Apple Facing $1 Billion UK Antitrust Lawsuit Over App Store Fees

[OneBar]

In a way, you're substantiating my argument.

Those 5 stores that compete on that markup is what drives the cost down. I do agree that the cost of the app can be fairly immutable. But 30% and even 15% is way way above the actual operational support cost of infrastructure and delivery that Apple purports... competing stores can offer same product "for cheaper" because they don't have a higher cut. But without competition, there's no incentive. Monopolistic practices cause this, and it's anticompetitive because Apple outright forbids any other stores, payment methods, or processing ... even advertising for such .. on their platform.

It's like buying petrol at the Exxon over here because it's cheaper than the Exxon over there.

Alternate app stores often do not charge less though (google play, apple, amazon, galaxy, etc), because there's no incentive to. They're "in on it". It's market cost and no one is going to cut costs just for that reason alone, because it's what the market can bear with limited competition even in the hardware space, they can afford to squeeze it. But I guarantee you the billions of overhead that Apple gets for simply hosting data on sites does not require that level. And their lack of disparate choice is perceived as anti-competitive which is dangerous for everyone.

This goes to my base statement that a lack of competition with the context of the market does nothing to drive the cost down, and quite often does the reverse.

If you lived in the Land of Safeways and you could only get food from Safeway, they could markup the delivery, support, maintenance, care, feeding, nurturing, lights, air, and mental-health therapy of their milk and charge $25 for it, even though the farmer only charges $2.50. All in the name of security (apple line). And we paid SO MUCH to that farmer, says Safeway. Aren't we great, says Safeway. You had a choice through right? You moved to the land of Safeway... so really, you didn't. You'd have to move. Everyone uses that as a line, but the ISV can't compel you to buy a phone. You don't see Spotify saying "we don't support Apple because they're price gougers" but you for sure don't see them taking payments on Apple, and the lawsuits show it. You see ISVs supporting where the users go, but they have no choice in this matter.

*** and to the point of my last post here the market is the Apple App store, which is not the same as the market for hardware: phones have competition. The apple app store does not -- no sideloading, no alternate store, nothing. You're no sooner going to chuck your iphone and buy android as an app developer is going to cut off an arm to deny themselves that market.

Ah, so you actually think that if I sold my app on App Store and Google Play for $30 and Apple takes 30% and Google takes 20% that I'll pass that difference on to customers? That's not going to happen. Companies are in existence to make money first and help the customer second. It's not a burden on them to keep the price the same. In fact, it's a boon if they can do that and make an extra 10%.

But again, the stores aren't competing. The stores aren't selling anything in order to compete. The cost for a third party to form a store with the robustness of the App Store is going to be higher than the App Store, at least for many years until they get their initial buy in paid off. And no one is going to want to use them that long because the costs are going to be higher to purchase an app. The App Store was a success because they had the financial backing already in order to go all-in from day 1. Some third party isn't going to have that OR the infrastructure to do so.

 

[AppliedMicro]

Again, you are radically misrepresenting the facts. 98% of apps qualify for the 15% fee

While we are at misrepresenting facts…:
While probably neither Apple nor you (quoting Apple’s figure) are lying, and the figure may technically be true it is deliberately misrepresenting facts.

The vast majority of apps on the App Store are free. I have little doubt that Apple count as „qualifying“ developers all of the developers that only publish free apps.

Banks? Their apps are usually free.
Transport for London and National Rail? Their apps are free.

Hopefully I've now proven to you that this is not really an issue.

Not proven, no, as long as we don’t know:

- How many apps are subject to a 30% fee?
- How much is the share of in-app transactions subject to 30% fee?
- What percentage of all app and (digital) in-app sales are subject to Apple’s 30% fee.

If 90% of sales revenue is subject to a 30% fee (as they may very well be), the share of developers qualifying for a lower rate does not refute the point.

 

[BaldiMac]

While we are at misrepresenting facts…:
While probably neither Apple nor you (quoting Apple’s figure) are lying, and the figure may technically be true it is deliberately misrepresenting facts.

The vast majority of apps on the App Store are free. I have little doubt that Apple count as „qualifying“ developers all of the developers that only publish free apps.

Banks? Their apps are usually free.
Transport for London and National Rail? Their apps are free.

There's no misrepresentation. You're simply emphasizing the point. The vast majority of developers (around 85%) don't pay anything other that the $99/year developer fee. Even the ones that make millions on ads. Or those that make millions through external transactions. Or those that make millions through physical goods and non-digital services.

Again, the 30% only affects a subset (subscription drops to 15% after first year) of the top 2% of developers by purchase and IAP revenue despite your attempt to obscure that fact.

 

[AppliedMicro]

The App Store is not a public utility

It has basically become one. Considering how many other utilities or quasi-utilities (banking, transport, etc) are basing their business and customer interaction on mobile apps, it should - and will be - publicly regulated.

I will, however, make one important concession:
Apple only charges for electronic in-app content or in-app functionality - which are not utilities or regulated similarly.

You make or authenticate a bank transfer with your banking app?
Apple doesn’t charge commission (even if your bank/payment provider charges a fee).
You buy a ticket or transport pass in an app?
You can pay by credit card, don‘t have to go through Apple’s IAP system and Apple won’t charge anything.

All the fees can be passed on to customers by raising the app price. Some developers are choosing not to do this, but they do have a choice, as do consumers. There is nothing anti-competitive about the fees

All that doesn’t mean that the fees (or business practices) aren’t anticompetitive.
Neither does the „choice“ developers and consumers have.

Just ask the credit card companies.

Can card payment / acceptance fees be passed on to consumers? They can.
Does a consumer have a choice to pay by cash, instead of card payment? They do.
Does a merchant have a choice of accepting or not accepting card payments? They do.

Nevertheless have card schemes been fined or reprimanded by regulators for acting anticompetitively.

 

[_Spinn_]

Apple is being targeted because they have deep pockets. As others have pointed out Google Play and video game consoles do the same thing.

 

[AppliedMicro]

Again, the 30% only affects a subset (subscription drops to 15% after first year) of the top 2% of developers by purchase and IAP revenue despite your attempt to obscure that fact.

As long as you don't state the share of transactions and revenue that these 2% of developers account for, you're being disingenuous.

EDIT: It's not so much you as it's being Apple of course (cause they probably won't release the figures).

Apple is being targeted because they have deep pockets. As others have pointed out Google Play and video game consoles do the same thing.

Google also has deep pockets. So does Nintendo.

 

[I7guy]

It has basically become one. Considering how many other utilities or quasi-utilities (banking, transport, etc) are basing their business and customer interaction on mobile apps, it should - and will be - publicly regulated.

[…]

The app store has become a successful enterprise because apple has nurtured it. All the more reason for government to stay out of it. Devs use the iOS app store imo because it’s safe, people who own iPhones buy apps, for the most part crapware is limited. All these advantages will be nil by this impending legislation.

 

[iJest]

The lawsuit seems to suggest that Apple's 15% to 30% fee on in-app sales is somehow excessive and unfair, but it fails to consider the expenses and investments Apple makes in running the App Store. Maintaining a secure and reliable platform, hosting and distributing apps, providing customer support, and ensuring app quality require substantial resources.

One of the claims is that Apple holds a monopoly on the distribution of apps onto iPhones and iPads, resulting in an alleged abuse of its dominant position. However, it is important to recognize that Apple's App Store is not the only app marketplace available to developers. Google's Play Store, which serves as the primary app distribution platform for Android devices, also charges similar prices for in-app sales.

Google's Play Store follows a similar model to Apple's App Store, with a commission fee ranging from 15% to 30% on in-app purchases made through the platform. Like Apple, Google provides app developers with access to a massive user base and the infrastructure required for app distribution, security, and updates. Therefore, developers on Google's platform also benefit from a large market reach and potential revenue opportunities.

In the highly competitive smartphone market, both Apple and Android devices offer different ecosystems with their respective app stores. Users have the freedom to choose between these platforms based on their preferences, and developers can decide to distribute their apps on either or both platforms to reach a broader audience.

Apple's App Store has been a boon for developers, offering them a massive market of potential customers. The App Store's extensive user base allows developers to reach millions of people with their apps, which would have been much more challenging to achieve otherwise. Additionally, Apple's investment in developers' success and the support offered through various programs have contributed to many developers' growth and prosperity.

Apple has maintained its commission rates for over 15 years and has not added any additional fees during that time. This stability provides developers with predictability and allows them to plan their business models accordingly. The consistent commission rates have been ruled as legitimate in court cases, indicating that it is not an exploitative practice.

The lawsuit claims that consumers are being deprived of innovation due to the alleged excessive fees. However, it fails to acknowledge the benefits provided to consumers through the strict quality and security standards upheld by the App Store. This ensures that users can download apps with confidence, reducing the risk of malicious software and data breaches (and yes, some bad "apples" make it through, but it's significantly less than the Google Play Store).

While it is true that Apple has faced antitrust investigations in various countries, it is essential to recognize that such investigations do not necessarily equate to a company engaging in monopolistic behavior. It is not uncommon for successful companies to face scrutiny, and Apple has, in some cases, made changes to accommodate regulatory requirements.

This class action lawsuit against Apple in the UK appears to be misguided and fails to consider the broader context of the App Store's operations. Apple's commission structure has allowed the company to maintain a secure and thriving marketplace that benefits both developers and consumers. Developers tend to make a LOT more money with Apple's App Store than Google's Play Store. While it's crucial for regulatory authorities to assess market dynamics, this lawsuit, based on the information provided, does not seem to have strong grounds for success.

 

[AppliedMicro]

However, it is important to recognize that Apple's App Store is not the only app marketplace available to developers. Google's Play Store, which serves as the primary app distribution platform for Android devices, also charges similar prices for in-app sales.

The way you describe it sounds very much like a classic duopoly.

Apple has maintained its commission rates for over 15 years

...as its App Store business dramatically scaled up in transactions and revenue.
In a competitive market, commissions tend to decrease with an increase of the overall size of the market.

While it's crucial for regulatory authorities to assess market dynamics

If they do, they'll find that Apple is able to set their commission rates either unilaterally or in collusion with Google.

 

[iJest]

The way you describe it sounds very much like a classic duopoly.

I can't disagree. The UK should be going after Google as well, but it's always Apple on the proverbial chopping block.

...as its App Store business dramatically scaled up in transactions and revenue.
In a competitive market, commissions tend to decrease with an increase of the overall size of the market.

While it's true that commissions can decrease in a competitive market, it's essential to consider the unique costs and investments associated with operating app marketplaces like Apple's App Store and Google's Play Store. These platforms require ongoing maintenance, security, and customer support, which are funded, in part, by the commission fees. Additionally, competition in the app market is not solely based on commission rates, as factors like platform features and user base play a significant role. The presence of various distribution channels fosters healthy competition and benefits developers and users alike.

If they do, they'll find that Apple is able to set their commission rates either unilaterally or in collusion with Google.

While the concern of unilateral or collusive commission rate setting is valid, it's essential to note that regulatory bodies closely monitor such practices to ensure fair competition. Companies like Apple and Google are subject to antitrust laws, and any evidence of anti-competitive behavior would be thoroughly investigated. It's in their best interest to adhere to the legal framework and maintain transparency in their operations.

 

[webkit]

Apple is being targeted because they have deep pockets. As others have pointed out Google Play and video game consoles do the same thing.

This is not about targeting companies because they have "deep pockets", it's about targeting dominant companies because they have much greater control and impact on a particular market. Small companies simply don’t wield the power, control. influence, etc. in a market that large companies do.

It's market dominance combined with alleged anticompetitive behavior that can make companies like Apple targets, not deep pockets.

 

[AppliedMicro]

this lawsuit, based on the information provided, does not seem to have strong grounds for success.

I can't disagree either.

Considering how they've maintained their commission rates from the get-go (even decreasing them for at many developers, however big or small their combined market share may be), the argument (to quote from the article) that "charges are unfair in their own right" doesn't quite resonate with me, from a legal standpoint.

While it's true that commissions can decrease in a competitive market, it's essential to consider the unique costs and investments associated with operating app marketplaces like Apple's App Store and Google's Play Store. These platforms require ongoing maintenance, security, and customer support, which are funded, in part, by the commission fees.

...and hardware sales. They could cover costs from hardware sales alone. The existence of third-party apps is the biggest boon to sales of hardware devices.

 

[iJest]

I can't disagree either.

Considering how they've maintained their commission rates from the get-go (even decreasing them for at many developers, however big or small their combined market share may be), the argument (to quote from the article) that "charges are unfair in their own right" doesn't quite resonate with me, from a legal standpoint.

You make a valid point. Apple's consistent commission rates since the beginning, along with occasional decreases for some developers, do present a compelling argument from a legal perspective. This stability in their approach adds to the complexity of the issue and could influence how regulatory bodies assess the fairness of their charges.

...and hardware sales. They could cover costs from hardware sales alone. The existence of third-party apps is the biggest boon to sales of hardware devices.

You're right. I didn't think about hardware sales. Apple's hardware sales significantly contribute to covering operational costs, and the existence of a vibrant ecosystem of third-party apps undoubtedly enhances the appeal and sales of their devices. The synergy between hardware and the App Store is a crucial factor in Apple's success and further supports the sustainability of their commission rates. The sales of the iPhone accounts for over 50% of Apple's total revenue for the company, which is insane.

 

[BaldiMac]

As long as you don't state the share of transactions and revenue that these 2% of developers account for, you're being disingenuous.

Again, there's nothing disingenuous about it. You're justing trying to change the topic. I'd guess that the top 2% of developers by App Store revenue make 95% of App Store Revenue from numbers I have seen in the past.

That doesn't change the fact that the 30% only applies to less than 2% of developers. Nor does it make that fact disingenuous.

 

[senttoschool]

Try telling that the the Apple users here. They won't have that.

Ok, then that means Apple users don't have a problem with UK Appstore fees being 15-30% for UK developers. If it truly bothered them, Apple users will switch.

 

[urbanman2004]

Most if not all available app platforms charge a 30% fee to devs for selling their app in the respective platform's store which has become industry standard, and it seems to me that the UK is intentionally targeting Apple in the guise of "antitrust" in an attempt to fine Apple as a grift. That's probably the easiest transfer of wealth w/o having to lift a finger. Lol...

 

[AppliedMicro]

I'd guess that the top 2% of developers by App Store revenue make 95% of App Store Revenue from numbers I have seen in the past.

Without being able to provide other, better numbers, I find that very plausible.

That doesn't change the fact that the 30% only applies to less than 2% of developers. Nor does it make that fact disingenuous.

It doesn't change the fact.
But it makes the choice of fact presented disingenuous.

We're talking about App Store fees and the lawsuit alleges that they're unfair. The fact that a large number (probably even a majority) of developers of free apps pay no fees at all (save for the flat $99 developer subscription) only underscores the point that Apple's fees are unfair.

To rephrase your own statement:

They're just the tools to provoke sympathy. This issue is about billion dollar corporations trying to take a bite out of trillion dollar corporations

The "less than 2%" figure is just a tool to provoke antipathy against bigger, successful developers of iOS apps.

Here's the thing: The fact that only 2% of developers pay a higher rate doesn't make that rate fair or unfair.

UK developers fees ARE 15-30%, with the overwhelming majority being 15%.

If 95% of App Store revenue is made by the top 2% of developers (as BaldiMac suggests), the overwhelming majority of developer fees is subject to 30% commission - not 15%.

You're now wanting to focus on sales revenue? What does that have to do with anything? What does that have to do with the lawsuit? That 2% of developers, the most successful developers, and likely heavily weighted to big business, are paying 30% is somehow harmful to these developers?

The higher the sales revenue, the bigger the financial impact on consumers.

What does "big business" have to do with it?
Just assuming that Apple's rate are anticompetitive and illegal.
Why should "big business" have less of a right to pay competitive rate than small businesses?
Why should successful businesses have less of a right to pay competitive rates than less successful ones?

I mean, I'm hearing the complaint that "they're just going after Apple cause they're so successful and have such deep pocket" all the time. Just as the argument that "Apple should be able to demand the rates they want, just as any other less successful business".

 

[AppliedMicro]

We were talking about developer fees, the primary issue raised in the lawsuit that spawned this thread.

Exactly.

That is why the "98%" figure...

In fact, most of the discussion here and elsewhere keep quoting the 30% figure. That is radically misleading, since about 98% of developers qualify for the 15% rate

...is "radically misleading, since about...

95% of apps in the app store are free.

When we're talking about developers fees, the primary issue raised in the lawsuit that spawned this thread, quoting and basing your argument on figures about (mostly) non-fee paying developers (of free apps) is misleading.

 

[AppliedMicro]

Most if not all available app platforms charge a 30% fee to devs for selling their app in the respective platform's store which has become industry standard

This points to fees being not competitively determined.

it seems to me that the UK is intentionally targeting Apple

"Sean Ennis, a professor of competition policy at the University of East Anglia (...) is bringing the class action on behalf of over 1,500 U.K.-based developers." (Techcrunch, linked in the Macrumors article)

👉 It doesn't seem that "the U.K." (as in their government) is targeting Apple.

 

[1129846]

They do have a choice. They can develop for Windows, Android, Linux, web, Playstation, Xbox, Samsung App Store, Nintendo Switch, etc. The terms were clear when they first signed up to develop for iOS - pay 30% for digital goods. They signed up knowing this term.

It's like suing Walmart, America's largest retailer, because you don't want to continue to pay the fee to have your products in Walmart stores. If you don't like Walmart's fees, then put your products into Kroger, Albertson, Target, Amazon, etc.

There is a differences.

You have to think of iOS as a single town/city. Right now in that city their is only one choice. Walmart and Target can exist in the same town and have users regularly crossing both. People don't have 2 phones. They have one and it is either android or IOS for the most part. The other one might as well be in a different country. You can only work in one.

It is more like a single company owning all the stores in the town. Then the choice is not the same.

 

[OneBar]

There is a differences.

You have to think of iOS as a single town/city. Right now in that city their is only one choice. Walmart and Target can exist in the same town and have users regularly crossing both. People don't have 2 phones. They have one and it is either android or IOS for the most part. The other one might as well be in a different country. You can only work in one.

It is more like a single company owning all the stores in the town. Then the choice is not the same.

I can sell my iPhone and buy an Android at any time. The majority of the apps I use have direct Android equivalents. There aren't all that many apps that are iOS only anymore. Most devs are making for both OSs.

 

[1129846]

I can sell my iPhone and buy an Android at any time. The majority of the apps I use have direct Android equivalents. There aren't all that many apps that are iOS only anymore. Most devs are making for both OSs.

That is the same argument as you can always just sell your house and move. Not really a valid argument.

Also most devs do not make things for both OSs. Companies make things for both OS but very few of the devs are truly working on both platforms. Most work on one or the other. There is an insane amount of specialized knowledge and platform specific. You might have some that dable on both sides but they really are only going to be truly good at one of them.

 

[OneBar]

That is the same argument as you can always just sell your house and move. Not really a valid argument.

Also most devs do not make things for both OSs. Companies make things for both OS but very few of the devs are truly working on both platforms. Most work on one or the other. There is an insane amount of specialized knowledge and platform specific. You might have some that dable on both sides but they really are only going to be truly good at one of them.

No it would be the same as canceling your Sam's membership for a CostCo membership. My home doesn't determine what social or financial interaction I have.

All the devs I know dual develop. They build an app and then they compile it for iOS or Android.

 

[AppliedMicro]

Selling your phone is the same as selling your house and moving?

It is very similar and a fitting analogy, yes.

Very few users would ditch a smartphone overnight that they've grown accustomed to and invested in the ecosystem and spend hundreds of dollars to switch from iOS to Android (or vice versa) spontaneously, just for a particular app. They'd rather look an alternative app that's available on the platform they have chosen.

iPhone user discovers interesting app today that's only available for Android.
Then goes to purchase Android phone tomorrow.
Switches platforms, downloads and purchases that app?
👉 Come on, that's not happening (often) in the real world.

 

[I7guy]

It is very similar and a fitting analogy, yes.

Very few users would ditch a smartphone overnight that they've grown accustomed to and invested in the ecosystem and spend hundreds of dollars to switch from iOS to Android (or vice versa) spontaneously, just for a particular app. They'd rather look an alternative app that's available on the platform they have chosen.

iPhone user discovers interesting app today that's only available for Android.
Then goes to purchase Android phone tomorrow.
Switches platforms, downloads and purchases that app?
👉 Come on, that's not happening (often) in the real world.

People claim they ditch the iPhone here in macrumors for various reasons. We don’t know if that scales up or not to millions and millions.