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

[Nuno Lopes]

Are there stats? Saying there is at least one business offering a reduced price is not helpful (because the rational might not be the ios app store commissions, it could be desperation for customers). The Mac app store is a different business model, as we know.

Trying to argue that a 30% tariff does not influence the end price people pay does not make any sense in any kind of economical model. Of course it does. If intuition does not serve you don’t go as far, just realize how different US states and country goes go along changing VAT rates in order to help motivate ot consumption. Geezz.

 

[I7guy]

Apple’s profit margin on iOS AppStores sales is 78%. You are confusing commission fees with profits.

They’re allowed 78%. But certainly a citation rather than an anecdotal reference to one…

 

[I7guy]

Trying to argue that a 30% tariff does not influence the end price people pay does not make any sense in any kind of economical model. Of course it does. If intuition does not serve you don’t go as far, just realize how different US states and country goes go along changing VAT rates in order to help motivate ot consumption. Geezz.

You can’t prove otherwise…as it relates to the App Store. The store levels the playing field between big and small developers all for a paltry commission.

 

[quarkysg]

Not exactly. Microsoft charges 30% because it is selling their devices at a loss. Apple is has huge profit margins on the devices they sell already. How else you think Apple is the richest company in the world. They have more money than some countries even.

Apple grew to its size today due to them producing products that customers value and want, making customers buying their product over and over, and also attracting new customers.

The gaming console is a race to the bottom business model where the earning is recovered from fees charged via software sales thru their respective digital stores. I can’t see the logic why one business model is deemed acceptable while the other is not, when both are legal.

 

[quarkysg]

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

I would like to pay nothing, but that doesn't mean I'm entitled to it. If a product (hardware or software) is not something you are willing pay for, don't buy it.

 

[quarkysg]

You have no proof of that.

Actually, there's one here: https://forums.macrumors.com/thread...y-overcharging-for-apps.2295678/post-29875183

 

[ksj1]

Trying to argue that a 30% tariff does not influence the end price people pay does not make any sense in any kind of economical model. Of course it does. If intuition does not serve you don’t go as far, just realize how different US states and country goes go along changing VAT rates in order to help motivate ot consumption. Geezz.

Honestly, it's obvious you know nothing about business or software development. You've been told time and again of the benefits the app-store provides to both developers and customers and just keep on about tariffs and other such nonsense.

Are you a lawyer working for the firm that filed this action? Or perhaps you're an economist, another group of people that think they know everything and really only know just about as much as anyone else about the economy

 

[quarkysg]

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.

This would severely handicap the indie developers. The iOS App Store made it possible for a one man development operations. Going the MSDN route would only benefit the big development houses. So it'll be like the rich get richer.

 

[1258186]

They’re allowed 78%. But certainly a citation rather than an anecdotal reference to one…

The 78% figure came from details released during the Epic trial and Apple have not denied its accuracy.

 

[quarkysg]

Trying to argue that a 30% tariff does not influence the end price people pay does not make any sense in any kind of economical model. Of course it does. If intuition does not serve you don’t go as far, just realize how different US states and country goes go along changing VAT rates in order to help motivate ot consumption. Geezz.

I agree with you. Of course the 30%/15% influences the end price. This is the cost of doing business. This 30%/15% is applied across all developers publishing their work for sale. All the developers determine their software's list price based on what they think their software is worth and what customers is willing to pay for it, and also what other competing developers are charging for similar software. Isn't this the epitome of a capitalistic market?

Also the more pertinent question is, is this unlawful for Apple to charge 30%/15%?

 

[Abazigal]

Trying to argue that a 30% tariff does not influence the end price people pay does not make any sense in any kind of economical model. Of course it does. If intuition does not serve you don’t go as far, just realize how different US states and country goes go along changing VAT rates in order to help motivate ot consumption. Geezz.

It does when you realise that apps are essentially software, which by their very nature tend to have very high fixed costs, but close to zero marginal costs of production and distribution.

Take a fortnite skin for example. The cost is only incurred once - in the time and resources used to design and code it. Afterwards, it doesn’t matter whether one person buys it or 1 million people do.

So what this means is that the developer is simply going to calculate the revenue-maximising rate and charge that, and this rate would remain constant regardless of whether there is a 30% cut or not. Users are not going to see a price reduction, because they have already demonstrated that they are already willing to pay the higher price, so why lower it and leave money on the table?

Else, by this logic, when Apple lowers its take of subscription fees from 30% to 15% after the first year, should I not see my monthly netflix or fantastical bill decrease as well?

That’s why as a consumer, I am at best indifferent to Apple lowering their cut for developers, because I know that app prices are not going to decrease for me (developers will simply pocket the difference).

Conversely, I do have some vested interest in the continued vitality and viability of the App Store, and where does the money to maintain it come from? From that 15/30% cut that developers (understandably) want to get out of paying.

There is no right or wrong solution here, only who ends up bearing the externality at the end of the day.

 

[1258186]

Where do you get 78%? Is the complaint referring to gross profit or net profit being “unlawful”? Is there a UK law that prohibits a certain level of profit (either gross or net)?

Is nobody else following the Epic trial. I’ve replied to this question several times now. The 78% figure was revealed as part of the trial. Apple has not denied that it’s an accurate figure.

Apple’s 30% cut is their revenue not their profit. Add up all those 30% fees to get their revenue then deduct their operating costs to get their gross profit.

I’m not aware there is a limit on gross profit margins but 78% does seem excessive even for the software industry which has notoriously high profit margins.

The claimant will need to prove that Apple has a monopoly on sales of apps through the AppStore and that they are exploiting that monopoly to overcharge consumers.

 

[neuropsychguy]

It doesn’t

Nevertheless find it amusing watching the comments...funny when the UK stopped the Epic case, most were waxing lyrical about the uk

Well they have been doing the latter with earnest for years

Apple’s hardware margins have been falling for years. They can do this because services revenues are rising and margins are large.

My comment was tongue-in-cheek but it’s what Apple will do if forced to lower App Store fees. Or they will raise rates of services or some other tactic to keep profits high.

 

[ksj1]

Is nobody else following the Epic trial. I’ve replied to this question several times now. The 78% figure was revealed as part of the trial. Apple has not denied that it’s an accurate figure.

Apple’s 30% cut is their revenue not their profit. Add up all those 30% fees to get their revenue then deduct their operating costs to get their gross profit.

I’m not aware there is a limit on gross profit margins but 78% does seem excessive even for the software industry which has notoriously high profit margins.

The claimant will need to prove that Apple has a monopoly on sales of apps through the AppStore and that they are exploiting that monopoly to overcharge consumers.

I think net profit rather than gross profit is the number we should be looking at.

 

[I7guy]

Is nobody else following the Epic trial. I’ve replied to this question several times now. The 78% figure was revealed as part of the trial. Apple has not denied that it’s an accurate figure.

Maybe because the 78% it's not relevant to the core of the trial.

Apple’s 30% cut is their revenue not their profit. Add up all those 30% fees to get their revenue then deduct their operating costs to get their gross profit.

I’m not aware there is a limit on gross profit margins but 78% does seem excessive even for the software industry which has notoriously high profit margins.

On way to increase margins is to increase efficiency and reduce expenses.

The claimant will need to prove that Apple has a monopoly on sales of apps through the AppStore and that they are exploiting that monopoly to overcharge consumers.

I say good luck with that.

 

[Kierkegaarden]

Is nobody else following the Epic trial. I’ve replied to this question several times now. The 78% figure was revealed as part of the trial. Apple has not denied that it’s an accurate figure.

Apple’s 30% cut is their revenue not their profit. Add up all those 30% fees to get their revenue then deduct their operating costs to get their gross profit.

I’m not aware there is a limit on gross profit margins but 78% does seem excessive even for the software industry which has notoriously high profit margins.

The claimant will need to prove that Apple has a monopoly on sales of apps through the AppStore and that they are exploiting that monopoly to overcharge consumers.

I am aware of the difference between gross and net profit — that is why I am asking what the lawyer is referring to as being “unlawful”. And if there isn’t a law limiting profit (either gross or net), then what is “unlawful”?

How were consumers “overcharged”? The developer sets the price, not Apple. In the case of Spotify, they decided to charge more for their service — Apple didn’t force them to price their service in any certain way.

The basis for this case is all about a company (Spotify), having a poor business model with little profit, is jealous of another company (Apple) that slowly built their business with profit from a superior business model. You reap what you sow.

 

[Fidgit]

It’s been a while since I brushed up on any competition law but this seems like a fairly basic argument from a legal perspective. There’s a very good chance that the courts would decide that Apple have a monopoly on selling apps on their devices - unless things have changed, UK law determines that any market share above 25% is a monopoly, and the precedents that previous examinations of google and Microsoft have set would make me fairly confident here too. It’s then a question of whether Apple has used that power in any of the unlawful ways that the Competition Act sets out, particularly the misuse of a dominant market position. Brexit may have changed some of this recently though. The other part they may have issues with is the area of law that talks about a monopoly compelling ‘customers’ (which could include developers in this case) to agree to disconnected terms, which could be what they’re looking at in terms of this payment system that developers have to sign up to. There isn’t really enough detail in this article to be able to have a strong view one way or the other though.

 

[Fidgit]

This has absolutely zero to do with government

CMA investigates Apple over suspected anti-competitive behaviour

The CMA has launched an investigation into Apple following complaints that its terms and conditions for app developers are unfair and anti-competitive.

www.gov.uk

 

[quarkysg]

It’s been a while since I brushed up on any competition law but this seems like a fairly basic argument from a legal perspective. There’s a very good chance that the courts would decide that Apple have a monopoly on selling apps on their devices - unless things have changed, UK law determines that any market share above 25% is a monopoly, and the precedents that previous examinations of google and Microsoft have set would make me fairly confident here too. It’s then a question of whether Apple has used that power in any of the unlawful ways that the Competition Act sets out, particularly the misuse of a dominant market position. Brexit may have changed some of this recently though. The other part they may have issues with is the area of law that talks about a monopoly compelling ‘customers’ (which could include developers in this case) to agree to disconnected terms, which could be what they’re looking at in terms of this payment system that developers have to sign up to. There isn’t really enough detail in this article to be able to have a strong view one way or the other though.

If that's the case, all the console makers will also be affected if Apple is found to be guilty, as this will set a precedent.

 

[coredev]

UK law determines that any market share above 25% is a monopoly

 

[ani4ani]

CMA investigates Apple over suspected anti-competitive behaviour

The CMA has launched an investigation into Apple following complaints that its terms and conditions for app developers are unfair and anti-competitive.

www.gov.uk

The Competition and Markets Authority (CMA) is an independent non-ministerial department. Our work is overseen by a Board, and led by the Chief Executive and senior team. Decisions in some investigations are made by independent members of a CMA panel.

 

[ani4ani]

If that's the case, all the console makers will also be affected if Apple is found to be guilty, as this will set a precedent.

....only if they are abusing their power. Clearly monopolies exist even if they come about by accident, e.g. their competition fails and go out of business, leaving only one or two players; the issue is do they abuse their power

 

[ani4ani]

I am aware of the difference between gross and net profit — that is why I am asking what the lawyer is referring to as being “unlawful”. And if there isn’t a law limiting profit (either gross or net), then what is “unlawful”?

How were consumers “overcharged”? The developer sets the price, not Apple. In the case of Spotify, they decided to charge more for their service — Apple didn’t force them to price their service in any certain way.

The basis for this case is all about a company (Spotify), having a poor business model with little profit, is jealous of another company (Apple) that slowly built their business with profit from a superior business model. You reap what you sow.

Of course Apple indirectly impacts the price of an App. If I am a developer and I need to cover my costs and make a reasonable [adequate or satisfactory profit], then that sets the price I could sell their App for [all my development costs + the profit I want to make]; Apple come along and they require another 30% on top, so now I have to consider the Apple fee in the base cost. Will the market bare the cost of the uplifted price or do I accept I cannot make as much profit as I would like or potentially not even be able to sell my app at all. I would hazard a guess that Apple makes the most money from my endeavours.

 

[coredev]

Of course Apple indirectly impacts the price of an App. If I am a developer and I need to cover my costs and make a reasonable [adequate or satisfactory profit], then that sets the price I could sell their App for [all my development costs + the profit I want to make]; Apple come along and they require another 30% on top, so now I have to consider the Apple fee in the base cost. Will the market bare the cost of the uplifted price or do I accept I cannot make as much profit as I would like or potentially not even be able to sell my app at all. I would hazard a guess that Apple makes the most money from my endeavours.

That really depends on how successful your app is. Since you don't occur a per-item cost for development, the price should be mostly based on your estimates of how many customers you will have. Then after you reach the tipping point where your cost is covered, you will have 70% of the profit, Apple will still get their 30% cut.
Most small software developers probably don't calculate like that, they write an app because they think they have a cool idea and they set the price to whatever they think the customers will pay for it. If they ever break even remains to be seen.
And Apple's 30% store fee is just the price to do business on their ecosystem.

 

[robco74]

I think we also need a comprehensive analysis of application costs in general. Even for a web app, using FOSS frameworks, there are still costs for deployment, maintenance, marketing, etc. Apple absorbs some of these costs as part of the commission, but free and ad-supported are essentially subsidized. Is this a fair cost structure, or should Apple be spreading them out more evenly, or perhaps switch to the wholesale model and set prices as they see fit?