UK Class Action Accuses Apple of Breaking Competition Law by Overcharging for Apps

[Martinpa]

I keep seeing people tout that the percentage should be 15% or 10% or whatever, but never any explanation as to why, either rooted in numbers and math, or in customary practices. Sounds like it’s just because they like that number or because it sounds lower enough than 30%…

I don’t have any math to say that 30% is either the right amount or the wrong one, so I won’t speak to that. It does seem to be customary though. I’m open to hearing why another percentage would be more appropriate, but the explanation shouldn’t be because one “feels” 30% is too high, without any substantiated reasoning.

 

[falainber]

That would not be a forest. It would be a jungle with many different sets of rules and no responsible carekeeper. A disaster in the making, re: for example Android on a Samsung phone with two "official" stores – confusing & complicated for the average customer.

Disclaimer: I have an iPad Pro and a nice Samsung Galaxy Tab with a top-notch AMOLED display (the reason why I have it). User-experience and app-wise it's a frustrating, more laborsome device – but Netflix looks so nice on that AMOLED

I have Samsung Galaxy Tab too. No problems for me. I generally use the Play Store only but if the prices and/or app selection were better in the Galaxy Store, I am sure I would gladly use it too.

 

[gregmancuso]

How come no? Have you gone to the Apple website lately to buy a device? The VAT is calculated before or after the price set by Apple for its devices? Man you are so screwed Kekeke. Sorry, no disrespect meant.

Any business person will set their price without VAT man. The VAT its not included in the supplier business rationale, just the cost of business. The VAT is than included in the total on top of the price Apple set for the device. SAme with devs, they does not set end price, is totally out of their control.

Just like the 30% commission so that users can download and update you App is not their choice. Apple has pricing tables that you need to follow, choose a price from, the tables already include the commission … is that the Dev setting the end price? Of course not.

mare you trying to be intentionally obtuse? Sorry - no disrespect Meant.

the VAT analogy is perfectly apt. From the consumers point of view. It may not be perfect comparing developer and manufacturer but could be trenched to the store.

the AppStore fees is just a cost of doing business The developer sets a price knowing that there is a fee off the top. That price is presented to the customer.

the store sets a price for the merchandise knowing there is VAT to be paid off the top. They set the price based on the cost their merchandise costs the desired sell price and the customer’s price incl VAT

as I said it is not a great analogy. I was trying to find a “hidden to the consumer” fee that is paid off the top of what the consumer pays.

 

[falainber]

I keep seeing people tout that the percentage should be 15% or 10% or whatever, but never any explanation as to why, either rooted in numbers and math, or in customary practices. Sounds like it’s just because they like that number or because it sounds lower enough than 30%…

I don’t have any math to say that 30% is either the right amount or the wrong one, so I won’t speak to that. It does seem to be customary though. I’m open to hearing why another percentage would be more appropriate, but the explanation shouldn’t be because one “feels” 30% is too high, without any substantiated reasoning.

This particular issue is about IAP. Nobody is arguing it should be 10 or 15%. Because it should be 3% or less. It's just a payment mechanism like a credit card or PayPal. I am sure PayPal would be happy to help app developers charging very reasonable fees.

 

[LoggerMN]

A new legal case filed with the U.K.'s Competition Appeal Tribunal has accused Apple of breaching competition law by overcharging nearly 20 million customers for App Store purchases.

The collective action case alleges Apple's 30% commission on app sales and consumers' forced use of its own payment processing system generates "unlawfully excessive levels of profit," and calls for the company to compensate iPhone and iPad users in the U.K. for years of alleged overcharging, with damages of up to £1.5 billion being sought.

The collective action has been brought by Dr Rachael Kent, an expert in the digital economy and a lecturer at King's College, London, who claims that because the App Store is the only way to get apps on to an iPhone or iPad, it is acting like a monopoly.
In opt-out cases such as this, the claim can be brought on behalf of a defined group, and aggregate damages awarded to the group, without the need to identify all the individual claimants and specify their losses. Claimants within a class are automatically included in an action unless they take specific steps to opt-out.

On this basis, anyone in the U.K. who has bought paid apps, paid subscriptions, or other in-app purchases on an iPhone or iPad since October 2015 is included in the claim. The rest of the team behind the case includes law firm Hausfeld and Co and Vannin Capital. However, the collective action needs to be approved by the tribunal before proceeding.

Apple in a statement called the lawsuit "meritless."
The case echoes similar allegations made in the ongoing legal battle between Apple and Epic Games, in which Epic alleges that the App Store and associated developer commission rates are anti-competitive and monopolistic.

In April, Apple was also charged by the European Commission with abusing its dominant position in the music streaming market with regard to App Store rules on in-app payments. The charges followed a complaint by rival streaming service Spotify.

Article Link: UK Class Action Accuses Apple of Breaking Competition Law by Overcharging for Apps

Does British law define how much profit is lawful? Seems like that would have to be established for this case to go anywhere.

 

[Mescagnus]

I have a logic on my side. If the developers could arbitrarily raise their prices they would do it today. However, they can't. They compete with each other. App Store on the other hand is a monopoly so nobody knows what the reasonable price is. Once the government(s) mandate alternative app stores the market should be able to establish fair prices.

I have app-pricing market-consensus (fair price) on my side. Regardless of the "Apple tax", apps would be priced in similar, competitive fashion – unless the reduction of distributor cut is cut across the board, regardless of mobile OS.

If AppStore lowered their fee, a $1.99 app wouldn't suddenly be a $1.69 app, unless Google et al. made a similar reduction.

And I dare say that with reductions, the app markets would be looked after and moderated way worse than they are now. That'd hurt everyone: Apple, Google, Android device manufacturers – and yes, developers and customers.

A lose-lose spiral.

I would not race to the bottom here.

 

[ArtOfWarfare]

Don't these people realize that iOS allows HTML 5 apps to bypass the App Store? How is App Store a monopoly if developers can completely bypass it to reach customers and not pay Apple anything for it.

According to Apple lawyer's during the Epic case, the main reason they block apps is because the apps can be done as websites instead.

So according to Apple's logic, the contents of the app store cannot actually be done as web apps, because if they could be, they would have been rejected.

I do agree with you though. I think the most significant feature that's only available for native apps are notifications - those work pretty much everywhere except iOS, despite the fact that the feature originates with Safari on macOS:

"notifications" | Can I use... Support tables for HTML5, CSS3, etc

caniuse.com

 

[tgwaste]

>developers pay Apple nothing
besides the $100 / year.

You actually have to PAY Apple to PAY Apple. Thats how horribly greedy they are.

 

[falainber]

Don't these people realize that iOS allows HTML 5 apps to bypass the App Store? How is App Store a monopoly if developers can completely bypass it to reach customers and not pay Apple anything for it.

Go implement, say Adobe Photoshop or Fortnite in HTML 5 and report back. In the mean time can we have alternative app stores because I am afraid that it may take you a decade or two to do what I asked (and then this would only be possible after HTML 25 is released)

 

[Martinpa]

This particular issue is about IAP. Nobody is arguing it should be 10 or 15%. Because it should be 3% or less. It's just a payment mechanism like a credit card or PayPal. I am sure PayPal would be happy to help app developers charging very reasonable fees.

I don’t know if you’ve read the article, it is not about IAP only. Even if it was, plenty of people are arguing it should be 10 or 15%, or “whatever” (like I wrote in my original post) — 3% would be encompassed in that “whatever”.
Also, try and think what a lot of developers would do if the percentage Apple takes on IAP was significantly lower than that of an App purchase… The Freemium model is already sketchy in a lot of instances.

 

[1258186]

That would not be a forest. It would be a jungle with many different sets of rules and no responsible carekeeper. A disaster in the making, re: for example Android on a Samsung phone with two "official" stores – confusing & complicated for the average customer.

Disclaimer: I have an iPad Pro and a nice Samsung Galaxy Tab with a top-notch AMOLED display (the reason why I have it). User-experience and app-wise it's a frustrating, more laborsome device – but Netflix looks so nice on that AMOLED

If that was the case why is it not a disaster on my Mac? I can chose to install apps from the Mac AppStore or I can chose to install them from anywhere else. I’ve never had a problem installing apps from outside the Mac AppStore. This is a false argument intended to shore up support for the AppStore monopoly. I don’t believe my security would be compromised in any way by allowing alternative app stores.

 

[1258186]

I'd call this a win-win.

As for Apple's profit margin on the AppStore being colossal – I'd rather call the margin healthy, for maintaining the market place. It's a source of equally healthy (or colossal) profit for the developer.

Harm the AppStore and the developers will be hurt the most. If you cannot see this, I'd be inclined to say you don't see the forest for the trees.

You would call a 78% profit margin healthy? I would call it excessive and exploitative.

 

[I7guy]

All that means is users like me end up paying the 30% AppStore tax by way of higher prices because developers pass it on. Thanks for nothing.

So if Apple is forced to slash it's fees and commissions the price should go down, because developers are altruistic and want to pass along cost savings to their customers?

 

[BC2009]

I have no problem with Apple being the gatekeeper of the only App Store on iOS. Game consoles were far more monopolistic for decades before Apple came along --taking a huge cut of every cartridge sold and requiring developers to participate in developer programs that had very onerous terms -- it's not like anybody could just make and market a game for the Nintendo 64, Playstation or Xbox and distribute it on their own without signing a contract with the console manufacturer and giving up a HUGE cut of the revenue.

The only thing I want from Apple is for them to triple the amount of money they spend on app reviews to (A) speed them up and (B) weed out garbage. Apple would have a much stronger position in these suits if they could say "we weed out 99% of counterfeit or scam apps" -- but the truth is that it is probably more like 65%.

 

[I7guy]

If that was the case why is it not a disaster on my Mac? I can chose to install apps from the Mac AppStore or I can chose to install them from anywhere else. I’ve never had a problem installing apps from outside the Mac AppStore. This is a false argument intended to shore up support for the AppStore monopoly. I don’t believe my security would be compromised in any way by allowing alternative app stores.

This has been debated, it's a different platform, albeit with a closely tied ecosystem. But I disagree about the security aspect and the gradual decline of the ios ecosystem. As with all things, YMMV.

 

[ArPe]

Nah. The Mac does quite well as it is and that’s not down to the App Store so iOS would survive.

Computers are not phones 👏👏👏

Phones contain a lot of sensitive real time data including location and your money 👏👏👏

If your phone turns into a flea market crooks buying your data will track you and rob you 👏👏👏

Or kidnap your family 🤮🤮🤮

Especially if you live in a dangerous place 💥💥💥

Think carefully before you talk rubbish otherwise one day these criminals and dictators will come for you and your family 🩸 🩸 🩸

 

[robco74]

It's clear governments, and increasingly consumers are put off by the 30% commission and the agency model in general. In the beginning, it was necessary to attract developers to the platform. But now, it's established that having a presence on iOS, even for free apps, is beneficial.

Apple should consider moving to the MSDN model and rather than monetize by charging commissions, move to monetizing the development tools. Charge a few grand a year or a few hundred a month for pros, discounts for non-profits and education. Businesses who find value in having a presence on the platform will pay it, just as they do for VS.

Apple can keep the App Store for consumers who want vetted apps, who don't want to give out payment details to several third-parties, who want a central place to manage subscriptions, and/or value other App Store rules around privacy. Apple can be more particular, really curate the store and keep the number of apps relatively low - quality over quantity. Some developers will find value in staying on the App Store.

Apple should be absolved of any and all security issues that may arise when users go outside the App Store, as that should be the responsibility of the alternate store, developer, and user.

 

[cyb3rdud3]

It sounds like Apple fans are the only people on this planet who love paying the taxes (43% in this case). It must be some sort of disease. Not only that, in addition to loving paying the taxes they also love going around and arguing how higher taxes are good for them.

I was thinking exactly the same. Who wants to pay more. I want to pay less.

Some people recognise quality and are happy to pay more for more. It doesn't always have to be a race to the bottom.

And no matter how often you people say this, it isn't a tax. It is simply a cost of doing business and very well worth it to get access to a captive qualified audience of customers. Entirely normally for anyone who actually works in any kind of commercial setting.

The moment it is no longer commercial viable nor makes any business sense then developers/publisher will stop using the system and go somewhere else or do something else. As such change is inherent to the model it uses.

Those are valid use cases for the phone, but not good reasons to keep the device locked down. None of these use cases would no longer be possible if the OS opened up. Face it, apple loves the control and doesn’t want to let go.

Possibly from some peoples perspective. For example it could be argued that by having it locked down it provides a capability to ensure quality control, and for example verify the impact on battery life. The reputational damage a popular application coded in the wrong way can have on the hardware provided can be severe. Removing such controls from Apple would provide a risk to the entirety of the platform with no clear finger to point or person to blame.

 

[cyb3rdud3]

It's clear governments, and increasingly consumers are put off by the 30% commission and the agency model in general. In the beginning, it was necessary to attract developers to the platform. But now, it's established that having a presence on iOS, even for free apps, is beneficial.

Apple should consider moving to the MSDN model and rather than monetize by charging commissions, move to monetizing the development tools. Charge a few grand a year or a few hundred a month for pros, discounts for non-profits and education. Businesses who find value in having a presence on the platform will pay it, just as they do for VS.

That would kill off many smaller developers and thus innovation where they just don't have the money to invest several thousands...The MSDN model is a bit of a mess in my opinion and no where near as clear on development tools and approaches. And not least Microsoft has a nasty habit of delivering incomplete frameworks, switch and totally leave existing stuff behind.

I agree it is a model. It is not a model I'd aspire to personally.

Apple can keep the App Store for consumers who want vetted apps, who don't want to give out payment details to several third-parties, who want a central place to manage subscriptions, and/or value other App Store rules around privacy. Apple can be more particular, really curate the store and keep the number of apps relatively low - quality over quantity. Some developers will find value in staying on the App Store.

They can't contain that. Fragmentation will kick in and the user experience will become worse for it than it is today.

Apple should be absolved of any and all security issues that may arise when users go outside the App Store, as that should be the responsibility of the alternate store, developer, and user.

In theory that is great, but in practice you surely aren't so naive to really think it would work like that. I can already see the headlines. And not only that, it wouldn't surprise me when some of the same people now lobbying for the break up of the stores will then file suites that it is all Apple's fault and they should protect us all.

People really don't seem to be able to grasp how good they have it now.

 

[I7guy]

But that as irrelevant as is hypothetical. What is not that irrelevant is how much Apple is charging users for the ability to install and update an app … 30% of the app ot digital service price. Up until recently Spotify and Netflix had to include the in-app-purchase device. That meant back than, if the subscription cost $10 a month in app, that is $3 a month just to be able to install the Netflix app, say $36 in a year just for that, for one app …

Not much? Consider it 3.6 months of service, leveraged on one single thing: The user ability to Install and update an app. That is on top of the devices and OS licensing cost. Praise the lord Jesus by multiplying breads out of an half a piece of bread, feeding an entire nation of shareholders. I agree with Tim Cook when he said in a hearing that the App Store is a economic Miracle.

This is actually very relevant, because it shows the fees and commissions are not elastic. Do you have the stats on how many devs reduced the price of their apps when their commission rates went to the SB tier pricing? I'll bet not many. And if the pricing isn't elastic, who is to say that 15% or 30% is overpriced.

And whatever the rules were yesterday, a year ago, 10 years ago is not relevant today, imo.

 

[Mescagnus]

If that was the case why is it not a disaster on my Mac? I can chose to install apps from the Mac AppStore or I can chose to install them from anywhere else. I’ve never had a problem installing apps from outside the Mac AppStore. This is a false argument intended to shore up support for the AppStore monopoly. I don’t believe my security would be compromised in any way by allowing alternative app stores.

Your security would not be compromised. I take it you are above the average compared to most unassuming users, so you would know trustworthy app stores to install apps from.

The beauty of iOS is in its walled garden. Even the less-than-average user doesn't have to be mindful of where they get their apps from. Apple as a gatekeeper upholds at least some standard for the apps. "App store X" might have entirely different standards for usability, stability & security – or no standards at all.

A jungle, as I said in my previous comment, to the very potential detriment of user-experience, quality and security.

AppStore, 30% cut, over a billion users. Where's the problem? Breaking it and paving way for unforeseen problems is stupid for everyone, devs and users alike.

Still today "power users" can jailbreak their phones and go on an expedition into the jungle. So I wonder if Apple introducing a less restricted (less walled) Power User Mode would alleviate some of the controversy? Power User Mode would of course come with a disclaimer that after enabling it, you are no longer eligible for Apple Support. Why should Apple support something they have not vetted, approved and distributed?

Which, again, brings me to the jungle – from the user's point of view. Wanna do what you want? Choose Android. As we all know, it's already what a lot of people love

iOS is an alternative choice. It's good to have choice. Ironically, many people here wanting more choice are advocating for removing the choice that iOS offers.

 

[Mescagnus]

You would call a 78% profit margin healthy? I would call it excessive and exploitative.

Please do educate me, with a trustworthy source, on where that 78% profit margin comes from.

 

[UBS28]

That is a load of crap. Selling hardware at a loss is a business decision and does not justify anything regarding app fees. Also, not all consoles are sold at a loss. All Nintendo machines are sold at a profit. Sony sells profitable after a very short runway. Neither reduce or eliminate the fees once profitable. So, again, the consoles are different so fees are ok makes no sense.

serious question - do the MS or Sony stores do anything for the 30% or is it just to make up for their poorly designed business model on the hardware side? Do they do the customer servicing for all sales and returns? Do they do global tax payment, reporting, and account for the software develooers? I don’t know the answer to that but from all the rhetoric on these boards I am guessing not.

and that does not consider the significantly higher upfront developer program fees the game console manufacturers also charge that same license on physical copies of gamea.

Poorly designed business model? Microsoft is doing so well, Apple will not even bother entering the console market (because Apple will never sponsor a hardware device).

And you are wrong about Sony. The Playstation 5 is also sold at a loss.

And Microsoft does alot more than Apple does with iOS. Because if I buy a Xbox Series X game, I can play on my iPhone, iPad, Mac or OS X also.

There is reason why Apple is the richest company in the world.

 

[Apple_Robert]

What a pile of legal manure.

 

[Wildkraut]

"We believe this lawsuit is meritless and welcome the opportunity to discuss with the court our unwavering commitment to consumers and the many benefits the App Store has delivered to the UK's innovation economy," Apple said

"Belief" is a confession of existing ignorance!
Good to see UK waking up!