Apple and Google control almost all app distribution on UK smartphones. That lets them charge fees that consumers and developers cannot avoid, and the UK competition regulator has powers to tackle them that it should now use.
Key takeaways
- Nearly every smartphone in the UK runs an operating system made by either Apple or Google, and each company controls how apps are distributed on its own system.
- The “app tax” is the commission app stores take on digital sales and subscriptions, a cost that can end up in the prices consumers pay.
- The Guardian has published a comment piece by the chair of a parliamentary committee, who argues that the UK regulator has the powers to stop this practice and should use them.
- The strongest case against intervention is that closed app stores protect users’ security and privacy, and that forcing them open could weaken those protections.
The argument: a two-firm gatekeeper needs a referee
The argument is simple. Getting software onto a phone in Britain means going through one of two companies. Apple runs the iPhone’s operating system and its app store. Google runs Android, the system most other phones use, and its Play store. When a market has only two ways in, and each is owned by the firm that sets the rules for it, normal competition does little to hold down the price of entry.
That price is what critics call the app tax: the share of a payment the platform keeps when someone buys an app, a subscription or an in-app item through the store’s own payment system. App developers either absorb this cost or pass it on to customers. Most consumers never see the fee because it is folded into the price they pay.
The Guardian reports a comment piece by the Labour MP who chairs the House of Commons science, innovation and technology committee. It describes the arrangement as a deeply rooted duopoly that lets the two companies exploit both the public and developers. It also argues that the UK’s competition regulator already has the legal tools to end this, and that the question is whether the regulator will use them.
The argument does not say app stores are worthless or that platforms should run them for free. It says the level of fees and the rules around payments are set without real competitive pressure, so an outside referee should set limits. In the UK that referee is the Competition and Markets Authority (CMA). Recent digital markets legislation gave it the power to impose conduct requirements on firms it finds to hold strategic market status.
Evidence one: users and developers have nowhere else to go
The first piece of evidence is the structure of the market. Most markets put a ceiling on prices because customers can switch. Here, switching is limited at every level.
A consumer who dislikes the fees in Apple’s ecosystem would need to buy a different phone, learn a different system and often repurchase apps and move data. Even then, they would land in the other half of the same two-firm market. Within each ecosystem, the company that makes the operating system also runs the main or only route for installing apps, and it sets the terms for payments made inside those apps.
Developers have even less choice. A business that wants to reach smartphone users in Britain cannot realistically ignore either platform, because doing so means giving up a large share of potential customers. It therefore has to accept the terms of both. Economists call this a “must-have” position. Each platform is a bottleneck in its own right, so the fact that two exist does not create the competition a two-player market might suggest.
This explains why the Guardian piece calls the duopoly deep-seated rather than temporary. Competing operating systems have come and gone, and building a rival ecosystem with enough users and developers to matter is very hard. Where entry barriers are that high, competition authorities have traditionally treated market power as lasting rather than self-correcting, and that is what justifies regulation instead of waiting for the market to fix itself.
Evidence two: the rules on payments protect the fee, not just the user
The second piece of evidence is how payment rules work. App stores have generally required that digital goods sold inside an app go through the store’s own billing system, which triggers the commission. They have also restricted developers’ ability to tell users that a cheaper option exists elsewhere, such as subscribing directly on the developer’s website. Critics call this “anti-steering”.
Defenders of the fee say it pays for the store’s services: hosting, discovery, review and payment processing. Anti-steering rules are harder to justify on those grounds. A rule that stops a developer from simply telling a customer about a lower price elsewhere does not obviously make anyone safer. Its main effect is to keep transactions, and therefore commissions, inside the platform. This is why competition regulators in several jurisdictions have focused on steering rules in particular. They show most clearly the gap between the security reasons platforms give for their rules and the money those rules protect.
The way the fee works in practice also matters. It applies to digital goods and services, such as subscriptions, game items and premium features, and often not to physical goods or services bought through an app. As a result, the burden falls unevenly. Music, video, gaming and dating apps, whose products are digital, carry it most heavily, while many other apps pay nothing. This complicates any claim that the fee is a fair, general charge for using the platform.
Evidence three: other regulators have already moved
The third piece of evidence is that the UK would not be acting alone or inventing an untested approach. The European Union has adopted digital markets rules that put obligations on large “gatekeeper” platforms. These include requirements on alternative app distribution and on allowing developers to point users to other payment options. Courts and regulators elsewhere have also examined anti-steering and in-app payment rules, with varying results.
Earlier action abroad gives Britain evidence to learn from. The CMA can see how platforms have responded to rules elsewhere, which compliance approaches have proved hard to enforce, and whether new fee structures have actually lowered costs for developers. It does not have to design interventions blind.
The Guardian piece argues that the regulator now has its own powers to stop what it calls abuse. The UK’s newer digital markets regime lets the CMA set tailored rules for firms with strategic market status, rather than relying only on slow case-by-case enforcement after harm has occurred. Supporters of intervention say that having these tools and not using them would be a choice in itself, with consequences for consumers and developers. The specific measures the regulator is considering, and its timetable, are not set out in the source material and are not known here.
The case against: closed stores are part of what users are buying
The strongest objection deserves a fair hearing. Apple, in particular, has long argued that tight control over how apps reach the iPhone is a deliberate feature that users value, not an accident of market power. It says a single reviewed store, combined with a single trusted payment system, cuts exposure to malware, fraud and apps that misuse personal data. Many consumers may choose an iPhone precisely because it is a controlled environment. On this view, forcing it open takes away a choice those customers have made.
A related argument concerns payments. When everything is bought through the platform’s own billing, refunds, parental controls and subscription management sit in one place. If developers can route users to outside payment pages, scammers can copy those pages more easily and consumers may face a messier system when something goes wrong.
There is also an economic defence of the fee. Building and maintaining an operating system, developer tools and a global store costs a great deal. The commission is one way platforms recover that investment, and many apps, including free ones without in-app purchases, pay nothing at all. If regulation pushes fees down, platforms may recover costs in other ways, such as higher device prices, new developer charges or fewer free tools. In that case the overall benefit to consumers would be smaller than it first appears.
Finally, there are risks to a mid-sized market like the UK imposing its own rules. Platforms may comply slowly or minimally, or delay launching some features in Britain. Detailed conduct rules can also turn the regulator into a long-term price-setter for a fast-moving industry. Rules written for today’s market structure may suit tomorrow’s poorly.
These points do not rule out intervention, but they set a high bar for how it is designed. Any rule that improves competition while degrading security would be a poor trade, and supporters of intervention need to show that the two can be separated.
Evidence that would change the conclusion
Several kinds of evidence would weaken or strengthen the case for strong action.
If studies showed that app store fees are mostly absorbed by large developers rather than passed through to consumer prices, the argument that ordinary phone users are paying an app tax would be weaker. It would become a dispute between businesses rather than a consumer issue.
If ecosystems that allow alternative app stores or outside payments showed a clear and lasting rise in fraud, malware or data misuse, the security case for closed stores would gain considerable weight.
If experience in the EU and elsewhere showed that platforms could keep effective fee levels unchanged through new charges or complex compliance schemes, that would suggest regulation of this kind produces process rather than results. A different approach would then be needed.
On the other side, if developers in jurisdictions that have intervened cut their prices, launched new services or gained meaningful ways to reach customers directly, the case for the UK to follow would get stronger. Measurable evidence of that kind is what the debate needs most, and much of it is not yet publicly available.
Sources and further reading
- The Guardian: a comment piece arguing that Apple and Google’s app store duopoly harms consumers and developers, and that the UK regulator should act.
- Competition and Markets Authority: published material on mobile ecosystems and the UK’s digital markets regime.
- European Commission: guidance on the EU’s digital markets rules and their obligations for gatekeeper platforms.
- UK Parliament: records from the House of Commons science, innovation and technology committee.
Surfaced from the rss:guardian_tech signal “smartphone app store fees”. AI-assisted draft, editorially reviewed.
