The UK's Competition and Markets Authority Prepares to Regulate Apple and Google App Stores

Overview

• On July 23, the CMA published proposals to regulate Apple and Google in regard to their respective appstores, after finding that the two companies’ mobile platforms represent “an effective duopoly”.
• This follows, on June 24, the CMA proposal to designate Google as having 'strategic market status' (SMS) in regard to online search and search advertising and its roadmap of proposed interventions.
• The Competition and Markets Authority recently gained new powers to regulate large companies providing digital services in the UK. Designation of a company as having "SMS" is the first step and requires both financial thresholds and qualitative criteria to be satisfied, after which the CMA can regulate the terms on which that company conducts its business.
• The proposed interventions in appstores fall short of previous CMA proposals to allow competing appstores and third-party payment solutions to be used on Apple and Google phones. Instead, Apple and Google will be required only to ensure that apps are ranked and reviewed fairly, and Apple will need to improve its approach to interoperability.
• This latest retrenchment reflects shifting UK domestic policy objectives and geo-political realities that leave agencies like the CMA out of favor, with little cover to challenge US tech companies beyond the scope of its American or European counterparts.
• Interested parties still have time to influence the final outcome.

The Digital Markets, Competition and Consumer Act

The Digital Markets, Competition and Consumer Act (DMCCA) came into force on January 1, 2025. 

Shortly afterwards, the CMA's Digital Markets Unit launched two investigations into:

• Google's general search and search advertising services (on January 14); and
• Apple and Google's mobile ecosystems (on January 26).

The CMA also committed, at a parliamentary select committee and in a press release, its intention to launch a third investigation by July 2025.

Designation of a Company As Having 'Strategic Market Status'

Before the CMA can regulate a company's terms of business on the relevant markets, it must first designate it as having SMS. To do this, the CMA must demonstrate that:

• the candidate company generates at least £1 billion turnover in the UK (or £25 billion worldwide);
• is active in a "digital activity," whether supplying a digital service by means of the internet, providing relevant content or otherwise, which is important to a significant number of UK users, whether customers or businesses, or be an important gateway, input or platform to other businesses;
• occupies a significant position in the market, and holds substantial market power, which allows that company to determine or substantially influence the conduct of other companies (that is, the company must have substantial market share, approaching dominance); and
• competition is not effective or there are inadequate alternatives for customers and/or other businesses to use.

The CMA found that this threshold was met for Apple and Google.

Once so designated, the CMA may impose tailored "conduct requirements" on the company, which it can do without passing any additional legal test (though it must ensure that its actions are proportionate and for the purposes of fair dealing, open choices, or trust and transparency). 

The CMA can also pursue "pro-competitive interventions," though these can only be to remedy an established ‘adverse effect on competition’ arising from that company’s behavior on the market (that is, a similar test to that which already exists under the CMA’s market investigation regime).

The CMA's Track Record to Date

The CMA has now provided its initial road map for its SMS investigation into Google in Search and Search Advertising, and its investigation into Apple and Google in Mobile Ecosystems. 

There are no further SMS investigations at this time (the CMA already confirmed that the regime is now effectively on hold until 2026).

The main takeaway from the Search and appstores roadmaps is that they are a far cry from the ambitions of the regime and those of its most staunch advocates. 

• In the case of Google Search and Search Advertising, June's roadmap was reduced to a proposal for "choice screens," fair ranking principles, some publisher controls and greater customer data portability. More ambitious calls for greater access by search and advertising rivals and, potentially, even structural separation of search from search advertising were shelved.
• Now, in Apple and Google appstores, the proposals only require both companies to ensure that apps are ranked and reviewed fairly, and that Apple will need to improve its approach to interoperability. CMA has dropped proposals to allow rival appstores to be installed on Apple and Google phones, much to the dismay of major players such as Epic Games, which has raised the specter that Fortnite may now never return to Apple phones.

This climbdown will also impact rivals to Apple and Google Pay (such as Square and Stripe) and ultimately consumers that stood to benefit from inter-app store competition. That competition would likely have led to lower commission on app subscriptions and in-app purchases (which the CMA had identified as up to 30%) and therefore lower prices paid by customers.

The Wider Context

In both of its initial (and only active) SMS investigations, the CMA has now essentially made good on its commitment in its guidance published on April 30 (delivering the 4Ps delivering the 4Ps – pace, predictability, proportionality, and process – under the digital markets competition regime), where it signaled its intention to step down from the role of global policeman, respect and row in with the actions of its larger sister agencies (both in Europe and the US), and turn to focus on UK-specific issues that are not being addressed elsewhere. Of course, given the minimum turnover requirements for SMS designation of at least £1 billion in the UK (or £25 billion globally), it is unclear now what sweet spot remains for 'UK-specific' interventions under the DMCCA, and what future the regime has in the ever-narrowing role the CMA has carved itself.

Not for the first time in recent weeks, many are left wondering whether the CMA has stepped so far back as to be entirely off the digital regulatory playing field. In its July 23 announcement, the CMA explicitly acknowledges the work of Brazil and Japan's antitrust agencies, which gives some sense to where it now sees itself in the global pecking order. There is also suggestion that the next iteration of the roadmap may not be for another 12 months and only after the relevant US court cases have progressed. 

Which all tallies with a diminished approach to digital competition regulation in the UK that simply may not recover, at least not through the DMCCA. Indeed, much like the ancient Ship of Dionysius (the Syracusia), which was so complex and massive as to be almost impossible to sail or dock effectively, this regime may prove after merely a single voyage to be far too overengineered and cumbersome to be useful for the practical UK-specific role the CMA has now set its sails towards.

Next Steps

Please do not hesitate to reach out to the author, Ronan Scanlan, or your usual Steptoe contact if you would like to discuss the potential implications of these developments to your business.