Are the major app stores abusing their power? ACCC report investigates
For some time, the Australian Competition and Consumer Commission (ACCC) has been carefully examining the impact of the dominant digital platforms on competition and Australian consumers. This culminated in the start of 5-year ‘digital platform services enquiry’. Initially focussed on the harm caused by social media platforms and online private messenger services, the ACCC has now turned its attention to two app marketplace giants: the Google Play Store (Google) and the Apple App Store (Apple).
The ACCC’s second interim report (Report) looks at the duopoly in market power that currently exists and considers the associated competition and consumers issues. The substantial market power held by Google and Apple is an important consideration for both app developers and rival app marketplaces looking to enter or grow in this space.
Key issues
The issues highlighted by the ACCC in its Report include:
Self-preferencing: both Google and Apple offer first-party apps (i.e. their own apps) which compete directly with third-party apps who are reliant on the two app stores and may have anti-competitive effects on downstream markets.
Data practices and access to information: both Google and Apple have unrivalled access to commercial information and insights into the habits of consumers, allowing them to disadvantage rival app developers.
Excessive app prices: given that certain in-app payments must be processed through both app stores payment systems, a number of app developers have raised concerns about the commission rates (up to 30%) charged by Google and Apple for in-app payments.
Harmful apps: the potential deficiencies in both Google and Apple’s review and surveillance processes attracts malicious app developers who may aim to exploit consumers.
Tracking app users: despite Apple’s positive steps towards protecting the privacy of consumers, there is still concern that the data practices of the apps available do not align with the preferences of consumers to limit their ability to be tracked.
Complaints handling process: the ACCC considers that consumers need more readily available access to complaint avenues for malicious apps, low quality apps, unauthorised billing of users or where they are otherwise entitled to a remedy under the Australian Consumer Law (including the ability to escalate complaints to an external body).
Policies and practices: the ACCC identified that the practices and policies of both Google and Apple restrict competition to distribute mobile apps within their respective channels.
ACCC’s recommendations
The Report listed extensive recommendations including:
Giving consumers the ability to change any pre-installed default app on their smartphone that is not a core smartphone feature to give consumers more choice and control over apps that best serve their needs.
Greater transparency about key algorithms and processes to avoid self-preferencing and ensure better app discoverability.
Allowing consumers to write reviews on all apps to inform consumer choice and ensure third-party apps are able to compete on their merits.
The need for information collected by Apple and Google as app marketplace operators to be ‘ring-fenced’ from their other operations and business decisions to minimise the risk of such information giving them an unfair competitive advantage over third-party app developers.
Allowing app developers to provide users with information about alternative payment options to provide consumers with greater choice, potentially lower prices and encourage innovation in app development.
Recommending Apple and Google monitor consumer app reviews and implement better processes for intervention if certain ‘triggers’ are met (e.g. number of consumers affected) to minimise the risks associated with malicious or harmful apps.
What does the Report mean for app developers?
Apps plays a fundamental role in the competition and consumer space, with millions of apps available at the push of the button. There is no doubt that Google and Apple play in an important role in supplying these apps to the masses. However, the ACCC has recognised that there are minimal alternative distribution channels for apps beyond Google and Apple, which creates significant barriers to entry and expansion in this space.
If you are an app developer or your business utilises an app as part of its services, you may benefit from the recommendations outlined in the Report. In particular, changes to the complaints handling processes available to developers is likely to improve the resolution of disputes with Apple, Google and third parties.
The ACCC will revisit the issues and recommendations raised in the Report as part of the 5-year digital platform services inquiry, with consideration given to the steps taken by Google and Apple during this time. Importantly, ACCC’s Chairperson Rod Sims has said the prospect of future regulation should not be discounted if the app store giants are unable to take steps to address the ACCC’s concerns.
For more information, please contact:
Paul Gray
Principal
T: 03 5225 5231
M: 0414 195 886
E: pgray@ha.legal
Hugo Le Clerc
Lawyer
T: 03 5225 5213
E: hleclerc@ha.legal
This article was written with the assistance of India Smith, law student
