The United Kingdom's Competition and Markets Authority (CMA) has launched a crackdown on Apple and Google over their controversial "app tax," a levy imposed on in-app purchases and subscriptions that the regulator deems unfair and unreasonable. The move aims to force the tech giants to allow smartphone users direct access to cheaper deals, potentially saving consumers billions of pounds.
At present, Apple's policies prevent users from finding alternative payment methods for in-app purchases, requiring all transactions to go through the company's own system. App developers are prohibited from offering external links or QR codes for payments on iPhones. Google has eased some restrictions but still maintains limitations.
This practice results in a charge of up to 30 percent on in-app purchases and subscriptions, often referred to as an 'app tax.' Critics argue that this 'stealth levy' is passed on to consumers, increasing the cost of services by as much as a third. These fees are paid by app makers, including popular dating platforms, but the increased cost is ultimately borne by users.
Campaigners and some politicians contend that these fees also harm the UK's tech sector by siphoning profits that could be reinvested and by stifling competition. Research suggests that Britons could spend an additional £4 billion over the next five years due to this 'tax.'
The CMA's intervention, which follows a consultation period, aims to introduce competitive pressure by encouraging Apple and Google to lower their charges. The regulator stated that this would ensure fees are 'fair and reasonable,' though it stopped short of imposing fines or setting a cap on the fees.
Will Hayter, the CMA’s Executive Director for Digital Markets, described the move as the "best way to introduce some competitive pressure in a vital part of the mobile eco-system that is otherwise sorely lacking such pressure." The CMA expects that consumers will pay less for services under the proposed changes.
Supporters of the CMA's proposals, such as Tory peer Baroness Stowell, view them as a significant step forward for developers and consumers. "Whether they go far enough remains to be seen, and the CMA must act again if they don’t," she added.
Former Tory tech minister Damian Collins called the announcement "welcome progress" that could facilitate better deals for consumers and encourage innovation. He also suggested the CMA should review the pricing regimes in app stores, noting previous concerns about excessive profits.
However, some groups believe the measures do not go far enough. The Coalition for App Fairness stated that the plans "risk being little more than cosmetic" and fall short of increasing competition or improving outcomes for developers and consumers. They advocated for a fee cap to prevent excessive profiteering.
Liberal Democrat Martin Wrigley, a member of the Commons technology committee, described the move as a positive step in breaking the dominance of Apple and Google but also called for further investigation into the value of the app store charges.
Apple has indicated it will oppose the CMA's announcement, expressing concerns that directing users away from its payment system could compromise their security and protection from fraud. Google, conversely, asserted that it has already implemented the changes proposed by the CMA.
The CMA's consultation is set to conclude in August, with potential changes to take effect later in the year. The app tax does not typically apply to free apps or those offering tangible services, such as food delivery or ride-sharing.
