The CMA’s New Approach to App Store Payments
The UK's Competition and Markets Authority (CMA) is exploring significant changes to the payment systems of Apple and Google, aiming to reduce costs for app developers and ultimately lower prices for consumers. This initiative focuses on allowing developers to direct users away from the tech giants' in-app payment systems, which are currently restricted by Apple and limited by Google in the UK.
Currently, developers are required to use the platforms' payment systems, leading to mandatory fees set by Apple and Google. The CMA is proposing new measures that would permit "steering" — a term used to describe the ability of developers to guide users to alternative payment methods outside of the app stores. These measures aim to ensure that any fees charged by Apple and Google for this process are "fair and reasonable."
According to the CMA, steering fees should be lower than the current app store charges, with savings potentially passed on to UK customers or reinvested into developers’ businesses to support future innovation. This move follows the CMA's decision last October to grant Apple and Google "strategic market status" due to their dominance in the mobile market. This designation allows the regulator to intervene and promote more competition, which it believes will benefit both consumers and businesses.
At the Informa Connect CompLaw conference, the CMA’s executive director for digital markets, Will Hayter, emphasized the importance of giving app developers and users more choice in how they communicate and transact. He stated, “We think it is important to give both app developers and users more choice about how they communicate and how they transact. This is not only because choice is inherently valuable but also because we see this as the best way to introduce some competitive pressure in a vital part of the mobile ecosystem that is otherwise sorely lacking such pressure.”
Google has responded by stating that it already allows "steering" for developers, although with certain restrictions. The company claims it has made the changes that the CMA is proposing. However, Apple has raised concerns, arguing that the CMA’s "steering" plans could lead to an increase in scams. An Apple spokesperson said, “Through the App Store, we strive to ensure that apps are safe, transactions are secure and users are protected. Steering requirements undermine that foundation, opening the door to scams, bait-and-switch tactics and the circumvention of parental controls.”
The CMA is also looking at further changes to unblock restrictions on Apple’s platform, enabling UK fintechs and developers to support contactless transactions, such as card-based payments through digital wallets, within their own iOS apps. It is understood that Apple already allows authorised developers to offer near field communication (NFC) contactless transactions using the secure element from within their own apps on iPhone, separate from Apple Pay and Apple Wallet.
The CMA has concluded three strategic market status investigations and launched a fourth into Microsoft’s business software ecosystem since the UK’s digital markets competition regime started 18 months ago. Mr. Hayter added later in his speech: “In many cases, the market takes enough care of both companies and people – such is the power of competition to give people a choice of innovative products and services at reasonable prices, and to give companies with great ideas the chance to succeed. But sometimes that simply doesn’t work in practice. If companies don’t do right by consumers, we may have to step in.”
Implications for the Future
This ongoing regulatory scrutiny highlights the growing concern over the power of major tech companies in the digital economy. As the CMA continues to push for greater transparency and fairness, the potential impact on app developers, consumers, and the broader tech industry remains significant. The outcome of these discussions could reshape the landscape of mobile app development and digital payments in the UK.
Key Points to Consider
- Steering Fees: The CMA aims to ensure that any fees associated with steering are fair and reasonable, with potential savings benefiting consumers or developers.
- Consumer Protection: Apple emphasizes the importance of maintaining a secure environment for users, warning that steering could lead to increased risks of scams and fraud.
- Regulatory Pressure: The CMA's strategic market status designation gives it the authority to intervene in markets where competition is lacking, promoting a more open and fair digital ecosystem.
- Future Developments: The CMA is continuing its investigations into other major players, indicating a broader commitment to addressing issues of market dominance and consumer protection.
As the digital landscape evolves, the role of regulatory bodies like the CMA becomes increasingly crucial in ensuring that the interests of all stakeholders are balanced and protected. The decisions made today could have long-lasting effects on the future of app development and digital commerce.
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