Australia probes app stores, politely suggests Apple and Google could try being nicer and more careful

Down Under watchdog doesn't call for commission cuts nor suggest major interventions

Australia’s Competition and Consumer Commission (ACCC) has decided that Apple and Google have a duopoly on mobile operating systems and probably harm third-party developers ... but has proposed only modest changes to the operations as remedies.

In an interim report, pulled together after Australia last year probed whether Apple’s and Google’s app stores hurt consumers and hindered competition, the ACCC found that the two tech giants have significant market power, and may be abusing it by promoting their own apps in search results over the competition and installing the software as defaults.

“A number of Apple and Google’s own apps clearly benefit from being pre-installed or set as defaults and/or having superior integration with the relevant OS,” the report, published this week, states. “Pre-installation and defaults may entrench market power, limit consumer choice, and reduce potential for innovation in the downstream markets in which they compete.”

The document is very critical of Apple and Google for allowing malicious apps onto their software stores. While the ACCC finds that the app store review process is a good filter for obviously dodgy apps, the report finds that applications that employ “dark patterns” to lure users into unintended spending are plentiful, and that both app store operators seem to ignore complaints present in online reviews.

Another observation: "Apple and Google have superior access to information about the entire app ecosystem and its users, which enables them to monitor the performance of all apps and hence gain valuable competitive insights. There are potential competition concerns arising from Apple and Google’s intelligence gathering given that their own first-party apps compete with thirdparty apps in downstream app markets."

The document also notes the dispute between Epic Games and Apple over in-app purchasing but finds Apple and Google’s 30 per cent commission is a cost-recovery mechanism that funds the development of their operating systems and operation of their app stores. The report says that commissions are probably inflated, but as OS development doesn’t directly generate revenue for either Google or Apple, enforcing reduced commissions may not be desirable.

While the review voices many concerns, it suggested just six “potential measures,” as follows:

  • Giving users the power to choose default apps;
  • Ring-fencing data derived from app stores from other operations at Google and Apple, so that their status as market operators doesn’t offer them advantages in other fields;
  • Better monitoring of apps after review, to stop malicious apps;
  • App marketplaces allowing developers to explain alternative payment options to users in their apps, and offering consumers more information about those options;
  • Requiring more transparency on algorithms that determine app visibility in marketplaces – but not so much transparency that gaming those algorithms becomes prevalent;
  • Allowing users to review apps from Google and Apple.

The less-than-savage nature of those measures may be explained by another observation in the report: a distinction between competition between mobile ecosystems (Apple vs. Google) and competition within mobile ecosystems (Apple or Google making life hard for third-party developers). The document says regulation must “ensure that any measures proposed to increase competition within mobile ecosystems do not lessen competition between mobile ecosystems.”

The report is now on government ministers’ desks and is unlikely to result in swift action, as Australia’s budget is in two weeks, and changes to app store regulations are almost certainly not seen as the kind of post-pandemic economic recovery stimulus or reform the nation’s government is already teasing.

Yet ACCC chair Rod Sims pointed out that legislation remains a future option, so Google and Apple should read the report closely.

“There is a window of opportunity for Apple and Google themselves to take steps to improve outcomes for app developers and consumers by adopting the potential measures we have identified,” Sims said. ®

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