Apple and Google face block on taking cut from in-app purchases in Australia

Josh Taylor

5--7 minutes

Apple and Google could soon face new rules that allow app developers to charge for in-app purchases without paying a cut to the app store, the head of Australia's competition watchdog has said.

"If our country doesn't take the step to empower this so that this obligation is there, it won't be offered," the Australian Competition and Consumer Commission (ACCC) chair, Gina Cass-Gottlieb, said.

The changes are likely to form part of the government's response to the ACCC's consultation in December last year on a mandatory code of conduct for designated digital platforms such as Google and Apple.

In its recommendations, the ACCC called for a code that would address anti-competitive behaviour on the platforms, such as self-preferencing, unfair business dealings and impediments to interoperability and the ability for consumers to switch services.

Apple and Google have been in the midst of high-profile battles over app store rules with Epic Games, the creator of the massively popular Fortnite game. The game was kicked off both app stores in August 2020 for bypassing the in-app purchasing systems Apple and Google force developers to use, which allows them to take up to a 30% cut in sales.

Epic Games is still engaged in litigation in Australia and the US over the ban, and the case is not due to be heard in Australia until next year.

But it is likely the federal government will seek to bring in the new rules before then, with industry comment being sought in the coming weeks on the proposed changes.

Cass-Gottlieb said cases overseas demonstrate how regulation is needed to achieve change. In South Korea, the companies have been forced by legislation to offer payment alternatives, while in the Netherlands regulators only managed to get Apple to offer in-app payment alternatives for dating apps.

She said the two instances show the companies can change how they operate, but only when forced by legislation.

"We really do need to take the step that the ACCC's recommending, which is to set up a legislative framework where they can be specific for the most important digital platform service providers."

A spokesperson for the assistant treasurer, Stephen Jones, would not confirm the timing of when draft legislation might be released but said the government "is considering its response to the recommendations".

The UK is seeking to legislate new powers for the country's competition regulator to govern the digital platforms, and the EU's Digital Markets Act will probably force Apple and Google to allow alternative payment methods outside the app stores.

The Australian code of conduct would be the first cab off the rank arising out of the digital platforms inquiry. The inquiry has most recently been assessing whether companies such as Apple, Google and Meta and their creation of "ecosystems" of technologies have reduced the ability for smaller companies to compete.

National Australia Bank, for example, said in a submission to the inquiry that the expansion of the tech platforms into mobile wallets and the credit sector more broadly gave them a competitive advantage due to the amount of data they already hold on customers.

Epic Games said in its submission that opening up the app stores to alternatives would reduce the competitive harms.

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"Apple and Google's digital platforms services face few, if any, competitive constraints in mobile app distribution. Consequently, mobile app developers have few, if any, viable alternatives for app distribution," the company said. "This enables Apple and Google to unilaterally impose 'take it or leave it' fees and terms as a condition of mobile app distribution."

Free TV Australia called for data separation rules, noting that Google's advertising business had "expanded unchecked" and the integration of the different ad businesses within Google had given the company large market power.

Google in its response argued that it did not consider its suite of products and services to be a single "ecosystem", and said what it offered was in competition with other companies offering similar but different services on a product-by-product basis, such as Apple and Amazon in home devices.

Apple said its own ecosystem was largely geared towards driving sales of its hardware devices -- and that its expansion into new areas, such as home devices, improved competition for other businesses as it helped "facilitate new and expanded services from and competition with and between third-party smart home device and service suppliers".

The ACCC, meanwhile, is continuing its work on digital platforms. Last week it released a discussion paper about the largely-unknown world of data brokering -- where third parties collect and sell a range of data from social media, search engines, loyalty programs and others for applications such as audience profiling.

Cass-Gottlieb said she hopes the inquiry sheds light on the industry's practices.

"We think very few people are aware of how data is being scraped, or actually provided or sold to third party data brokers. And therefore, consumers are less likely to have explicitly consented to that collection and use of the data and also less likely to even have a capacity to challenge or opt out of that collection and use of their data."

The issues paper is accepting comment until 7 August.