Most people keep their smartphone within arm’s reach 24 hours a day. From the time we wake up to the time we go to bed, it is our indispensable link to news, work, games, entertainment, friends, and family. However, for as much time as we spend using our mobile devices, most of us have likely never considered the lack of choice we have when downloading apps and making purchases in those apps.
The reason is simple: Apple and Google have carefully crafted their mobile device ecosystems to eliminate competition and maximize their own control and profits, to the detriment of developers and consumers. Now policymakers and regulators are starting to see Apple and Google’s anticompetitive practices for what they are and take steps to open the app marketplace to competition.
Apple and Google use their top-down control of their mobile operating systems to dictate the terms and conditions of app distribution on their respective platforms. And they have leveraged that control to advantage their own products, undermine competitors, and create a financial windfall by demanding exorbitant fees for the sale of digital goods and services. For example, Apple prohibits downloading software onto iPhones or iPads outside of the official App Store. And it requires many apps to exclusively use Apple’s in app payment service for any purchases of digital goods made while using an app. This gives Apple a tremendous and unfair advantage as it both regulates and competes in the digital marketplace on more than a billion iOS devices.
While Apple and Google have exploited their market power over the app economy for years, the tide is turning.
In March, the European Parliament and the Council of the EU agreed on the final text of the Digital Markets Act (DMA), which will introduce pre-defined obligations for gatekeepers at EU level. The DMA prohibits large tech platforms from requiring exclusive use of platform-specific in-app payment systems and requires platforms to allow alternative app stores and the direct downloading of apps. The new rules are expected to come into force across the EU by the end of this year.
The United States is also taking action with the Open App Markets Act working its way through Congress. The bill has already passed the U.S. Senate Judiciary Committee with an overwhelming bipartisan vote of 20-2 and has been introduced in the U.S. House. This proposal, which has generated broad bipartisan support, would end the tech giants’ requirement for companies to use their in-app payment systems, allow consumers to directly download software from developers or from alternative app stores, and prevent app stores from using the data and information they receive from developers to launch competing products.
In late 2021, the Netherlands’ Authority for Consumers and Markets mandated that Apple allow users of dating apps to have access to alternative in-app payment options beyond Apple’s own system. Apple has racked up more than €50 million in fines due to non-compliance, offering only superficial moves to meet the requirements of the order. It has even proposed taking a commission from payments made using other payment platforms. Apple and Google have both proposed a similar scheme to comply with a new law in South Korea prohibiting app store gatekeepers from requiring the use of a single payment platform. This is just the tip of the iceberg as Australia, France, the U.K., and a number of other jurisdictions have launched investigations or are taking steps to reign in anticompetitive practices.
The sheer power of Apple and Google have been on display as the gatekeepers fight new regulations and skirt those that have been enacted. The ability of Apple, with a market cap of nearly $3 trillion, to pay large fines rather than comply with the rule of law sends a strong message that other jurisdictions will have to go to great lengths to enforce their laws and regulations. As legislators and regulators finalize proposals to hold Apple and Google accountable, they must heed these lessons and prioritize strong enforcement of new orders and rules to protect consumers and developers.
Mobile technology has revolutionized our lives and created enormous opportunities for both businesses and consumers on every continent. The dawn of the competitive app store world will bring a new wave of innovation that further benefits mobile app users across the world.
Rick VanMeter is the executive director of the Coalition for App Fairness.