U.S. Antitrust Regulators Investigating Apple's App Store Fees and Policies

[Kierkegaarden]

Apple operates a store. They take up to a 30% cut of everything sold in their store. Simple. Every retail business operates this way. Why is it any business of the government to regulate this?

The 30% is not there to cover payment transaction costs. That is ludicrous. The App Store is the interface between the developer and the user. Apple created a brilliant software distribution channel and puts out new tools every year to help the developer create better apps, and in so doing they are enabling the continued improvement of the user experience. None of this is harming the consumer.

Picture yourself as a shop owner. You sell products and mark them up as you see fit to cover your operational costs. Is this fair? You created your business, and you know what it costs to operate it. The same logic should apply to every business — no matter how large or small — that is fair.

 

[TraceyS/FL]

1. Non-App Store Subscription: 5%. Apple will handle billing and distribution, but App will be unlisted and unsearchable on the App Store. Opens from a website link only.

Let them drive their own traffic - which would lead to pay for advertising/click sites that curated apps. Which I’m not sure is a positive step, but it does cover a set of wishes I’ve heard about.

As an end user, I’m not apt to go out seeking such things, and I have no beef with the current set up beyond i suck at searching. But if it gives devs an option then go for it.

 

[dwaltwhit]

I’m a bigger apple fan than the next person, but government oversight and consumer protections are a good thing

 

[rjp1]

Remember when Apple didn't like the rates Qualcomm was charging them? Some people will defend them no matter what.

 

[TiggrToo]

Where is the bad PR from mac viruses

Sorry, when did this discussion migrate to desktops?

Whew taking mobile. Stop trying to deflect.

Android has a well deserved reputation of apps doing any damn thing they want, including stealing information.

Google have a hard enough time with the Play store without sideloaded apps being considered.

Sideloading then creates a huge unstoppable nest of pirated apps or stolen IP.

Did you ever stop to think why Apple don't have the same bad rep that Android suffers from?

 

[CWallace]

Apple operates a store. They take up to a 30% cut of everything sold in their store. Simple. Every retail business operates this way. Why is it any business of the government to regulate this?

I agree with your analogy and I am going to hazard a guess that governments are investigating because Apple is the only retail store that sells the "product" so there is no incentive to be competitive and US anti-trust law is all about competitiveness (lowest price for the consumer). Another example would be that you could only sell accessories that worked with Apple physical products through the Apple Store and Apple took a 30% cut of each sale.

I don't like the idea of side-loading apps because that compromises the inherent security of the system. Even if I never install an app outside of the App Store, I imagine there would be attack vectors from websites or such exploiting those option. But on the flip side, I don't believe 30% is "fair and reasonable" across the board (even if that is what it has been since the creation of the App Store) considering how much larger the ecosystem is and how it can be circumvented with or without Apple's tacit approval.

 

[Cosmosent]

Consider this as "an addition" to what others are already talking about:

For ANY app that AAPL has EVER recommended, AAPL should get their agreed-upon cut.

For ANY app that APPL has NEVER recommended, AAPL's cut should be ZERO !

In other words, if AAPL markets an app, they are helping the cause for that app, & should thus be compensated.

And naturally the flip-side of that should ALSO hold true !

Also, very importantly, if an app had been in the App Store for more than a year BEFORE AAPL began providing ANY "marketing" help, AAPL's cut should be ZERO for a year, starting from when they first recommended it

That last part has the potential to be a Game Changer !

 

[ghanwani]

This is a good read:

The App Store is a monopoly: Here's why the EU is correct to investigate Apple | Proton

The EU is investigating Apple’s App Store practices for antitrust violations. Here’s why we must all resist abuses by tech giants.

protonmail.com

Apple attempts to justify these fees by arguing that the App Store is no different from a mall, where companies seeking to offer their products must pay rent to the owner of the mall (in this case, Apple). This argument conveniently ignores the fact that there is just a single mall when it comes to iOS and no possibility of a competing mall to rent space from. It is not illegal for Apple to own a mall and rent space, nor is it illegal for Apple to own the only mall. What is illegal, is exploiting the fact that it owns the only mall to charge excessively high pricing which harms competitors.

This is virtually indistinguishable from a protection racket: It is a fee that developers must pay if they want to stay in business. And it is a fee which ultimately harms consumers because these fees are indirectly passed on to users, either through higher prices, or through fewer competing products in the marketplace.

 

[sw1tcher]

The 30% wouldn't be an issue if you sold more units. I don't mean that to be rude, but it sounds like you want to make more money per app. So does Apple. I don't own stock in your studio, but I do own Apple Stock. So Apple has an obligation to me to make more from your software. The terms should be just generous enough that you keep developing, but if I discovered they could of taken a 40% cut and couldn't explain why they didn't I would have followup questions.

If you're referring to fiduciary responsibility, Apple has no such obligation to you.

Corporations Don't Have to Maximize Profits - NYTimes.com

www.nytimes.com

There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”

The Hobby Lobby case dealt with a closely held company with controlling shareholders, but the Court’s statement on corporate purpose was not limited to such companies. State codes (including that of Delaware, the preeminent state for corporate law) similarly allow corporations to be formed for "any lawful business or purpose,” and the corporate charters of big public firms typically also define company purpose in these broad terms. And corporate case law describes directors as fiduciaries who owe duties not only to shareholders but also to the corporate entity itself, and instructs directors to use their powers in “the best interests of the company.”

Serving shareholders’ “best interests” is not the same thing as either maximizing profits, or maximizing shareholder value. "Shareholder value," for one thing, is a vague objective: No single “shareholder value” can exist, because different shareholders have different values. Some are long-term investors planning to hold stock for years or decades; others are short-term speculators.

Also, most investors care not only about their portfolios, but also about their jobs, their tax burdens, the products they buy and the air they breathe. Which is to say, companies that maximize profits by firing employees, avoiding taxes, selling shoddy products or polluting the environment can harm their shareholders more than helping them.

Although some Delaware cases talk about maximizing shareholder value in the long run, Delaware (like other states) applies the business judgement rule to protect directors of corporations that reduce profits and share price when directors claim this will ultimately help the corporation. In the 2011 case of Air Products, Inc v. Airgas, the business judgement rule allowed Airgas directors to refuse to sell the company, even though a sale would have given Airgas' shareholders a hefty profit.

So, where did the mistaken idea that directors must maximize shareholder value come from? The notion is especially popular among economists unburdened by knowledge of corporate law. But it has also been embraced by increasingly powerful activist hedge funds that profit from harassing boards into adopting strategies that raise share price in the short term, and by corporate executives driven by “pay for performance” schemes that tie their compensation to each year’s shareholder returns.

In other words, it is activist hedge funds and modern executive compensation practices — not corporate law — that drive so many of today’s public companies to myopically focus on short-term earnings; cut back on investment and innovation; mistreat their employees, customers and communities; and indulge in reckless, irresponsible and environmentally destructive behaviors.

 

[alien3dx]

I agree with your analogy and I am going to hazard a guess that governments are investigating because Apple is the only retail store that sells the "product" so there is no incentive to be competitive and US anti-trust law is all about competitiveness (lowest price for the consumer). Another example would be that you could only sell accessories that worked with Apple physical products through the Apple Store and Apple took a 30% cut of each sale.

I don't like the idea of side-loading apps because that compromises the inherent security of the system. Even if I never install an app outside of the App Store, I imagine there would be attack vectors from websites or such exploiting those option. But on the flip side, I don't believe 30% is "fair and reasonable" across the board (even if that is what it has been since the creation of the App Store) considering how much larger the ecosystem is and how it can be circumvented with or without Apple's tacit approval.

it is not about sideloading but on more distribution.

Did google charge digital items like Apple?
Yes

Did apple have to give the option to charge a credit card for non-digital items?
Yes

Di Apple provides flexibility like google to distribute IPA(apk for android) to the tester ?
Yes, via testflight and ad hoc license.
** ad hoc license need some verification udid

Did google charge same 30% for digital item?
Yes

Why did all developers complain?

1. The fee is 99 dollars.
2. The return of investment (ROI) not suitable for indie developers.
3. Most clients think like 8% to 10% is normal but 30% is outraged high.
4. Xcode only provides a simulator to test not an emulator like android which brings more cost to develop the product which falls back to low return on investment.
5. Developers are scare, hard to find people to do most client's low-cost budgets.
** don't compare with those cheap fees, Indian, and don't say all Asian since I don't charge like them. We charge 40x compare to a cheap freelancer fee.

My conclusion is
1. Just remove the 99 dollar fee, apple already profits a lot on that 30 %.
2. Don't push we sell the non-digital items to 30% but instead if wanted 5% is okay if non-charge 99 dollar fee.
3. Just give the option, we sign and distribute ourselves via the link. Charge us 99, we handle ourselves. Apple already profits a lot we need to buy all the hardware/software to build the apps.

 

[sw1tcher]

Apple operates a store. They take up to a 30% cut of everything sold in their store. Simple. Every retail business operates this way. Why is it any business of the government to regulate this?

Every retail business does not operate that way.

If I buy a piece of software (game, anti-virus, Microsoft Office, etc.) for my PC at Target, Best Buy, Amazon, Newegg, etc., the retailer only gets a 1 time cut of the intial sale. The retailer I buy it from does not get a cut of the subscription month after month or year after year like Apple does.

Then there's the issue of me being able to sell/distribute my product where ever I want with other retailers. Developers can't do that with Apple. It's the Apple app store or it's nothing.

 

[damphoose]

These are a bunch of ungreatful developers who were not around before Apple App store. Trying to get your software picked up by a retailer, any retailer was a nightmare best left for those with deep pockets. Yes there was shareware but its nothing like automatically getting your app in front of millions of users. You only really need a small percentage to actually pay to make a money off your work. Its a fair exchange. Apple spends millions promoting Apple which brings more and more users to the store every day.

Apple is going to lose this fight. No matter how “right” they may be the DoJ is never going to rule in favor of the company with 200B in the bank. Realistically I expect the EU will come down harder and faster on Apple than the US. This is why we can’t have nice things.
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Do people seriously believe that Apple spends 30% cut in millions of daily transactions to run the App Store? If so, whoever’s in charge of procurement must be using government contractors who charge $10k for a toilet seat.

No one said that. thanks for presenting a fake point arguing against the point no one made. You know what that is called.

 

[TiggrToo]

Consider this as "an addition" to what others are already talking about:

For ANY app that AAPL has EVER recommended, AAPL should get their agreed-upon cut.

For ANY app that APPL has NEVER recommended, AAPL's cut should be ZERO !

In other words, if AAPL markets an app, they are helping the cause for that app, & should thus be compensated.

And naturally the flip-side of that should ALSO hold true !

Also, very importantly, if an app had been in the App Store for more than a year BEFORE AAPL began providing ANY "marketing" help, AAPL's cut should be ZERO for a year, starting from when they first recommended it

That last part has the potential to be a Game Changer !

So, Apple should handle the payments subsystem and delivery/update processed for free and let the author pocket the lot?

Now that's hardly fair either. And who gets to decide if it was "recommended"?

You really didn't think this one through.

 

[alien3dx]

These are a bunch of ungreatful developers who were not around before Apple App store. Trying to get your software picked up by a retailer, any retailer was a nightmare best left for those with deep pockets. Yes there was shareware but its nothing like automatically getting your app in front of millions of users. You only really need a small percentage to actually pay to make a money off your work. Its a fair exchange. Apple spends millions promoting Apple which brings more and more users to the store every day.

Apple is going to lose this fight. No matter how “right” they may be the DoJ is never going to rule in favor of the company with 200B in the bank. Realistically I expect the EU will come down harder and faster on Apple than the US. This is why we can’t have nice things.
[automerge]1593224942[/automerge]

No one said that. thanks for presenting a fake point arguing against the point no one made. You know what that is called.

that's mean open market like google, you can choose to any store or distribute yourself. Average software customize is big size and mostly over 100 mb . We dont want end user complain 500 mb to large or 2gb games to download after. We dont want apple to peek the code de-compile and see all the non disclosure code. I can write more but ...

 

[Rogifan]

I’m an app developer... I’ve been so for more than a decade. I had an app on the App Store in the first month of its launch in July 2008.

Here is why the 30% cut is a problem:

1. People argue that it’s the “storefront and distribution” and not just the payment processor that developers are paying for. But the reality is that free apps cost developers NOTHING (besides $100/year dev fee) to host on the App Store. And many of them make tons of money from ads within the app. But they own 0% to Apple. So why should paid apps have to subsidize free apps?

2. Payment processors typically take 1-3% of a transaction. Apple has a bit more convenience with in-app payments via Touch ID and Face ID, so let’s say 5%. Maybe even 10% if we are being generous. But 30%? Makes no sense except for a cash grab. It’s arbitrary. And when subscriptions are over a year, it’s 15%, which is still arbitrary.

3. The 30% wouldn’t be an issue if Apple allowed distribution outside of the App Store OR allowed developers to at the very least to advertise a different payment method within the app itself, even if it takes people out of the app for a purchase. Then devs would offer a “discount” to users for using a cheaper processor to save from the 30% rake. Which would in turn force Apple to be competitive in the cut, which is WHY they don’t want to allow outside payments.

4. But despite all of this, Apple does make exceptions to these rules to large companies with hidden contract terms no one knows about. “Reader” apps, for some reason, don’t have to follow these rules, such as Netflix. Why? Who knows. Apple just make up some rule to make them happy so they could be on their store. But the Hey email app wasn’t a “Reader” app so screw them right? Technologically there is no reason one should get hit with 30% and Netflix with 0%.

Apple has complete control and are using it to take arbitrary cuts of money for no real reason. There are millions and millions of iOS devices, WAY more than what Microsoft had with Windows when they got in trouble, and Apple owns large chunks of market share especially in North America and Europe.

I hope they are forced to change something.

This 💯. It would be easy for Apple to solve if they would just allow alternate payment options along side Apple’s IAP in-app. Customers that trust Apple more and/or want all their payments and subscriptions managed in one place can use Apple’s IAP.

Maybe in the beginning of the App Store the finders fee argument worked but it doesn’t any more. I can’t remember the last time I downloaded an app because Apple featured it in the App Store. And I’ve seen numerous developers on social media say Apple is not responsible for their customer acquisition. People aren’t downloading their apps or subscribing to their service because of Apple.

You bring up good points about all the ”free” apps on the App Store and how they’re being subsidized by paid apps. Apple will never get rid of “free” apps because it would kill the App Store. They’re perfectly fine with allowing a “free” app and then taking 30% when someone uses IAP to get rid of adds or purchase additional functionality. And they’re even happier if its a subscription model where they can take 15% in perpetuity

The only reason “reader” apps exist is because Apple knows how important Netflix, Spotify, Amazon etc. are to their platforms. But rather than dealing with the root issue they put a band aid over it and gerrymander a policy to fit certain companies. There is no logic to the reader category other than it fits specific companies to a T. Netflix, Spotify, Amazon, Dropbox don’t want to pay 30% and are threatening to leave or make a stink to regulators so lets make a new policy that exempts them from this cut. And it’s not a coincidence Apple happens to compete with many of these companies. If you offer a service that Apple also offers you can get out of giving Apple a cut. If you don’t too bad so sad.

And how about upgrade pricing. So many developers want this but Apple won’t budge. Why? Because they want developers to go the subscription route where they can get get their 15% cut forever. So long as Tim Cook is selling a services story to Wall Street I don’t see these policies changing. The only way they’ll change is regulators forcing Apple to do it.

 

[alien3dx]

This would be easy for Apple to solve if they would just allow alternate payment options along side Apple’s IAP in-app. Customers that trust Apple more and/or want all their payments and subscriptions managed in one place can use Apple’s IAP. Maybe in the beginning of the App Store the finders fee argument worked but it doesn’t any more. I can’t remember the last time I downloaded an app because Apple featured it in the App Store. And I’ve seen numerous developers on social media say Apple is not responsible for their customer acquisition. People aren’t downloading their apps or subscribing to their service because of Apple.

it exist and call as telco payment,apple pay. Yes , google nor apple don't do marketing for developer, if so we all broke cannot afford .

 

[TEG]

How about just allowing customers to download apps from safari...just like on a Mac. That would allow competition in the payment field too

They already do that, and that is what Steve envisioned. I have several apps, based mainly on HTML5 on my phone, and they all came directly from Safari.

 

[TiggrToo]

Every retail business does not operate that way.

If I buy a piece of software (game, anti-virus, Microsoft Office, etc.) for my PC at Target, Best Buy, Amazon, Newegg, etc., the retailer only gets a 1 time cut of the intial sale. The retailer I buy it from does not get a cut of the subscription month after month or year after year like Apple does.

You confused two concepts in your race to make a case.

Lets take your analogy and correct it: If a bricks and motar store sells a boxed game that requires a physydisk for each subscription release then yes, they'll keep something for the subscription.

You went for a b&m analogy then immediately took a tangent into online distribution, thus demolishing your argument.

 

[oneMadRssn]

I’m an app developer... I’ve been so for more than a decade. I had an app on the App Store in the first month of its launch in July 2008.

Here is why the 30% cut is a problem:

1. People argue that it’s the “storefront and distribution” and not just the payment processor that developers are paying for. But the reality is that free apps cost developers NOTHING (besides $100/year dev fee) to host on the App Store. And many of them make tons of money from ads within the app. But they own 0% to Apple. So why should paid apps have to subsidize free apps?

2. Payment processors typically take 1-3% of a transaction. Apple has a bit more convenience with in-app payments via Touch ID and Face ID, so let’s say 5%. Maybe even 10% if we are being generous. But 30%? Makes no sense except for a cash grab. It’s arbitrary. And when subscriptions are over a year, it’s 15%, which is still arbitrary.

3. The 30% wouldn’t be an issue if Apple allowed distribution outside of the App Store OR allowed developers to at the very least to advertise a different payment method within the app itself, even if it takes people out of the app for a purchase. Then devs would offer a “discount” to users for using a cheaper processor to save from the 30% rake. Which would in turn force Apple to be competitive in the cut, which is WHY they don’t want to allow outside payments.

4. But despite all of this, Apple does make exceptions to these rules to large companies with hidden contract terms no one knows about. “Reader” apps, for some reason, don’t have to follow these rules, such as Netflix. Why? Who knows. Apple just make up some rule to make them happy so they could be on their store. But the Hey email app wasn’t a “Reader” app so screw them right? Technologically there is no reason one should get hit with 30% and Netflix with 0%.

Apple has complete control and are using it to take arbitrary cuts of money for no real reason. There are millions and millions of iOS devices, WAY more than what Microsoft had with Windows when they got in trouble, and Apple owns large chunks of market share especially in North America and Europe.

I hope they are forced to change something.

Great post. Thanks.

I think its pretty simple to call it what it is: forced bundling. You have mobile software to distribute, fine, but you have to use our credit card processing for all transactions including ones that take place outside the app, or else.

It’s literally no different that Microsoft bundling IE as a condition of OEMs preinstalling Windows in the 90s, or Qualcomm bundling a license to their entire patent portfolio as a condition of buying baseband chips. All of it is illegal bundling.

 

[Rogifan]

You confused two concepts in your race to make a case.

Lets take your analogy and correct it: If a bricks and motar store sells a boxed game that requires a physydisk for each subscription release then yes, they'll keep something for the subscription.

You went for a b&m analogy then immediately took a tangent into online distribution, thus demolishing your argument.

If I buy a magazine at Walmart and then decide to subscribe to it (physical copy not digital) should Walmart get a cut of that subscription because I purchased the magazine in their store?

 

[TiggrToo]

If I buy a magazine at Walmart and then decide to subscribe to it (physical copy not digital) should Walmart get a cut of that subscription because I purchased the magazine in their store?

Again, it's mixing the analogy. You've crossed from a physical item handled by the store to one that's no longer handled by the store.

 

[DummyFool]

Am I the only one that could not care less about who gets the money but desperately want an other way to download apps. It looks like it by judging the comments. All the tools that would be useful for my job are forbidden by Apple. Having an "open" store would transform my iPad from fun toy to a useful working tool, even maybe a laptop replacement.

 

[cmaier]

Am I the only one that could not care less about who gets the money but desperately want an other way to download apps. It looks like it by judging the comments. All the tools that would be useful for my job are forbidden by Apple. Having an "open" store would transform my iPad from fun toy to a useful working tool, even maybe a laptop replacement.

I want to be able to buy whopper jr’s at mcdonalds. It’s more convenient for me.

 

[4jasontv]

If you're referring to fiduciary responsibility, Apple has no such obligation to you.

Corporations Don't Have to Maximize Profits - NYTimes.com

www.nytimes.com

There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”

The Hobby Lobby case dealt with a closely held company with controlling shareholders, but the Court’s statement on corporate purpose was not limited to such companies. State codes (including that of Delaware, the preeminent state for corporate law) similarly allow corporations to be formed for "any lawful business or purpose,” and the corporate charters of big public firms typically also define company purpose in these broad terms. And corporate case law describes directors as fiduciaries who owe duties not only to shareholders but also to the corporate entity itself, and instructs directors to use their powers in “the best interests of the company.”

Serving shareholders’ “best interests” is not the same thing as either maximizing profits, or maximizing shareholder value. "Shareholder value," for one thing, is a vague objective: No single “shareholder value” can exist, because different shareholders have different values. Some are long-term investors planning to hold stock for years or decades; others are short-term speculators.

Also, most investors care not only about their portfolios, but also about their jobs, their tax burdens, the products they buy and the air they breathe. Which is to say, companies that maximize profits by firing employees, avoiding taxes, selling shoddy products or polluting the environment can harm their shareholders more than helping them.

Although some Delaware cases talk about maximizing shareholder value in the long run, Delaware (like other states) applies the business judgement rule to protect directors of corporations that reduce profits and share price when directors claim this will ultimately help the corporation. In the 2011 case of Air Products, Inc v. Airgas, the business judgement rule allowed Airgas directors to refuse to sell the company, even though a sale would have given Airgas' shareholders a hefty profit.

So, where did the mistaken idea that directors must maximize shareholder value come from? The notion is especially popular among economists unburdened by knowledge of corporate law. But it has also been embraced by increasingly powerful activist hedge funds that profit from harassing boards into adopting strategies that raise share price in the short term, and by corporate executives driven by “pay for performance” schemes that tie their compensation to each year’s shareholder returns.

In other words, it is activist hedge funds and modern executive compensation practices — not corporate law — that drive so many of today’s public companies to myopically focus on short-term earnings; cut back on investment and innovation; mistreat their employees, customers and communities; and indulge in reckless, irresponsible and environmentally destructive behaviors.

Interesting. But she didn't address stock value in general. Sure she makes some claim about short vs long term value but that was avoiding answering not an answer itself. I didn't say developers shouldn't get paid only that it's in the best interest of Apple to pay out the bare minimum necessary to keep developers working for them. That's my point. This doesn't say Apple doesn't have a responsibility to shareholders, just that they can demonstrate that responsibility in various was.

Frustrating side note, she didn't actually answer the question of where the idea came from. She says 'where did it come from' and then lists some people who believe it without making the bold claim that are the source. That paragraph undermines her authority because it makes me question if she is doing something similar in the preceding paragraphs.

 

[alien3dx]

Am I the only one that could not care less about who gets the money but desperately want an other way to download apps. It looks like it by judging the comments. All the tools that would be useful for my job are forbidden by Apple. Having an "open" store would transform my iPad from fun toy to a useful working tool, even maybe a laptop replacement.

for your information, if you're gamers. It app purchase much cheaper in android then can play same thing in your apple device.So what will you choose as consumer ? tool forbidden please clarify.