This investigation is one of the first examples after the end of the Brexit transitional period of the UK’s principal competition regulator, the Competition & Markets Authority (CMA), conducting a parallel competition investigation into similar practices being concurrently examined by the EU Commission. The CMA opened its investigation into Apple under the Chapter II of Competition Act 1998.
It follows on from the CMA’s 2020 Digital Advertising Market Study. One of the recommendations of that Study was to set up a new pro-competition regulatory unit and regime for UK digital markets with appropriate powers to policy the new regulatory framework. These recommendations were accepted by UK Government. However, as the new regime has not yet reached the Statute Book the CMA will conduct this investigation under its existing powers.
The EU Commission is already scrutinizing Apple’s practices regarding Apple Pay and its App Store rules. These investigations under the EU competition rules were commenced prior to the end of the Brexit transitional period (31st December 2020). However, the UK now has jurisdiction over any ongoing infringements of competition law in the UK after the end of the transitional period.
The CMA’s investigation relates to a possible abuse of dominance over Apple’s exclusivity and tying provisions in its application developer terms and conditions. On 4 March 2021, the CMA announced it had opened an investigation into suspected breaches of the Chapter II prohibition of the Competition Act 1998 by Apple (UK) Limited, Apple Europe Limited and Apple Inc (Apple). The investigation focuses on certain exclusivity and tying terms and conditions imposed on iPhone and iPad application developers.
Under Apple’s terms and conditions all applications (“Apps”) on Apple’s App Store must be approved by Apple. Its terms contain certain exclusivity provisions which mean that developers can only distribute Apps to iPhones and iPads via the App Store. In addition, there are also tying restrictions which require developers, who offer payment facilities within their Apps, to use Apple’s payment system. Apple demands a high commission rate (up to 30%) for these transactions and App purchases.
The CMA’s Chapter II investigation will consider whether Apple has a dominant position in the distribution of Apps on Apple devices in the UK, and if so whether Apple imposes unfair or anti-competitive terms. The CMA is concerned that these practices may result in consumers having less choice by hindering developers investing in new Apps or causing consumers to pay higher prices.
