Shares in U.S. tech giant Alphabet (GOOGL) were lower today because of fears of a U.K. clampdown on its mobile platforms.
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U.K. regulator the Competition and Markets Authority (CMA) said today that it planned to designate Alphabet’s Google and Apple (AAPL) with strategic market status for their role in mobile ecosystems.
Competition Concerns
This means that the CMA, which opened the investigation in January, can take actions against a firm to change or stop specific behaviors or practices in order to address competition concerns.
Apple’s Safari and Google’s Chrome dominate the mobile browser market on iPhones and Android devices, respectively. In the U.K. the CMA said Apple and Google’s mobile platforms hold an effective duopoly, with around 90 – 100% of U.K. mobile devices running on their mobile platforms.
As such, Europe is a key market for Google.
The CMA said this led to issues such as inconsistent app store search rankings favoring apps owned by the firms, and choice architecture, like default settings, pre-installation, prominence, prompts, and friction, which may favor the firms’ own services, limiting competition and genuine choice for users.
It also highlighted the up to 30% commission charged by the firms on some in-app purchases and restrictions on developers telling customers about cheaper ways to pay or to subscribe outside of the app.
“Apple and Google’s mobile platforms are both critical to the U.K. economy … but our investigation so far has identified opportunities for more innovation and choice,” CMA head Sarah Cardell said in a statement. “The targeted and proportionate actions we have set out today would enable UK app developers to remain at the forefront of global innovation while ensuring U.K. consumers receive a world-class experience.”
Changes Needed
The CMA said that it wants Apple to review apps for distribution in a “fair, objective and transparent manner.” This could include remedies such as Apple explaining delays or rejections and creating an avenue for businesses to raise concerns about the process.
Apple could also be made to publish a methodology for how it ranks apps in the App Store. The CMA has laid out similar remedies for Google.
Google called the move “disappointing and unwarranted.” “It is crucial that any new regulation is evidence-based, proportionate and does not become a roadblock to growth in the U.K.,” Google’s senior director for competition, Oliver Bethell, said.
Apple said it was concerned that the new rules being considered would undermine the privacy and security protections expected by its users.
This is another example of enhanced regulatory crackdown on U.S. tech in the U.K. and Europe. However, it has done little to stop the growth in either Apple’s or Google’s share price.
Is GOOGL a Good Stock to Buy Now?
On TipRanks, GOOGL has a Strong Buy consensus based on 30 Buy and 9 Hold ratings. Its highest price target is $250. GOOGL stock’s consensus price target is $206.51, implying a 7.93% upside.
