Debates around big tech and digital regulation can sometimes feel distant from the everyday concerns of voters. But the power that a small number of global tech companies hold over our lives goes far beyond what most people realise. As chair of the parliamentary science, innovation and technology committee, I have spent years raising concerns about this: from the data they harvest and the digital “twins” they build of us, to the algorithms that decide what our children see.
But there’s a much less visible example of this imbalance of power sitting in the pocket of almost every smartphone user in Britain: the app tax. Apple and Google control the two app stores through which almost every mobile app in this country reaches its customers, and that position lets them set terms for app developers that most businesses would never accept from a supplier. Sell a subscription, game or piece of software through either app store and both companies now charge a commission of up to 30% on purchases made inside apps, regardless of what the product is or what it costs to make.
With no alternative platforms, developers simply have to accept the terms set by Silicon Valley. Developers are also prevented from telling users that a cheaper option exists elsewhere, known as “steering”. That restriction is enforced by Apple and Google to protect their own profits.
For small British developers who might struggle to absorb the cost, that could be the difference between hiring their next engineer or not, investing in a new product or shelving it, or growing their business here or uprooting and building overseas instead. Consumers pay the price, too. Research commissioned by the Coalition for App Fairness, as reported in the Daily Mail, indicated that British consumers pay approximately £700m per year to Apple and Google, a full £232m more than the companies paid in UK corporation tax last year combined.
This is equivalent to around £55 annually for a household with four smartphone users. It is a cost built into the price of the product, invisible on any receipt, that has far more to do with market control and bolstering profits than anything the companies actually did to earn it. My last job before coming into parliament was with Ofcom, the regulator for communications markets.
I was responsible for assessing the competitiveness of markets, because it is through competition that consumers get choice. The Competition and Markets Authority (CMA) has found that Apple and Google’s mobile platforms hold an effective duopoly, with at least 90% of UK mobile devices running on their mobile platforms. App developers have no choice but to distribute their product through the Apple App Store or the Google Play Store.
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