Let’s just wait and DMCC: the CMA rejects Google commitments on mobile app store practices, preferring its new digital markets powers

The UK's Competition and Markets Authority (CMA) has this week rejected commitments offered by Google to resolve its long-running antitrust investigation into Google’s practices in its Play Store, finding - 16 months after they were first consulted on - that the proposals were insufficient to remedy the competition concerns identified. At the same time, the CMA announced it was formally closing its antitrust investigation (together with a parallel investigation into Apple’s app store, where no commitments were offered) on ‘administrative priority’ grounds. 

The case closure statement indicates the CMA has taken this step because it believes its new powers under the Strategic Market Status (SMS) regime introduced by the Digital Markets, Competition and Consumers Act (DMCC), will allow its concerns to be addressed in a  “more timely, holistic, and flexible”  manner than under its existing antitrust powers. The announcement is an interesting and important development that gives one of the clearest indications yet about how the CMA intends to use the very broad powers it has been handed by Parliament. 

The Play Store investigation

The CMA’s investigation was focused on whether Google had abused a dominant position with its Play Store practices and centered on the fairness of Google’s payment policies imposed on developers for in-app purchases. The investigation was opened in 2022 following the CMA’s Market Study into Mobile Ecosystems, and during a period of uncertainty as to whether the SMS Regime would receive legislative backing.

In 2023, Google offered and the CMA provisionally accepted “commitments” in exchange for closure of the investigation. Under the commitments, developers of apps in the UK Play Store would no longer be required to process in-app payments via Google’s proprietary billing system. Instead, developers would be given the option of using an alternative billing system for processing in-app transactions by implementing either (i) User Choice Billing (UCB), which would allow developers to offer an alternative billing system to users for in-app purchases alongside Google’s proprietary billing system; or (ii) Developer-Only Billing (DOB) – which would allow developers to offer the alternative billing system instead of Google’s proprietary billing system. The commission taken by Google on payments would be reduced by 4% and 3% respectively. 

However, following public consultation on Google’s proposals, and a long period of “limbo” in which the case timetable was repeatedly extended, the CMA has now rejected the commitments. The CMA’s decision to not accept commitments highlights the main concerns raised by stakeholders were around (i) the reduction in commission being insufficient to cover the costs of alternative billing; and (ii) the interstitial screens creating unnecessary friction and / or being unduly negative / misleading, leading to low take up. A number of other concerns are also noted including around Google’s broader app store rules and anti-steering practices. 

Looking forward to the DMCC

With the DMCC expected to commence in the coming months, the CMA's announcements give one of the clearest indications yet about how it will approach its significant new powers. 

First, and consistent with what the CMA had previously hinted at in its DMCC Roadmap publication, it re-affirms that mobile ecosystems are likely to be early targets for designation under the SMS Regime (albeit the CMA’s announcements are clear that no decision has yet been formally taken on this). With the CMA having indicated that it intends to run only three to four designation investigations within the first year of the new regime, this is significant. 

Second, again unsurprisingly and consistent with the CMA's draft guidance, it demonstrates that the CMA is laser focused on outcomes and sceptical of measures that might fix problems “on paper” but have limited impact in the real world. In rejecting Google's commitments, the CMA finds that “although under the Proposed Commitments [Google’s proprietary billing system] would no longer be mandatory in principle, certain conditions and requirements in place under the terms of the Proposed Commitments could affect whether the commitments were effective in practice in addressing the CMA's competition concerns.”  

Finally the clear implication of the fact the CMA shut its investigation, despite having competition concerns, is that the CMA believes it will be in a position to impose some better remedy under the SMS regime. The kind of choice screen rejected by the CMA here has a long history in antitrust enforcement and indeed several “gatekeepers” have introduced choice screens as part of their Digital Markets Act compliance in the EU. Choice screens by their very nature increase user friction and raise issues around online choice architecture (which has been a focus for the CMA in a number of digital contexts). Such problems are difficult to overcome, but the DMCC gives the CMA various powers that may help (e.g. compelling demonstrations / trials, including A/B testing).

More than a one shot game

Perhaps most critically, under the SMS Regime the CMA will have the flexibility to iterate and improve conduct requirements with relative ease if they don’t initially achieve their objectives. This flexibility stands in stark contrast to commitments given through antitrust procedures (or indeed to the rules under the parallel EU Digital Markets Act). All signals from the CMA are that it will not be shy to use this flexibility, suggesting that its decision to “wait and DMCC” is not just about setting a different set of rules than those it could have extracted through commitments, but about being able to re-write those rules if they aren't achieving their objectives.