The Competition Appeal Tribunal’s decision in Kent v Apple is an important landmark in the approach of UK courts to competition within tech ecosystems, showing how traditional tools can be used to police digital walled gardens.
The decision is also very timely. Just as the government is considering whether recent high-profile disappointments in the collective proceedings space are indicative of a wider problem with the regime, Dr Rachel Kent has succeeded in a claim which no individual consumer could have brought themselves, identifying several harmful types of anticompetitive conduct by one of the world’s largest companies, and which is expected to lead to significant pay-outs to affected class members.
The case concerns the rules and charges for Apple’s App Store and for in-app transactions. The Tribunal held that there is a market for iOS App distribution, which Apple has foreclosed by preventing other app stores from entering. It also found Apple’s headline 30% commission rate to developers is abusively high. In addition to that, the Tribunal identified a separate market for in-app purchases, and it held that Apple had abusively tied its services in that market to the app distribution market.
For a detailed discussion of the judgment and its implications, you may be interested in this recording of an event yesterday with me and some of my Blackstone Chambers colleagues.
Three themes stand out to me, each of which will be important as competition law grapples increasingly with platform power.
Theme 1: Ecosystem competition
It is possible to imagine an alternative regulatory universe in which antitrust laws are used to encourage competition between ecosystems, but where each tech giant is allowed greater freedom within its own domain. In that alternative universe, Apple would be able to say that the relevant market needs to be defined by reference to the wider set of services in its ecosystem, and it would be able to justify restrictions on one service (such as the App Store) by pointing to the wider interests of its ecosystem.
However, the basic problem which Apple faces is that those sorts of arguments do not reconcile easily with traditional competition law concepts. There is doubtless some truth in the notion that those of us who choose Apple products – which will be the large majority of people reading this blog – do so because we see the benefits of quality, security, brand etc of the ecosystem as a whole. Apple tried to marshal points about the wider ecosystem in its defence in several different ways in the Kent proceedings. However, the Tribunal rejected the argument at every stage of the analysis:
- The point does not assist at the market definition stage because the focus at that stage is on a traditional hypothetical monopolist test, addressing a narrow focal product (e.g. app distribution).
- The point does not assist at the dominance stage because the factors which influence consumers when they buy a smartphone (i.e. when they buy into the ecosystem) are not relevant to the question of dominance in the secondary markets.
- The point does not assist at the abuse stage because foreclosure in one market cannot be in some way offset by what happens in other markets.
- The point could in principle assist at the justification stage, but the problem there is that the test for justification is high, and will not be satisfied where (as in this case) the exclusionary conduct has completely prohibited competition.
At a high level, this case and others like can be understood as a clash between different visions of how competition should work: between the tech companies determined to build high-quality but heavily-guarded ecosystems, versus those wanting to prise them open to greater market pressure.
Theme 2: Comparators
The second theme is a more mundane point, but one which will be important to other similar cases. It is to emphasise the importance of the comparators which the Tribunal relies on to reach its conclusions.
Comparators are vital to several stages of the analysis. Perhaps most obviously, they are a necessary part of the test for abusive pricing, where one way of testing whether a price is unfair is to contrast it to the price for other comparable services. Comparators also become important at the stage of estimating damages, where they can be useful pointers to how prices might have developed under competitive conditions.
What is less obvious is that comparators are also relevant at the market definition stage. The reason for that is that, to apply the hypothetical monopolist test (viz: would a hypothetical monopolist of the candidate market find it profitable to impose a small but significant non-transitory increase in price above competitive levels?), it is necessary first to identify what a ‘competitive’ price would look like. For that purpose, the Tribunal considered prices charged by PC gaming platforms: Microsoft Store, Epic Games, and Steam. All of those charge significantly below Apple’s 30% commission on app distribution, and the Tribunal reasoned that, without needing to say precisely what price would have been charged in a competitive market, it could conclude that a hypothetical monopolist in iOS app distribution would indeed be able profitably to increase prices over competitive levels.
Once those comparators are locked in at that early stage as suitable comparator platforms, they exert a strong gravitational pull on the overall result. They strongly influence market definition, which then in turn tends to lead to dominance, because Apple has 100% market share of the markets as defined. The dominance finding in turn makes it hard for Apple to avoid the exclusionary abuse finding, given that Apple completely prohibits entry by competitor app stores. And as I have already mentioned, the comparators then make a re-appearance at the stage of abusive pricing and quantum.
Theme 3: Prior regulatory findings
The final theme is the significance of prior regulatory findings. This has a particular resonance in this case because the background is that the CMA first identified many of the underlying issues in its own Mobile Ecosystem Market Study (MEM Study), and it then launched a Competition Act investigation which was then stopped on administrative priority grounds in summer 2024. Meanwhile, Dr Kent’s case had progressed, building on the MEM Study findings.
The Tribunal says that it will take account of the MEM Study, and also the European Commission’s Spotify Decision. To the extent that the Tribunal takes account of factual evidence underpinning those decisions, that is uncontroversial. However, the Tribunal goes a step further. It says at paragraph 138 that the MEM Study “should be accorded a high degree of respect.” It goes on at paragraph 139:
“On the other hand, we do agree with the argument Apple made to the effect that we should in the first instance focus on the evidence before us in this case, which can be tested by cross examination. For that reason, our approach to both the MEM Study and the Spotify Decision is to use them as a reference point for consistency, or to fill gaps which there might otherwise be in the evidence before us. In each case where we have done this, we have considered the appropriate weight to be given to any opinions or conclusions, so as to ensure that there is a proper balance between fairness to Apple and the evidential value we see in the material.”
The Tribunal therefore takes a balanced approach, but critically it does allow itself to place weight on opinions expressed by the CMA and the European Commission. For instance, going back to the question of comparators, the reason why the Tribunal does not treat the Google Play Store, or indeed the Samsung Galaxy Store, as valid comparators is because of the CMA’s conclusions in the MEM Study, which cast doubt on the degree of competition on the Android platform. From the perspective of regulatory consistency that makes very good sense, but as the Tribunal’s reasoning recognises, it also raises important questions of fairness to a company in Apple’s position.
Conclusion
This case is the first of a queue of collective actions against big tech. It of course does not determine how the others will be resolved – each will turn on its own facts – but it does demonstrate that the UK’s collective action regime can deliver real accountability in digital markets. That will be an important consideration as the government considers whether the system needs further reform.
