The UK Government should look to strengthen, not weaken, the powers of the Competition and Markets Authority to boost innovation and grow the economy, according to a new report from the Institute for Public Policy Research (IPPR). 

The think tank’s study, Fair Play: How Competition Policy Can Drive Growth, says that despite growing political criticism and intense lobbying – often from powerful tech giants – the government should use the CMA’s remit to create fairer, more dynamic markets, arguing that effective competition policy is vital to a pro-worker, pro-business economic agenda.

Earlier this year, the CMA, under pressure from the government’s growth agenda, released a new framework which could see the approval of more business deals under review.

In a February blog post, the CMA’s chief executive, Sarah Cardell, said that the regulator would look to introduce a set of reforms to address the process it undertakes in its reviews of business deals, to ensure the UK is seen as a ‘great place to do business’. 

The Big Tech duopoly hitting UK innovation

The IPPR’s new analysis suggests that taking this kind of approach with firms like Apple and Google, both under ongoing CMA investigations, may be hindering the growth of UK businesses by leveraging their dominance over the app store market. 

The IPPR said that the tech firms charge up to 30% commission on in-app purchases, with a reduced rate of 15 per cent for small businesses, but around 90% of revenues are still generated through the higher rate.

This is despite their marginal costs being very low, according to the CMA, with Apple’s gross profit margin on the app store averaging between 75% and 100%. Apple and Google are likely to have made total revenues of between £1.5 billion and £2.4 billion from app stores in the UK this year, according to IPPR estimates.

The think tank said that in a more competitive market, this commission would likely be a lot lower.

If these fees were reduced to 12% – a level cited by the CMA based on more open markets like PC gaming – it would result in up to £1.4 billion of revenue from UK transactions shifting from Apple and Google to app developers this year, based on the same estimates. 

The report projects this figure could rise to £3.3 billion by the end of this parliament in 2029, with the money far more likely to be reinvested by UK-based developers into innovation, job creation and wage growth.

As evidence of the impact that realigning the CMA could have, the IPPR points to a recent court judgement in the US that forced Apple to permit external payment links from iOS apps, opening the potential for developers to bypass Apple’s commissions. 

Some firms immediately responded by undercutting the 30%, and even the 15%, commission fees, with Stripe publishing documentation allowing developers to process fees outside the app store at a standard payment processing fee of little as 2.9% plus $0.30 per transaction. 

Deregulation alone won’t boost growth

The IPPR said that the case is a clear example of how concentrated market power is allowing dominant firms to extract wealth from the UK economy, to the detriment of high-potential startups, their investors and their workers.

Challenging the idea that competition policy is ‘anti-business’ or holds back economic growth, the IPPR study instead argues that strict enforcement is essential to creating markets that reward innovation over extraction.

“Enforcing the UK’s competition rules isn’t anti-business – it’s a pro-business, pro-worker, pro-growth agenda,” said Dr George Dibb, associate director for economic policy at IPPR.

“If we weaken those rules, we’re letting dominant firms and tech giants hold back innovation and investment. That’s money being extracted from British businesses and workers, and funnelled to monopolistic firms, often overseas.”

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To rebalance power away from what the IPPR calls a handful of corporate giants, the think tank is calling on the government to empower the CMA with a stronger mandate.

That includes delivering faster, more responsive decisions, and fast-tracking consumer harm cases, breaking down policy silos between competition and other policy areas, and adopting a formal ‘growth mandate’ that actively targets business practices that suppress wages, holds back SMEs and undermines regional development. 

Regarding the power of tech firms, the IPPR wants the government to accelerate interventions against exploitative practices by focusing on the biggest threats to consumers and innovation, such as big tech fees and energy pricing.

“As this timely paper rightly suggests, competition is the lifeblood of free enterprise and healthy businesses. We don’t have enough of it,” said Lord Andrew Tyrie, former chair of the CMA.

“The UK’s competition authorities, led by the CMA, have failed to prevent rising concentration and declining competition in many markets, as have competition authorities in many other jurisdictions.

“The CMA has recently been given huge new powers and tools. It now needs to deploy them, and vigorously.”

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