The Japanese antitrust regulator has completed its study of the mobile app market, and concluded that it is dominated by an Apple and Google duopoly.
It says that while it hopes the two companies will make changes voluntarily, and that existing antitrust regulation can be used to apply pressure, new legislation would be the most reliable way of ensuring fairness …
Background
Apple has been the subject of antitrust investigations around the world, from its home market of the US to this latest one in Japan. The two biggest issues concern the App Store, and default apps on iOS devices.
Apple argues that it does not have a dominant position in the mobile app market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store.
Additionally, some companies accuse Apple of anti-competitive behavior by giving its own apps advantages over third-party ones.
One way that Apple does this, they say, is by pre-installing its own apps. For example, when the Apple Weather app is already installed on an iPhone when you buy it, then Apple’s own app has an obvious advantage over a competing app. Apple is also able to offer in-app subscriptions in Apple Music without penalty, while Spotify would have to pay Apple an unaffordable cut in order to do the same.
Apple and Google duopoly
The Japanese Fair Trade Commission (JFTC) has published a report entitled Market Study Report on Mobile OS and Mobile App Distribution. This is based in interviews with both developers and consumers, as well as an “exchange of opinions” with antitrust regulators in the UK, European Union, and Australia.
It says that as most smartphone users will not change platforms due to significant barriers (like familiarization and repurchasing apps), Apple and Google each faces little competitive pressure.
Both companies therefore enjoy a monopoly-like position, where they can set their own policies and commission rates, and developers have no choice but to accept them.
Additionally, both companies gives their own apps and devices priority. Apps which are pre-installed on phones don’t have to compete for attention in the same way as third-party apps do, and Apple gives its own smartwatch greater integration with the iPhone than is possible for third-party devices.
Recommended changes
Top comment by Eric Swinson
One of the things that I find interesting is a lot of anti-trust regulation is designed to preemptively prevent companies with dominances in other markets from establishing dominance in new markets. In this case the market is being dominated by two companies that previously had no experience in it and the shoe-ins (Microsoft and essentially every other phone manufacturer aside from Samsung) are nowhere to be found. Which is exactly the desired outcome of these regulations. Ironically, the one company, Microsoft, that regulators were so certain would dominate every market they entered and had to be stopped at all cost was unable to muscle their way into this one even when leveraging the full might of their war chest.
The JFTC makes a number of recommendations for changes, among them:
- Allow third-party app stores
- Allow developers to offer their own payment platforms, or use third-party ones
- Third-party apps to get access to the same OS features as stock ones
- Only collect the same data from apps as is permitted for third-party apps
- Offer consumers a choice of stock and third-party apps during setup
The watchdog notes that existing antitrust laws may be able to address some of these issues, and it may be possible to persuade Apple and Google to change their policies and practices on a voluntary basis, but that specific legislation would be the most reliable approach.
Foss Patents suggests this could lead to the equivalent of the European Union’s Digital Markets Act (DMA). The site also notes that Apple has been somewhat naughty in not mentioning the Japanese investigation when the Brazilian antitrust regulator asked the company to disclose any similar investigations in other countries.
Adds to pressure in the US
In the US, President Biden called on Congress to pass tech antitrust regulation, as part of his State of the Union address. Several attempts at this have been made, with one senator suggesting that these have been blocked by an “incredible onslaught of money” from lobbyists, Apple among them. The iPhone maker does, however, seem to be preparing to bow to the inevitable.
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