Competition in App marketplaces | ACCC Digital platform services inquiry – second interim report

On 28 April 2021, the ACCC released its second interim report as part of the five-year Digital Platform Services Inquiry, which examines the competition and consumer issues associated with the distribution of mobile apps to users of smartphones and other mobile devices.

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In this second interim report the ACCC found that:

  • App developers need fair and reasonable terms when dealing with app stores and better processes for the approval of apps to help address the consequences of Google and Apple’s power in the app market; and
  • Apple’s App Store and Google’s Play Store have significant market power in the distribution of mobile apps in Australia (both comprising approximately 50% of the Australian market), and measures are needed to address this.

The ACCC’s view is that restrictions on competition currently occur or can occur at two levels. First, there is competition between mobile ecosystems, occurring as a result of both the Apple Store and Google Play stores being pre-installed on the devices as well as blocks by Apple on other app stores being downloaded.

Second, competition occurs within Apple and Google’s mobile ecosystems, including by way of the following:

  • Unfair terms of access: including those restricting the ability of app developers to access users of their apps, the lack of transparency in policies and processes governing app review and approval and the inadequacy of avenues to resolve disputes.
  • Risks of self-preferencing: given their market power and their related activities, Apple and Google both have the ability and the incentive to favour their own first-party apps at the expense of rival third-party apps, for example by way of pre-downloading apps onto devices.
  • Data practices of app marketplaces: Apple and Google have superior access to information about the entire app ecosystem and its users, allowing them to monitor performance and gain competitive insights into app usage.
  • In-app payments: Apple and Google both require that certain in-app payments must be processed through their respective in-app payment systems.

In Epic v Apple, Epic expressed similar concerns with Apple’s in-app payment systems as well as the choice of law clause included in its standard form agreement with Apple.

Other concerns expressed by the ACCC included the tracking of consumers through apps, inadequate complaint handling processes and the availability of harmful apps on the Apple Store and Google Play that consumers may reasonably expect to have been identified and removed through initial marketplace review and ongoing surveillance processes.

The ACCC proposed various recommendations to overcome these issues, including prohibiting unfair contract and trading terms, new internal dispute resolution mechanisms and an ombudsman scheme to resolve disputes.

If such reforms are adopted, this will likely significantly expand the market opportunities for app developers, for example by allowing them to develop their own in-app payment systems and offer their product through other stores.

The ACCC’s third interim report is due to be released in September 2021, with a final report to follow by 31 March 2025.

Please contact Sophie Dawson for any further information on the above.

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