UK competition regulator launches probe into Apple over App Store policies

The CMA says it will examine whether Apple's terms and conditions for app developers are forcing users to spend more money for apps and add-ons

The UK Competition and Markets Authority (CMA) announced on Thursday that it had opened a probe into Apple over complaints that the iPhone maker's terms and conditions for app developers are unfair and anti-competitive.

Presently, Apple's App Store is the only way for developers to distribute third-party apps on Apple's mobile devices. App developers cannot distribute their apps on iPhones and iPads without approval from Apple.

The apps are approved with certain terms and conditions that developers are required to agree to if they want their apps to be published on App Store.

Developers who offer 'in-app' features and add-ons are required to use Apple's payment system. Moreover, Apple charges a commission of up to 30 per cent to developers on purchases made by iPhone and iPad users on all their apps.

In January, Apple reduced its App Store cut from 30 per cent to 15 per cent for developers with annual revenues less than $1 million in 2020.

According to CNBC, Apple's App Store generated an estimated $50 billion in revenue in 2019. Apple also said that "in 2019 alone, the App Store ecosystem facilitated $519 billion in commerce worldwide - with over 85 per cent of that total accruing solely to third-party developers and businesses of all sizes."

The CMA says it will assess whether Apple is enjoying a dominant position in connection with the distribution of apps on its mobile devices in the UK.

If that is the case, the CMA will consider whether Apple's terms and conditions for app developers are unfair or anti-competitive - causing users to pay more money for apps and add-ons.

The regulator said that it is just the beginning of the investigation, and a final decision on whether Apple has violated a law will come later.

In a statement to Reuters, Apple said that it was looking forward to working with the British regulator to "explain how our guidelines for privacy, security and content have made the App Store a trusted marketplace for both consumers and developers".

The company said the terms it places on developers are fair and necessary to protect users "from malware and to prevent rampant data collection without their consent".

In addition to the UK, Apple is also being probed by the Dutch competition authorities, who are nearing a draft decision. The European Commission also has four ongoing antitrust investigations into Apple, three of which involve the App Store.

The CMA said that it will coordinate its investigation with the European Commission, as well as with other antitrust regulators around the world.

Payment policies related to App Store have long drawn criticism from app developers. In August last year, Epic Games launched a lawsuit against Apple over antitrust claims, after the iPhone maker removed its popular Fortnite game from its App Store.

Apple's decision about Fortnite came after Epic Games announced a direct payment plan for Fortnite users, offering them a 20 per cent discount on the Apple price for in-app purchases. The firm said that bypassing the 30 per cent tax to Apple enabled it to lower costs for users.

Apple criticised Epic Games for breaching App Store's guidelines and removed Fortnite from the App Store.

Epic Games filed a lawsuit against Apple (and Google), urging the court to give a ruling that would change the way tech giants run their app stores. Epic described Apple's payment system as monopolistic and illegal and said the iPhone maker had designed policies to ensure that "the App Store is the only distribution channel for developers to reach iOS app users".