Apple to Collect 27% Commission on Third-Party App Payment Systems in the Netherlands

[Sophisticatednut]

It’s not about payment solutions!
Apple’s commission is about profiting from the platform they built, iOS. What they have revealed now is that 3% of that cut is for payment processing- competitive with other offerings. 27% is not. If they have to offer alternative stores, they will subtract the cost of operating the App Store from the 27%.

Apple intends to profit from iOS, and those who develop for it using Apple’s infrastructure. Regulators may ban Apple from mandating that devs use Apple’s infrastructure (such as IAP or the App Store) but Apple will still enact a charge for whatever services it is allowed to provide. Regulators will have to fight Apple over each individual part of the 30%, and demand Apple allow alternatives for each bit. And if there is no good alternative (such as Xcode, notarization, etc.) then they will need to justify why Apple, singled out from all other companies, is not allowed to profit from the platform it built.

Apple is already allowed to profit from their platform. A developer offering InappPurchase doesn’t use any apple services= apple lose the right to a commission.

Xcode is provided for free.

Uploaded to AppStore costs 99$\year
Sale on store costs 15-30% cut of sales price

Using apples IAP connected to apples iTunes billing system costs 15-30% of sales price

APIs aren’t covered under copyright.
Developers aren’t using any IP that apple owns. Essentially undermining apple’s claim to revenue split, royalties(you can’t have a royalty on nothing)

And if apple continue it could in the worst case end up being forced to separate its business from the AppStore as separate businesses and use the The Digital Markets Act

 

[draugminaion]

Probably the EU Digital Markets Act.
Note how it does not require covered operators to be a "monopoly":

"The Digital Markets Act (DMA) establishes a set of narrowly defined objective criteria for qualifying a large online platform as a so-called “gatekeeper”. This allows the DMA to remain well targeted to the problem that it aims to tackle as regards large, systemic online platforms.

These criteria will be met if a company:
- has a strong economic position, significant impact on the internal market and is active in multiple EU countries
- has a strong intermediation position, meaning that it links a large user base to a large number of businesses
- has (or is about to have) an entrenched and durable position in the market, meaning that it is stable over time"

Note how they're not requiring a "monopoly" but only a "strong" economic and intermediary position (which Apple undoubtedly has).

- Innovators and technology start-ups will have new opportunities to compete and innovate in the online platform environment without having to comply with unfair terms and conditions limiting their development.
- Consumers will have more and better services to choose from, more opportunities to switch their provider if they wish so, direct access to services, and fairer prices.
- Gatekeepers will keep all opportunities to innovate and offer new services. They will simply not be allowed to use unfair practices towards the business users and customers that depend on them to gain an undue advantage.

I have little doubt that a 27% percent commission on "aftermarket" sales Apple aren't even handling themselves will be deemed "unfair"

"Gatekeeper platforms will have to:
- allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations
- allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform"

"What will be the consequences of non-compliance?
- Fines of up to 10% of the company’s total worldwide annual turnover
- Periodic penalty payments of up to 5% of the average daily turnover"

Going to the actual proposal of the act:

"A gatekeeper shall
- allow business users to offer the same products or services to end users through third party online intermediation services at prices or conditions that are different from those offered through the online intermediation services of the gatekeeper;
- allow business users to promote offers to end users acquired via the core platform service, and to conclude contracts with these end users regardless of whether for that purpose they use the core platform services of the gatekeeper or not, and allow end users to access and use, through the core platform services of the gatekeeper, content, subscriptions, features or other items by using the software application of a business user, where these items have been acquired by the end users from the relevant business user without using the core platform services of the gatekeeper;
(...)
- allow the installation and effective use of third party software applications or software application stores using, or interoperating with, operating systems of that gatekeeper and allow these software applications or software application stores to be accessed by means other than the core platform services of that gatekeeper."

And yes, it also has an anti-circumvention clause in place.

All pretty vague stuff that will need years to resolve.
Apple can argue that they already allow all of that.
Yes, doing it without Apple is a hassle, but that is because Apple did the work to make something better.

 

[draugminaion]

Apple is already allowed to profit from their platform. A developer offering InappPurchase doesn’t use any apple services= apple lose the right to a commission.

Xcode is provided for free.

Uploaded to AppStore costs 99$\year
Sale on store costs 15-30% cut of sales price

Using apples IAP connected to apples iTunes billing system costs 15-30% of sales price

APIs aren’t covered under copyright.
Developers aren’t using any IP that apple owns. Essentially undermining apple’s claim to revenue split, royalties(you can’t have a royalty on nothing)

And if apple continue it could in the worst case end up being forced to separate its business from the AppStore as separate businesses and use the The Digital Markets Act

Developers are using a lot of IP that Apple owns. APIs not being covered by copyright means that the *interface* that the application program uses to access functionality can be copied. Someone that copies the APIs will have to reimplement the functionality behind it for themselves.
That’s a lot of work and and invitation to legal challenges.
Google did it for Java for Android, it was messy.

 

[AppliedMicro]

All pretty vague stuff that will need years to resolve.

No, that's just the legalese nature of the text.

If you read the preamble, dig into the proceedings, or just observe Tim Cook's own reaction, it's all very clearly targeted at (among a few others) companies such as Apple.

Apple can argue that they already allow all of that.

They can try to argue, but their arguments will swiftly be ripped apart in courts.
The DMA is legislation tailor-made to force them to do what they aren't doing today.

May it take a while, while Apples tries to come up with ever so clever new schemes to counteract or pad their bottom line? Sure. At worst, cause the wheels turn slowly. But I doubt even that.

Someone that copies the APIs will have to reimplement the functionality behind it for themselves.

In-app purchases (as an example) have been available in shareware applications for literally decades of years. So have online payment processing systems for at least two decades. It's really not that hard to implement functionality for some kind of in-app purchases.

 

[draugminaion]

No. That's just the legalese wording.

If you read the preamble, dig into the proceedings, or just observe Tim Cook's own reaction, it's all very clearly targeted at (among a few others) companies such as Apple.

They can try to argue, but their arguments will swiftly be ripped apart in courts.

The DMA is legislation tailor-made to force them to do what they aren't doing today.

In-app purchases (as an example) have been available in shareware applications for literally decades of years. So have online payment processing systems for at least two decades. It's really not that hard to implement functionality for some kind of in-app purchases.

I very much doubt the "swiftly". Courts are not that tech savvy.
In app purchases in shareware is fine for nerds who know what they are doing.
Payment processing is a tiny part of the problem.
Shareware never built a platform that people trust with their bank passwords and the locations of their children.

Apple tries to make something that is not the sh*tshow that the PC ecosystem was for non-nerds.
They try to make something better.
They will try to argue that their product, what their customers are paying them for, is better than what we had for PCs and better than Android. Are regulators really going to tell them that what needs to be done to make that happen is illegal, or needs to be provided at cost or maybe free?
How much extra work can regulators require a company to do for free to make things easier for their competitors?

 

[AppliedMicro]

I very much doubt the "swiftly". Courts are not that tech savvy.

They don't need to be. It will not be a case where they have to apply broadly defined, decades-old competition law to an emerging technology and new, different economy. It'd be a slam-dunk case to enforce precisely what the was designed for.

That is, if Apple even risk non-compliance with the law.

Apple tries to make something that is not the sh*tshow that the PC ecosystem was for non-nerds.
They try to make something better.

That walled garden of pure ideology of theirs —where each user may bloom, secure from the pests purveying malicious thoughts?

They will try to argue that their product, what their customers are paying them for, is better than what we had for PCs and better than Android. Are regulators really going to tell them that what needs to be done to make that happen is illegal, or needs to be provided at cost or maybe free?

There is no argument to be made.
A law is a law - and in this case it was and is purposely designed to "break up“ business models such as theirs.

 

[Maximara]

It’s quite insane how different it can be with USA and EU. Apple lost on all accounts because they legitimately purchased every copy they sold

“Once a copyright owner consents to the sale of particular copies of a work, the owner may not thereafter exercise distribution rights with respect to those copies. See, e.g., Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350-51 (1908) (recognizing more than 100 years ago the concept of first sale and the limitations imposed upon a copyright owner in light thereof). Psystar acquired lawful copies of the Mac OS from Apple; those copies were lawfully acquired from authorized distributors including some directly from Apple; Psystar paid good and valuable consideration for those copies; Psystar disposed of those lawfully acquired copies to third-parties.” - Psystar Tells Court, “We bought the software!”

"Psystar infringed Apple's exclusive right to create derivative works of Mac OS X. It did this by replacing original files in Mac OS X with unauthorized software files. Specifically, it made three modifications: (1) replacing the Mac OS X bootloader with a different bootloader to enable an unauthorized copy of Mac OS X to run on Psystar's computers; (2) disabling and removing Apple kernel extension files; and (3) adding non-Apple kernel extensions. These modifications enabled Mac OS X to run on a non-Apple computer. It is undisputed that Psystar made these modifications." - Ruling for Apple against Psystar means clone-makers have no legal recourse

Psystar lost on First Sale doctrine because it violated the DMCA in altering those copies something that is required to make a hackintosh work. This is why I say DMCA and EUCD must be substantially different.

 

[UBS28]

Oh boy, still 27%, this will not land well with anti-monopolists and legislators

There is no monopoly position. Just like with Netflix, people can sign-up threw the website and circumvent the 30% commission.

But I bet those Dutch dating apps charge the same price on their website like they do on the App Store. If the website was 30% cheaper, then most Dutch people would switch to the website.

 

[Maximara]

I very much doubt the "swiftly". Courts are not that tech savvy.
In app purchases in shareware is fine for nerds who know what they are doing.
Payment processing is a tiny part of the problem.
Shareware never built a platform that people trust with their bank passwords and the locations of their children.

Shareware failed for a lot of the same reasons demos failed.

 

[Maximara]

Apple is already allowed to profit from their platform. A developer offering InappPurchase doesn’t use any apple services= apple lose the right to a commission.

Xcode is provided for free.

Xcode requires a Mac to run so it is "free" in the way Hypercard back in the day was "free".

 

[UBS28]

The entire business model of consoles will cease to exist in the Netherlands then. Because the Xbox Series X is sold at a loss and Microsoft is only making money by the commission of games and in-app purchases.

Apple (and other companies such as Sony and Microsoft) should pull out of the Netherlands, because else other countries will get the same crazy ideas.

 

[LV426]

Other than banks, financial institutions and other regulated industries, does any other business have it's fees and commissions regulated.

Yes, in the UK energy companies have their prices capped.

 

[LV426]

It’s closer to 1% in Europe due to the EU interchange fee cap.

I believe Visa and Mastercard recently upped it to 1.5%, which antagonised Amazon, who threatened to block Visa payments for this reason.

 

[I7guy]

Yes, in the UK energy companies have their prices capped.

Yes…energy is a heavily regulated industry here as well.

 

[I7guy]

[…]



Some components in the code may be … like some components of the iPhone are Qualcomms, LGs … IPs. I see no problem with that do you?

But Qualcomm is not the lP owner of the iPhone for instance. The same for third party Apps, they own no IP.

Hey but if you would like a world where that would be the case, you would need to include yourself as Apple IP first.

To be able to build an iPhone all ip has been paid to their respective patent holders.

 

[LV426]

Quick question... does the Netherland's 21% VAT affect this in any way? Good or bad?

I'm not familiar with VAT.

VAT is the European equivalent of Sales Tax in the US.

 

[I7guy]

They don't need to be. It will not be a case where they have to apply broadly defined, decades-old competition law to an emerging technology and new, different economy. It'd be a slam-dunk case to enforce precisely what the was designed for.

That is, if Apple even risk non-compliance with the law.

That walled garden of pure ideology of theirs —where each user may bloom, secure from the pests purveying malicious thoughts?

There is no argument to be made.
A law is a law - and in this case it was and is purposely designed to "break up“ business models such as theirs.

Nothing about this is a slam-dunk and probably will be tied up in the courts for years.

 

[AppliedMicro]

The entire business model of consoles will cease to exist in the Netherlands then. Because the Xbox Series X is sold at a loss and Microsoft is only making money by the commission of games and in-app purchases.

Not necessarily. It depends on the applicable definition of online intermediation services.

Apple (and other companies such as Sony and Microsoft) should pull out of the Netherlands, because else other countries will get the same crazy ideas.

Apple is going to pull out of the entire European Union if the DMA comes to pass.

Nothing about this is a slam-dunk and probably will be tied up in the courts for years.

With current legislation it can drag on in the courts for years, depending on definitions of monopolist power etc.

That’s the reason for the DMA: to make it more clear-cut what’s covered and what’s prohibited.

If and once the DMA comes to pass, it will be a slam-dunk. If you’re in doubt about that, we agree to disagree

 

[I7guy]

Not necessarily. It depends on the applicable definition of online intermediation services.

Apple is going to pull out of the entire European Union if the DMA comes to pass.

With current legislation it can drag on in the courts for years, depending on definitions of monopolist power etc.

That’s the reason for the DMA: to make it more clear-cut what’s covered and what’s prohibited.

If and once the DMA comes to pass, it will be a slam-dunk. If you’re in doubt about that, we agree to disagree

Unless of course the DMA is tied up on court ? The EU will get what it deserves, android.

 

[draugminaion]

They don't need to be. It will not be a case where they have to apply broadly defined, decades-old competition law to an emerging technology and new, different economy. It'd be a slam-dunk case to enforce precisely what the was designed for.

That is, if Apple even risk non-compliance with the law.

That walled garden of pure ideology of theirs —where each user may bloom, secure from the pests purveying malicious thoughts?

There is no argument to be made.
A law is a law - and in this case it was and is purposely designed to "break up“ business models such as theirs.

Then Apple will choose a different business model where they still get paid. It will be more hassle for everybody, mostly for developers, some for customers, least for Apple. It will be another example where regulators force a too successful company to make their products worse to give the competition a chance.

 

[superstrongcat]

You are real or a bot

 

[huge_apple_fangirl]

Probably the EU Digital Markets Act.

That probably is the nuclear option, but it’s going to happen regardless of Apple giving in on this.

Note how they're not requiring a "monopoly" but only a "strong" economic and intermediary position (which Apple undoubtedly has).

The act does just that - provide legal criteria to single them (and a few others) out. It doesn't mean that they aren't allowed to benefit from their platform though - they're just not allowed to "monopolise" it for digital transactions.

So now we know the reason Apple is being singled out: it’s a successful American tech company, so of course EU nationalists want to tear it down. The Biden Administration is right to lobby against this discriminatory, anti-American bill. At the same time though, I’ve long argued that if Apple doesn’t offer any concessions to regulators, nasty stuff like this could end up passing. Apple‘s malicious compliance is practically begging regulators to come down hard on them, so I do think they should seriously consider changing course.

With sideloading allowed, they basically have to do so through charging for developer tools and signing.

That‘s what I’ve suggested they would do. Basically you’ll have to pay them “royalties” to use their tools. They will collect the 30% by hook or by crook.

 

[I7guy]

That probably is the nuclear option, but it’s going to happen regardless of Apple giving in on this.

So now we know the reason Apple is being singled out: it’s a successful American tech company, so of course EU nationalists want to tear it down. The Biden Administration is right to lobby against this discriminatory, anti-American bill. At the same time though, I’ve long argued that if Apple doesn’t offer any concessions to regulators, nasty stuff like this could end up passing. Apple‘s malicious compliance is practically begging regulators to come down hard on them, so I do think they should seriously consider changing course.

That‘s what I’ve suggested they would do. Basically you’ll have to pay them “royalties” to use their tools. They will collect the 30% by hook or by crook.

Apple is correct to fight this tooth and nail. Once the genie is out if the bottle, that’s it. Government likes playing Robin Hood regardless of the collateral damage. Bills like the ACA prove this.

 

[huge_apple_fangirl]

Then Apple will choose a different business model where they still get paid. It will be more hassle for everybody, mostly for developers, some for customers, least for Apple. It will be another example where regulators force a too successful company to make their products worse to give the competition a chance.

Nah, they won’t. Apple will try every trick in the book to get the 30% cut of mobile game microtransactions (90%+ of the App Store profit), but they aren’t about to blow up the whole model and charge developers for free apps. That would destroy iOS as a platform long term, since the vast majority of apps are free. They would rather run the Store at a loss than charge for tools in such a way. They make up the margin on hardware anyway. Apple’s threat that taking away its commission will hurt small devs is an empty one. Regulators can safely call its bluff.

 

[Nuno Lopes]

To be able to build an iPhone all ip has been paid to their respective patent holders.

Yes. Don’t understand understand your remark. The Apple IP has always have been paid. Both in macOS and iOS, including devices, people buy the devices, own them, not the IP. To buy the IP you need to buy patents so on and so forth … that is not for sale.

Now your initial remark that all the apps IP on the App Store are of Apple, which is totally an erroneous assumption, neither its legal! If you wanna talk about IP ownership rights, the question is, what IP ownership rights an entity has when they absolutely cannot legally monetise it within the realm of your own properties if not through a third party entity, case in case Apple? Mostly none, 0. Not only that, it totally devalues it in favor of that third party. That is how ones gets to a 30% fee and massive profit margins: by devaluing the digital services within their software programs in favor of the value of the software program distributor.

No? From a cost point of view technically one can explain that the infrastructure required to host and stream a 5GB of a movie like say Netflix does every single second, costs orders of magnitude more than to host and facilitate the download of a 300MB file from time to time for each user. Now take that to a scale of hundreds of millions streaming activies. Yet, the second takes a mandatory slice of 30% of the end price the deal its done on Netflix App … its ridiculous. You have absolutely no idea.

Than you moved to some components that Apple supplies to third party Apps that are required to function.

This situation is fundamentally about Apps creators IP and their ability to monetize their creations the way they see fit within their properties, case in case their App, in which case Apple actually pays 0 yet it uses their products to build, enrich and tax smartphones owners access to digital services.

Look, just don’t go the moral way. You have absolutely 0 reason to complain Apples rights on their own IP. Its totally untouched.

Nowhere else’s but App Stores are charging 30% royalties for use of APIs, for payment or distribution of binaries. Referrals , yes its common to go up to 15%, but when you have absolute control over software distribution on 50% of the US smartphone devices such thing becomes immaterial in the face of it … who is referring who? Apple has little need to market anything but their App Store … all leads to digital services generated outside of the App Store will point to to an App inside their App Store. It’s logic.

Now I have been trying to push for alternative solutions to “sideloading” by introducing regulation on how sole software distributors can operate without devaluing third parties IPs in their favor … but than you come over with this IP mambo jambo.

The App Store enforced this way are in effect a gate between smartphone users and creators that devoid everyones common property rights but theirs.