In Case There’s Still Some Doubt: iOS Does Compete with Android, Australian Competition Authority Confirms
Back in January I briefly discussed an extremely interesting investigation conducted by the Australian Competition and Consumer Commission (ACCC) into a request made by some of Australia’s leading banks asking for permission to collectively bargain with Apple as regards access to the iPhone’s Near-field Communication (NFC) controller. The request was made over the desire to control bank customers’ digital wallets, which are increasingly part of the one item most people carry every day: mobile devices. The banks’ ultimate goal was to provide their own digital wallets with embedded NFC on iPhones without relying on Apple Pay for mobile payment processing. The rationale was to make sure Apple would not apply any unreasonable terms and conditions to the distribution of the banks’ digital wallets through the App Store — even though for Apple that request boiled down to an attempt to avoid paying fees associated with using Apple Pay.
Last week the ACCC issued its final verdict, a so-called ‘Final Determination’, firmly denying the banks’ request to collectively negotiate with Apple. In that respect, the Final Determination follows an earlier Draft Determination from November last year. You may ask yourself why is this proceeding from ‘Down Under’ worth discussing? Well, while the issue itself is certainly interesting, the far more interesting aspect relates to the reasons for the ACCC’s dismissal of the banks’ request.
One of those reasons is quite simply a concern that the collective bargaining of banks with Apple only could seriously undermine competition between Apple and Google; or to be more precise, between Apple’s iOS and Google’s Android mobile operating systems. The ACCC is quite straight-forward on that point by saying that:
“[I]f the Applicants are successful in obtaining NFC access, this would affect Apple’s current integrated hardware-software strategy for mobile payments and operating systems more generally, thereby impacting how Apple competes with Google. In particular, NFC access is likely to involve modifications to Apple’s software or hardware that lessen the degree of differentiation between the iOS platform and the Android platform.” (Para. 326, emphasis added).
While this finding may not be surprising and is probably just stating the obvious to many, it has real implications for competition law enforcement. The European Commission’s ongoing Android case rests on a market definition of ‘licensable smart mobile operating systems’ leaving Apple’s iOS out of that market. Google is argued to have a dominant position on that market but it is totally unconceivable how Google can be in a position to simply ignore the competitive pressure exerted by Apple — the undisputed, global number one in mobile ecosystem profitability. Dominance is something which allows companies to act independently of competitors and consumers. As I explained before, it is an economic situation which allows dominant companies to be completely numb and unresponsive to market forces. Interestingly, at least the ACCC seems to firmly not see the Android mobile operating system to be in this position because it competes with iOS. In order words, iOS should be considered as a competitive constraint on Android calling a finding of dominance into question.