The UK antitrust body, the Competition and Markets Authority (CMA), will be given legal powers enabling it to fine Apple and other tech giants billions of dollars. This is an apparent second U-turn in British government plans.
The CMA’s powers will now go even further than originally announced, allowing it to fine companies 5% of their daily global turnover per day …
Background
If you’re not up-to-date with the background to this, a neck brace is recommended to avoid whiplash.
The UK opened an antitrust investigation into Apple back in March 2021.
The UK’s competition watchdog today announced plans to determine whether the App Store restricts competition. The government announced that the Competition and Markets Authority (CMA) will be running the investigation.
A second investigation followed, this time into both Apple and Google. That one concluded that both Apple and Google do indeed have too much power. In particular, Apple is able to impose whatever App Store terms and commissions the company likes, because anyone wanting to sell an iPhone app can only do so via Apple.
This was a very worrying development for Apple, since the British government said that it would give the CMA the power to overrule the policies of tech giants, and to levy fines of up to 10% of their total global turnover. This is known as having statutory powers: the ability to impose penalties directly, without needing to involve parliament.
However, it was reported earlier this week that the government had shelved plans to grant statutory powers to the CMA. This would mean that the antitrust body could recommend fines and other actions, but parliament would have to vote on those recommendations.
UK will be able to fine Apple and Google billions of dollars
However, the government has now said that the CMA will get the promised powers. BBC News reports.
It had been rumoured that the Digital Markets Unit [part of the CMA] would not be given a legal footing – and would therefore lack bite. However the government has said it will introduce legislation to put the regulator on a statutory footing in “due course.”
The DMU will be given powers to clamp down on “predatory practices” of some firms. The regulator will also have the power to fine companies up to 10% of their global turnover if they fail to comply.
Indeed, the government now says that the CMA will be able to levy even higher fines than originally announced.
Tech firms could be handed additional penalties of 5% of daily global turnover for each day an offence continues.
The ability to levy daily or weekly fines is a power that has been used by other antitrust authorities around the world, as in the Dutch dating apps case. However, the maximum sum there was $5M per week; there would be no maximum for the CMA.
9to5Mac’s Take
When an official announcement says one thing, and a source reports a planned U-turn, there are three possibilities about the report:
- It was right.
- It was wrong.
- The government leaked a possible plan to test reactions.
Where the U-turn doesn’t happen, there’s a fourth possibility: The report was correct, but the reaction has been so strongly negative that the government changes its mind.
In this case, that fourth possibility seem most likely. That’s because the original plan would have seen the powers granted in the next parliamentary term. The government has now used three giveaway words – ‘in due course’ – which suggests it won’t happen in the next term. That’s a pointer to a hasty change of plan.
Of course, having powers, and actually maxing them out, are two very different things. It seems likely that the CMA would begin with far lower fines initially, before gradually ramping them up. We’d then get a standoff between Apple and the CMA, before one of them backs down.
The smart money is on some kind of clunky compromise, like the one Apple proposed in the Netherlands: where developers can choose to use third-party payment platforms, but the Cupertino company would only reduce its commission to 27%. The Dutch regulator has rejected that, so the final compromise is as yet unknown, but it seems likely that they will meet in the middle somewhere – and that this will also provide the basis for a UK deal, too.
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