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

[Sophisticatednut]

No...you can't just go to Costco. Costco chooses you. You don't choose them. Want to sell in Costco? It's entirely their choice, not yours.

And Costco and Walmart attract different types of customers, with some crossover, sure. But they are not exactly the same.

It shows I have no clue what difference there is between Costco and Walmart.

Take grocery store A and grocery store B

This comment of yours reveals much of the misunderstanding of markets that you and others have. Walmart and Costco are entirely closed systems.

Well we don’t have that here

They choose who they carry. They choose every item in their stores. You either pay their fee, once they accept you, or you don't sell there.

Same with Apple, you must pass their review process.

This mythology of "I have the right to sell my product in the store of any business, and the right to tell them what fees I will or won't pay" simply exists nowhere.

no, that’s completely upside down of what I or anyone have said.

I have the right to do business with who ever I want and sell my product through whoever that wants to do it. If I want to sell my über Bread fryer 9.000, or Paint dryer the game in ICA, Amazon, CDON dot com, Mediamark, Elon etc etc I’m free to do that.

microsoft, Apple, Toyota etc can’t tell me or anyone where I sell my products to. And actively preventing this is unethical and illegal as gate keeping for physical goods and I see no reason why digital goods should be any different.

 

[kognos]

If Apple wanted to really be anti-competitive, they'd lower their developer fees to 5% (losing money to do so) and really drive the market crazy. Everyone else might then be forced to lower their prices as well, meaning that everyone would be losing money. Apps would then be a loss-leader for Apple, and it would be a race to the bottom to see which companies can survive longest by losing money. A monopoly would likely have the most power to lose more money than the others and still survive.

Think about Amazon. I think of any of the large companies, they might most easily be seen as a monopoly. But, what do they do with that power? Do they raise prices? NO. They maintain their monopoly by lowering prices, making it nearly impossible for other online retailers to compete.

Apple would be contributing to a more competitive market by raising its fees, thus creating more room in the market for competitors to compete on price.

That's what's silly about most of this discussion. There's just so little rational basis for the arguments being made about Apple being anti-competitive.

I think you're on the right track but understand that they are inherently anti-competitive within their own market.

Hear me out, and this is where it gets cyclical.

If I were to say "The Apple App store is 100% anti-competitive because that's the only place you can get apps" people say "well you can buy android!" -- however that's not related, it's changing that market -- the market where you get apps, not the market where you get devices.

There's no getting around the point that apple controls 100% of what's sold and placed within Apple devices. So the next arguing point is that "well it's their hardware, why can't they??" That's where the legal argument is. If Android didn't exist, and apple had 100% of the market, you'd see this point. If you could only get your food from one store ever, it's the same thing. It's anti-competitive when you set the prices on your store and there's no choice in vendor within that market. Apple has already been hurt by disallowing alternatives, and that's where this comes into play. There are no alternatives on purchases, on store, etc.

No one has an issue with the markup from Android. Why? There are alternatives within that ecosystem that developers can utilize. All those stores have alternatives. No one has an issue wth markup from your local grocery store because both the farmers and the customers have choices. Apple does not provide any choice once you buy the hardware. If that's the only choice that matters to you, then great. However, that shouldn't be the only one.

The market does not have to be the hardware alone. The app store itself is the market. It's unfair to argue against that point by saying "your choice was before you entered the market -- the hardware -- you had a choice there". In good faith, you can't back that truck up once you buy the hardware. The software developer also can't compel you to buy one or the other, and they'll have to only develop for the app store or lose market share, that is lock-in.

 

[MastersoftMobile]

I'm a UK developer and I just want the App Store to play fair. It acts like it is rigged. Here is my app, below one abandoned 7 years ago. This is despite me paying apple £1000s for Search Ads for the term "chess".
The % is fair if and only if the store is fair. Right now most indie developers are paying for a store placement that is near impossible to find.

 

[Sophisticatednut]

And you can develop the exact same App for Android and sell it on your own terms. You can cross compile for both platforms. You have options. No one is forcing you to be App Store only, developers just want access to Apple's large customer base for less money or in some cses for for free with subscriptions.

That’s the thing, it’s not the same app. And most importantly, Apple doesn’t own their customer base. People speak like it’s apples property when it isn’t

it will be interesting to see how this plays out. I doubt any store, beyond a few major developers such as Epic or streamers such as Spotify, will reach the breadth and depth of iOS users that Apple has, so even if competing stores are allowed Apple will still charge it's cut and let developers chose to be on it or a competitor or both.

That would be the best.

Allowing competing stores would mean Apple is no longer the only gateway and so the while "they control all access" arguments go away, to Apple's ultimate benefit. Subscription only apps that don't allow IAPs or charge more than the non Appl Store price could be banned or face additional fees such as per d/l.

Well isn’t that the point?
And the last part is illegal and have not been in the agreement for years.

 

[webkit]

Easily? Name 10 companies that have been declared "duopolies" in violation of established law in the past 20 years?

A variety of duopoly companies have had antitrust/anticompetitive charges brought against them. These include Coca-Cola and/or Pepsi, Visa and/or Mastercard, Airbus and/or Boeing, Apple and/or Google plus others including some from more than 20 years ago. The legal issue is not necessarily just about being part of a duopoly but rather that PLUS anticompetitive behavior one or both may be alleged to be engaging in.

Sometimes things are settled out of court or the “violator” changes its business practices to avoid further legal proceedings and penalties. Like other laws, antitrust regulations can often be about trying to keep dominant companies in check.

 

[webkit]

It does seem like apple has a natural monopoly on the IPhone iOS and the App Store. At least in the US but we will see about the UK.

I wouldn't consider Apple a "natural monopoly" and if you feel Honda is one (based on your previous post) then I think your definition of a natural monopoly is off.

In any case, being a monopoly is not necessarily itself illegal. The legal issues for dominant companies potentially come in regarding unfair anticompetitive behavior and it's largely up to the court(s) to decide if the company meets the "dominance" criteria (monopoly, duopoly, etc.) AND the behavior violates laws/regulations.

 

[jlc1978]

Now that we have hundreds of years of market economies to analyze, it should be understand that what a monopoly power will do is to LOWER prices, thus making it nearly impossible for anyone to enter the market and compete on price.

Careful bring facts into an internet argument.

Case in point-Standard Oil, the poster child for big bad monopolies, reduced the price of kerosene to way below the price before they dominated the market. As you point out, that kept competitors out and the consumer benefited from lower prices. Prices went back up after the breakup.

 

[bluecoast]

You said they're a monopoly, and that Devs are at the mercy of Apple.

So, you think Apple operates outside of market forces. If so, they could charge whatever they want, right? So why don't they charge 40% according to your analysis of Apple and Developers?

They obviously picked 30% as a tax that they thought devs would reasonably bear, initially.

We are just people on a forum but there’s obviously a reason why many gvts across the world have antitrust probes open vs Apple.

 

[Wildkraut]

Sideloading isn't the only option on android. There are multiple stores available across all the devices. The Google Play store is not the only store. So if you're going to try to spin this as if it's "valid store" vs "hacky sideload" that's not valid.

And yes, I don't disagree that sideloading is bad. That's not the argument. On IOS, there is one store. All apps on IOS only go through one store. That's it. Full stop. If you want an app on IOS you go through the Apple app store and pay their fee.

Android doesn't have to allow sideloading for any reason whatsoever. There's nothing short of the monopolistic practices that creates that prevents them from doing the same as Apple.

In the EU there is now the Digital Market Act to prevent Google doing the same, and will also prevent Apple from doing this, soon.

Win, win! 😀

 

[AppliedMicro]

You have no "rights" to tell any store they must carry your product at your preferred fee.

The "Rights" crowd baffles me.

If there's a duopoly of two chains of retail stores controlling 99% of your local, regional and national market, the right to sell through them will be introduced and/or their business conduct will be regulated.

That's what's happening in the EU, what's being investigated in the U.K. and has been proposed in the U.S.

 

[Sebalto]

Lol, its not as if Apple has tens of thousands of people working every day to improve said ecosystem.

Exactly. If it's so easy why isn't everyone doing it.

How dare they be so successful.

 

[AppliedMicro]

The number could be 50%, much like a lot of retail is, and the defense of it wouldn't be the number, but the market forces that either allow or curtail that number.

It isn't set by market forces. Retail commissions don't just stay the same rate over fifteen years and exactly the same rate as their duopoly counterpart for the largest suppliers. That is indication (I'm not saying proof on its own) that they aren't set competitively.

I run 13 Airbnb's. What is a moral percentage above my costs that I can charge for my homes?

Anything, as long as you - or a duopoly "partner" don't control a substantial share of the market to be able to charge supracompetitive rent.

So why don't they charge 40% according to your analysis of Apple and Developers?

Because they are anticipating legislation and regulation that they want to avoid.
Unilaterally raising the rate to 40% (by 25%) would give competition authorities and legislators a slam dunk to regulate them.

 

[AppliedMicro]

This comment of yours reveals much of the misunderstanding of markets that you and others have. Walmart and Costco are entirely closed systems. They choose who they carry. They choose every item in their stores. You either pay their fee, once they accept you, or you don't sell there.

Here's what you either don't understand or fail to acknowledge about digital application markets:

When you can't sell your physical products through Walmart and Costco (because they haven't "chosen" you), you can literally set up a small primitive shack at the roadside and sell your competing products to the same 100% of people in town. You provide a competing product at a competitive price, and there's competition.

When Apple doesn't choose you, they'll literally prevent you from selling to all of their customers - cause your application will not be signed to run on their platform. It's not as if Walmart or Costco prevented you from direct sales, if they don't carry your product.

And any retail store customer can easily switch between retailers. You may have been the most die-hard Walmart customers for 20 years and may have bought all of your stuff from Walmart over that time. Yet if Costco - or someone else in his shack by the roadside - sell even just a single product you like better, you can just drive over and get it there. And it costs you basically nothing to switch (you still pay for the product, of course).

 

[msackey]

If it's so insignificant, are you willing to do it yourself for free? Apple is not a charity.

Developers understand the arrangement. Any good business writes a business plan based on known costs. If the business is not profitable based on the 15-30% commission the developer should not develop the app.

I'm not saying it's insignificant. I'm saying they're overcharging.

Apple is not a charity and developers are not a charity either. Apple's App Store depends on the developers. 15 to 30% of the cost is a lot to be asking for. Obviously I'm not the only one thinking that because some regulators are thinking the same too.

 

[Ethosik]

I'm not saying it's insignificant. I'm saying they're overcharging.

Apple is not a charity and developers are not a charity either. Apple's App Store depends on the developers. 15 to 30% of the cost is a lot to be asking for. Obviously I'm not the only one thinking that because some regulators are thinking the same too.

No it’s not a lot to ask. Apple profit margins are not that high. In fact even lower by almost 50% from Google or NVIDIA. So that means they feed their earnings back into servers, employees, etc that help run the App Store.

 

[ender78]

I run 13 Airbnb's. What is a moral percentage above my costs that I can charge for my homes?

Great question, who should decide? Would you be OK with being limited to a 3% profit? Should the end user pay 6% above your costs assuming that AirBnb gets 3% and you get 3%?

 

[I7guy]

I wouldn't consider Apple a "natural monopoly" and if you feel Honda is one (based on your previous post) then I think your definition of a natural monopoly is off.

In any case, being a monopoly is not necessarily itself illegal. The legal issues for dominant companies potentially come in regarding unfair anticompetitive behavior and it's largely up to the court(s) to decide if the company meets the "dominance" criteria (monopoly, duopoly, etc.) AND the behavior violates laws/regulations.

So far in the US apple has not been found if anti-competitive behavior in the App Store. Now that doesn’t mean laws cannot be changed, but that could be a ways out, if at any time.

 

[AppliedMicro]

Apple profit margins are not that high. In fact even lower by almost 50% from Google or NVIDIA

"Apple calculated a fully burdened operating margin for the App Store as part of its normal business operations and that this calculation was largely consistent with Epic’s expert witness’s estimates of operating margins to be over 75% for both fiscal years 2018 and 2019"

https://assets.publishing.service.g...39f799fed/Appendix_C_-_financial_analysis.pdf

This is much higher than the (albeit overall) operating margins of 26% for Alphabet or 15% for NVIDIA.

 

[I7guy]

[…]

When Apple doesn't choose you, they'll literally prevent you from selling to all of their customers - cause your application will not be signed to run on their platform. It's not as if Walmart or Costco prevented you from direct sales, if they don't carry your product.

[…]

So by extension now you want the government to determine what customers and what jobs retail business have to accept? (While there are laws surrounding discrimination, that not what I’m referring to) apple should not be forced to accept porn apps for example. I guess that’s one difference in the thinking of those across the pond to the US.

 

[AppliedMicro]

They absolutely own their customer base

...so much, that their customers can't buy iOS apps anywhere else.

There's a feasible consumer alternative to the Mall and any business can easily set up one.
That's not true for app ecosystems.

So by extension now you want the government to determine what customers and what jobs retail business have to accept?

Given how important these mobile platforms have become, and how much consumers and other businesses are relying on them to conduct their own business (and sell their products), yes, I absolutely want the government to regulate access to them.

It's not as if Apple wouldn't make enough money from hardware sales alone or would need to depend on these software sales. I'm not against Apple running their own storefront and charge commission on it. But consumers shouldn't be tied to and locked into it.

I'm very happy with the economics of the macOS ecosystem where there is competition between Apple's App Store and third-party developers selling their apps directly. And I've been using both ways to purchase software, depending on the most attractive (competitive) offer.

👉 iOS and Android have outgrown the state where they can or should be left at the sole whim (and commission setting) of their developers.

 

[AppliedMicro]

In the end, there are simply different philosophies at play here. There are those who think the market is best able to regulate these issues, and those who think Governments are best able to regulate these issues

I'm absolutely for competitive markets in the distribution of mobile apps.

It's just that such competition simply does not exist on iOS today. The main reason for that being that Apple has created a platform that 1. isn't substitutable or replacable and 2. that they're holding all the signing keys for, preventing third-apps from running on it.

Even if you did develop your own mobile OS to rival and compete with iOS (as Microsoft arguably did with Windows phone) overnight, nobody would use it - cause there are no apps for it.

 

[AppliedMicro]

Because Government is so adept at running businesses?

No. It mostly isn't. The more technologically advanced it gets, the less it (often) seems adept at running it

Government should only enable other businesses (the thousands of third-party developers) to run their business as they see fit and sell through the storefronts they want to (while being able to have their apps run on the, as a matter of fact, two dominating OS platforms).

 

[Glideslope]

Well this is a creative way for GB to raise revenue for more Storm Shadows.

 

[AppliedMicro]

Should Government therefore make it possible for third-party app stores to sell Apps that break iPhone functionality?

Technically even a firewall application "breaks" iPhone functionality.
Namely the functionality for an(y) app to access the internet.
I would love to break that functionality for certain apps, i.e. restrict their network access.

Should Government allow third-party app stores to sell apps that bypass Apples security schemes?

So should government allow third parties to sell and carry products that have been proven to be unsafe and hurt or kill tens of thousands of Americans every year? Well, the American constitution does (implicitly) guarantee that.

But to answer the question: No, why? Just as they shouldn't allow unsafe cars on the roads (or at least not mandate them to be sold). Apple should just apply a non-discriminatory way of safeguarding their operating systems.

Incidentally, these discussions seem to often run different lines of thinking between Americans and others (mostly Europeans, I guess). With Americans leaning much more towards the "free enterprise! Apple created the platform, they're free to exploit it as they want" school of thought. I wouldn't be surprised if there's a substantial overlap between people advocating for the the right to bear arms - and at the same time arguing for Apple to be allowed to be a benevolent dictator in order to ensure "security".

Above you stated that Government should be able to dictate to Apple what commissions they can and can't charge

No, I'm all for Apple charging the commission rate they want.

I'm just for enabling third-party developers to distribute through other means (storefronts) than Apple.
That way, commission rates will be determined in a competitive market.

In fact, I wouldn't even be surprised if the great majority of iOS users keep using Apple's App Store exclusively for their App downloads. But if there's another way, Apple will have to set competitive commission rates (though they'll likely be able to charge a premium over others).

 

[AppliedMicro]

So, for example...say the FBI wants Apple to build backdoors into the phones to allow police agencies to open them when they want. Should Government be able to dictate that to Apple?

It should not.
Again: it should enable competition, not backdoors in software.

There arguably is a risk of governments using mandated sideloading for exploits to enable such government access.
Then again, they're just seeking that access anyway.