ACCC to issue report on app marketplaces in March 2021

Saying that the Australian Competition and Consumer Commission has become quite active in the digital front would be an understatement. After delivering a pioneering report into digital platforms in 2019, it kicked off a five-year inquiry into digital platform services in 2020 and another inquiry in ad tech services (even though one might say we have had enough inquiries and studies). The digital platform services inquiry will cover a range of products and services such as online private messaging services, search engines, social media, and yes, apps and app stores.

Today the ACCC announced it will issue a report on app marketplaces in March 2021. It also published an Issues Paper, outlining the topics where it will focus its attention and seeking feedback from stakeholders, app developers and consumers. Interested parties may submit their observations by 2 October 2020. Judging from the Issues Paper, the ACCC is interested in, among others, the significance of Apple and Google’s respective app stores, the competitive interactions between the two (for instance, as you may be aware, Damien and I have argued that they belong in separate markets) the degree to which app developers and consumers may bypass them, as well as the procedure through which an app is admitted in the app store and how it is ranked in the app store’s search results. The ACCC will also look into two highly topical issues, namely (1) the dual role of Google and Apple (being both the platform and a player on the platform) and how this may afford them with the ability and incentive to give preference to their own apps over third-party apps and (2) in-app purchases for “digital” content, which both Google and Apple require to take place exclusively through their own proprietary payment solutions (Google Play In-App Billing and IAP respectively), and on which they levy a 30% commission (15% for subscriptions lasting more than a year).

The topic of the day

One could hardly think of a more appropriate time for the Australian watchdog to look into the realm of apps and app marketplaces. The ACCC will also not be the first one to look into these issues. Already in 2019 the Dutch Autoriteit and Consument Markt concluded a market study into mobile app stores and released an accompanying report. Apple’s App Store practices are also the subject of formal antitrust proceedings in the EU, launched this summer in response to a complaint filed by Spotify in 2019 (and a subsequent one from audiobook/e-reader app Kobo), centering around the obligation of apps offering “digital goods or services” to use IAP and pay a 30% commission on in-app sales, as well as Apple’s marketing restrictions.

On the other side of the Atlantic, Apple is involved in an ongoing litigation with consumers (the one that led to the Supreme Court’s ruling in Apple v Pepper) while also being closely watched by the Department of Justice. In a “grilling” session where all the GAFA CEOs appeared before the US Congress, Tim Cook faced intense criticism from lawmakers over Apple’s App Store practices. While Mr. Cook submitted Apple treats all app developers equally, the Congress released a 2016 email from top Apple executive Eddy Cue to Jeff Bezos of Amazon, where Apple offered to charge the Amazon Prime app a reduced commission of 15%, in an attempt to convince it join the App Store.

Less than a month ago Epic Games, maker of popular game Fortnite, made headlines for deciding to bypass IAP and Google Play In-App Billing by activating a direct payment option inside the app, offering its virtual currency V-Bucks at a 20% lower price. As soon as it was removed from iOS and Android devices, Epic Games filed lawsuits against both Apple and Google before the US District Court for the Northern District of California.

In Android devices Fortnite may still be downloaded from alternative app stores; in iPhones, however, it is no longer possible to download or update Fortnite. Existing users may still continue to use the already installed version of Fortnite. Epic Games claims that Apple has unlawfully monopolized the market for app distribution on iOS devices (by precluding rival app stores – such as that offered by Epic Games itself) and the market for in-app payment processing on iOS devices (by requiring app developers to use IAP). The Fortnite maker also filed a motion for a temporary restraining order and a preliminary injunction that would reinstate Fortnite in the App Store and preserve the access of Epic Games’ flagship game engine Unreal Engine (used by third-party game developers) to iOS devices. In a split decision, earlier this month Judge Yvonne Gonzales Rogers granted the TRO with respect to Unreal Engine, but dismissed it with regard to Fortnite, holding that Epic Games could not show irreparable harm, as its predicament appeared to be of its own making. A hearing on the preliminary injunction is now scheduled for 28 September, with a hearing on the merits of the lawsuit to follow next year. [Update: Apple has counter-sued, seeking damages from Epic Games for breaching its contract with Apple].

It looks like the period of escaping antitrust scrutiny is over for Apple. On its part, the tech company (or lawyers advising it) argues that the App Store has no market power, as it allegedly competes with Google Play, facilitates $ billions of transactions each year between consumers and developers and charges a commission in line with other marketplaces. Whether regulators will accept these arguments or not, only time will tell. In the meantime, considering the (generally) slow pace of Commission investigations and court proceedings, the ACCC may have the opportunity to take position on the matter sooner than its counterparts. More on this to follow…

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