision to kick the reform down the road means tech giants like Apple and Google have bought themselves a lot more time to keep extracting UK rents.

Commenting on the mobile market study in a statement, the CMA’s CEO, Andrea Coscelli, said:

“When it comes to how people use mobile phones, Apple and Google hold all the cards. As good as many of their services and products are, their strong grip on mobile ecosystems allows them to shut out competitors, holding back the British tech sector and limiting choice.

“We all rely on browsers to use the internet on our phones, and the engines that make them work have a huge bearing on what we can see and do. Right now, choice in this space is severely limited and that has real impacts – preventing innovation and reducing competition from web apps. We need to give innovative tech firms, many of which are ambitious start-ups, a fair chance to compete.

“We have always been clear that we will maximise the use of our current tools while we await legislation for the new digital regime. Today’s announcements — alongside the eight cases currently open against major players in the tech industry, ranging from tackling fake reviews to addressing problems in online advertising — are proof of that in action.”

Apple and Google were contacted for a response to the CMA’s findings.

Both tech giants sought to play down the idea that their stewardship of their respective mobile ecosystems has any negative impacts for consumers or other businesses.

Here’s Apple’s statement: 

“We believe in thriving and competitive markets where innovation can flourish. Through the Apple ecosystem we have created a safe and trusted experience users love and a great business opportunity for developers. In the UK alone, the iOS app economy supports hundreds of thousands of jobs and makes it possible for developers big and small to reach customers around the world.

“We respectfully disagree with a number of conclusions reached in the report, which discount our investments in innovation, privacy and user performance — all of which contribute to why users love iPhone and iPad and create a level playing field for small developers to compete on a trusted platform. We will continue to engage constructively with the Competition and Markets Authority to explain how our approach promotes competition and choice, while ensuring consumers’ privacy and security are always protected.”

A Google spokesperson also sent us this statement:

“Android phones offer people and businesses more choice than any other mobile platform. Google Play has been the launchpad for millions of apps, helping developers create global businesses that support a quarter of a million jobs in the UK alone. We regularly review how we can best support developers and have reacted quickly to CMA feedback in the past. We will review the report and continue to engage with the CMA.”

For a hint of what (more) may be to come, finally — if/when the DMU finally gets empowered and a new UK competition regime is up and running — Chapter 8 of the CMA’s report discusses a broad range of potential remedies for addressing competition concerns attached to the Apple-Google mobile duopoly, from making switching ecosystems easier for consumers; to lowering barriers for new OSes; to making interventions to aid native app distribution, or at the level of app store commission, or to support competition between app developers.

The report also touches on a number of potential separation remedies — namely data separation; operational separation; and structural separation — but the CMA sounds wary of going that far, without entirely ruling it out. “Given the significant costs, business disruptions, and risks of unintended consequences associated with these forms of intervention, we consider there are alternatives available with the potential to deliver many of the benefits with significantly lower cost and risks,” it writes on that. 

“In particular, we envisage that at this stage the interventions proposed above to level the playing field between Apple’s and Google’s own apps and third parties, would have the potential to deliver many of the benefits with comparably lower costs,” it goes on, before adding: “However, should Apple and Google act against consumers interests by making it unreasonably difficult for competing apps to successfully enter and expand, then separation could be reconsidered as an alternative which directly addresses their incentives to favour their own businesses.”

Returning to the immediately proposed interventions, if the MIR goes ahead as the CMA is proposing, it will have 18 months from the date the reference is made to conclude the investigation of Apple and Google’s market power in mobile browsers and Apple’s approach to cloud gaming — with the possibility of an extension of a further 6 months in exceptional circumstances. So it could be spending two full years digging into this.

The aim of a market investigation is to consider whether there are features of a market that have an adverse effect on competition (aka AEC).

If the CMA finds there is an AEC, it has a range of (existing) powers to impose its own remedies, such as being able to enforce behavioral requirements or even order the sale of parts of a business, as well as being able to make recommendations to other bodies (such as sectoral regulators or the government) for other appropriate interventions to support improving competition.

But, again, such interventions aren’t likely to deliver overnight results as they can also take time to implement, plus there’s the high possibility that enforcement orders would be appealed. So, again, any UK fix for the Apple-Google duopoly won’t be quick. 

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