In the Greek mythology, Odysseus famously lost six companions after he chose to sail towards Scylla, while escaping from an even worse venture if he had gone towards Charybdis. Economists often weigh the pros and cons of different alternatives, none of which is ideal (or first best in economic jargon). This paper discusses one of such choices: whether to define local markets by relying on catchment areas or by applying a hypothetical monopoly test. It argues that competition authorities should recognise more explicitly that this choice should be driven by the quality of the available data.
The Apple App Store is the only channel through which app developers may distribute their apps on iOS. First launched in 2008, the App Store has evolved into a highly profitable marketplace, with overall consumer spend exceeding $50 billion in 2019. However, concerns are being increasingly expressed on both sides of the Atlantic that various practices of Apple with regard to the App Store may breach competition law. The purpose of this paper is to examine whether this is indeed the case and, if so, how these concerns can be addressed. With these aims in mind, the paper first introduces the reader to the app ecosystem and the Apple App Store, with a focus on Apple’s in-app payment policies and the 30 percent commission charged for in-app purchases. After engaging critically with the distinction between apps selling “digital” and apps selling “physical” goods or services, we consider such distinction is unclear, artificial, and unprincipled.
The paper then critically reviews several practices of Apple that appear to be at odds with competition law and in particular Article 102 TFEU. We first analyze the issue of market definition and dominance with regard to the App Store. We find that Apple is a monopolist in the market for app distribution on iOS, as it is not subject to any meaningful competitive constraint from alternative distribution channels, such as Android app stores. The result is that Apple is the gateway through which app developers have to go to reach the valuable audience of iOS users. This bottleneck position affords Apple the power to engage in several prima facie anticompetitive practices. A first concern is that Apple may exploit app developers by charging excessive fees for the services it provides and by imposing unfair trading conditions. Second, based on four case studies, the paper illustrates how Apple may use its control of the App Store or iOS to engage in exclusionary behavior to the detriment of rival apps. These practices should be investigated by competition authorities, as they are likely to result in considerable consumer harm, be it in the form of higher app prices, worse user experience or reduced consumer choice. The paper finally proposes a combination of concrete remedies that would address the competition concerns identified.
