House antitrust chair calls Apple App Store fees 'highway robbery'

Posted:
in General Discussion edited June 2020
The chairman of the U.S. House Subcommittee on Antitrust characterized Apple's App Store fees as a "highway robbery" in a recent interview.

Credit: Apple
Credit: Apple


Apple takes a 15% to 30% of in-app purchases made on the App Store, and it has guidelines in place preventing developers from encouraging users to circumvent the App Store for subscriptions.

Those App Store fees have become a hot topic of conversation after reports that Apple threatened to remove email app "Hey" because of its lack of in-app purchase options.

Rep. David Cicilline, the house antitrust committee chair, recently sat down with The Verge and Basecamp CTO David Heinemeier Hansson, one of the developers of Hey, to discuss the App Store fees on the latest episode of The Vergecast.

"Because of the market power that Apple has, it is charging exorbitant rents -- highway robbery, basically -- bullying people to pay 30 percent or denying access to their market. It's crushing small developers who simply can't survive with those kinds of payments. If there were real competition in this marketplace, this wouldn't happen," Cicilline said.

The representative went on to explain that he has heard from "many people" who are afraid of economic retaliation. "This is a real problem in the marketplace. This is a direct consequence of enormous market power, the fact that Apple is the gatekeeper for these developers," Cicilline added.

Although Apple created the platform and associated hardware for App Store apps, Cicilline said that the company shouldn't be charging high fees for use of those solutions.

"You cannot simply allow someone merely because they invented a system or a product to continue to enjoy that kind of monopoly power," Cicilline said. "It's contrary to our laws. It's unfair to new developers, new startups, and it hurts consumers."

Heinemeier Hansson has been vocal about Apple's handling of the Hey app. Just a day prior to the interview, he took to Twitter to say that Apple blocked software updates for the platform and threatened to remove it. On Thursday, Apple reportedly rejected Hey's appeal to keep its app on the App Store in its current state, Axios reported.

The Hey app did not contain an in-app option to purchase subscriptions, which is required by Apple for most types of apps. Instead, users of Hey must sign up for the platform on the company's website and log in with their credentials.

Apple had originally approved the app, though it told Protocol that the app's approval was a mistake. The Cupertino tech giant said that it allows apps without in-app subscription options for business, but not consumer, services. It's worth noting that Spotify and Netflix do not contain in-app purchase options.

In 2019, the U.S. Department of Justice launched a probe into Apple's App Store activities. Heinemeier Hansson himself testified as part of the investigation in January.

Cicilline said that the antitrust probe is nearing its end and that a final hearing could be held as soon as July. He added that the committee has been attempting to get major CEOs to testify. The probe will result in a report, though Cicilline says that fixing any problems within it could require "regulatory action and statutory changes."

Although Apple chief executive Tim Cook declined, Amazon's Jeff Bezos, Facebook's Mark Zuckerberg and Alphabet's Sundar Pichai have agreed. Microsoft President Brad Smith, for his part, has voiced support for further investigation and possible regulatory action of app stores.
«1

Comments

  • Reply 1 of 35
    There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant. 
    Andy.HardwakebaconstangDogpersonjony0
  • Reply 2 of 35
    There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant. 
    I'm sure all developers, especially small developers, would like to see a reduction in Apple's cut, but I too guess that all those App Store costs must be significant. It's not like they aren't getting something in return for that percentage.

    When Cicilline said, "It's crushing small developers who simply can't survive with those kinds of payments," it makes me wonder how many "small developers" would even be able to exist without the App Store.

    Then when he goes on to say "If there were real competition in this marketplace, this wouldn't happen," well, certainly it's true in the iOS marketplace there is no competition to the App Store, but there is the wider marketplace outside of iOS with millions of other devices that can be marketed to--doesn't that count as competition?

    Then again, if a competing, alternate iOS store were allowed, who would trust it?
    edited June 2020 Andy.HardwakebaconstangDogpersondavgregjony0joseroverfan
  • Reply 3 of 35
    larryjwlarryjw Posts: 782member
    You know how to handle the 15% or 30% cut Apple takes? Charge more.

    Since few are getting a special deal, its fair by definition.

    Android I guess costs less. So, program for Android. Nobody is stopping them. 
    baconstangDogpersondavgregjony0
  • Reply 4 of 35
    mjtomlinmjtomlin Posts: 2,428member
    "Because of the market power that Apple has, it is charging exorbitant rents -- highway robbery, basically -- bullying people to pay 30 percent or denying access to their market. It's crushing small developers who simply can't survive with those kinds of payments. If there were real competition in this marketplace, this wouldn't happen," Cicilline said.

    Umm... I call bullshit! IT HAS ALWAYS BEEN 30%!!! That has nothing to do with "market power". And Apple's market grew even though that 30% was there. There is absolutely no proof that small developers are being crushed. As a matter of fact the App Store has allowed small developers to flourish., because they don't play favorites with large companies. It was said that the App Store actually leveled the playing field for small developers because there's no administrative overhead - you write your app and submit it - Apple handles everything else.

    Let's also not forget that the App Store was huge in bringing down the price of mobile apps - they didn't go up. Before the App Store, mobile apps were fairly expensive on other platforms. Furthermore, Apple doesn't tell developers what they should charge - that's completely up to the developer. noting Apple gets 30% and you want to make $2 on each sale, sell it for $2.99.

    All of this is easily demonstrable, so Apple doesn't have a worry here.


    "You cannot simply allow someone merely because they invented a system or a product to continue to enjoy that kind of monopoly power," Cicilline said. "It's contrary to our laws. It's unfair to new developers, new startups, and it hurts consumers."

    Seriously!? Someone makes a hit product and all of a sudden they are no longer allowed to decide how that product works? What's next? Break iOS away from iPhone, so other OEMs can make iOS based devices, because Apple has monopoly power over iOS!?

    I agree to all of this when there's a real case for it, like when your product is merely one component of an actual product and you are trying to assume control over that actual product (and market) - That's what Microsoft did in the 90's. They made an OS. OEMs made the hardware. Microsoft's OS was the largely dominant OS and Microsoft used their position to force OEMs and IT departments into onerous licensing terms.
    Andy.HardwakebaconstangJinTechDogpersonjony0
  • Reply 5 of 35
    ne1ne1 Posts: 60member
    Cicilline is obviously in the pocket of Google and Microsoft. Of course their CEOs will testify— they want to tear down Apple for competitive reasons, namely success. I hope the rest of Congress sees through this corporate shill. Good for Tim Cook on not agreeing to testify— he shouldn’t give this guy the time of day. Oh, wait, he probably already does, on Cicilline’s iPhone. 
    jony0
  • Reply 6 of 35
    jungmarkjungmark Posts: 6,814member
    30% may be high but 30% of free is zero. Apple can drop to 10-15% but then there would be less to no free apps as Apple would change the minimum app price to make up for the shortfall. Servers aren’t free. Apple isn’t a charity. 

    What are grocery stores charging for shelf placement AND what are they getting for buying in bulk?
    Andy.HardwakebaconstangJinTechDogpersonmike1lkruppjony0
  • Reply 7 of 35
    paxmanpaxman Posts: 4,666member
    30% has always seemed on the high side and it has been controversial since day one. I don't know what the costs are but we do know Apple makes shedloads of money and it would make sense (to me), for Apple to share some of the spoils with the creative people who help make the platform so successful by lowering the prices. 
    Oferelijahgdarkvadermuthuk_vanalingam
  • Reply 8 of 35
    JinTechJinTech Posts: 756member
    There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant. 
    When Cicilline said, "It's crushing small developers who simply can't survive with those kinds of payments," it makes me wonder how many "small developers" would even be able to exist without the App Store.
    Cicilline needs to watch this video:

    App developer Joseph Riquelme, who made his fortune as the creator of video editing app Videoshop, decided to make the grand gesture to his mum and dad as a Christmas present this year - and he got their reaction on film.

    edited June 2020 jony0
  • Reply 9 of 35
    fred1fred1 Posts: 779member
    Since I’m the one paying at least part of the 30% and not only the developer, I believe I can say that it’s reasonable to pay this percentage of usually very low app prices in order to benefit from the vetting Apple does to be sure that what I’m paying for is really worth it. And developers benefit from the exposure they get from being in the App Store. Is 30% too high? That’s for each of us to decide. Some will say yes, some will say no. 
    What does this politician recommend? Apps that aren’t checked, can only be found based on an expensive marketing campaign, and that have to be updated through each developer separately? No thanks. 
    Dogpersonjony0muthuk_vanalingam
  • Reply 10 of 35
    JinTechJinTech Posts: 756member
    What I find fascinating is all these nay sayers say how much Apple is robbing them with these fees. If a developer charges $.99 for their app and get *just* one million downloads, the developer makes a gross of close to $700,000! If they charge $1.99 they gross well over a million dollars. Some of the apps that I have purchased for film work are well over $19.99 and they are worth even more than that as they highly increase productivity to new levels. They are considered standard tools in a filmmakers toolkit so I know they have been very successful. These apps are not made by big corporations either!

    I would highly disagree that small developers "cannot survive with those kinds of payments." Watch the video I posted above.
    jony0the1maximus
  • Reply 11 of 35
    Rayz2016Rayz2016 Posts: 6,771member
    paxman said:
    30% has always seemed on the high side and it has been controversial since day one. I don't know what the costs are but we do know Apple makes shedloads of money and it would make sense (to me), for Apple to share some of the spoils with the creative people who help make the platform so successful by lowering the prices. 

    No it was not controversial from day one. When Apple announced 30% at the WWDC, there was cheering from the dev crowd. Why? Because before that, app stores such as Handango had been charging as much as 70%.

    What I find odd is that everyone seems to be railing at Apple for charging 30%, but no one seems bothered by Basecamp charging $99 a year … for an email service. I mean Hey doesn't even offer masked email addresses for signups … and they still charge $99! 

    So I actually have more of a problem with developers charging subs for apps that they do the bare minimum to update (Ulysses) or charge subs for providing  iCloud syncing, where the customer is paying for iCloud, not the developer.


    edited June 2020 jony0
  • Reply 12 of 35
    Rayz2016Rayz2016 Posts: 6,771member

    JinTech said:
    What I find fascinating is all these nay sayers say how much Apple is robbing them with these fees. If a developer charges $.99 for their app and get *just* one million downloads, the developer makes a gross of close to $700,000! If they charge $1.99 they gross well over a million dollars. Some of the apps that I have purchased for film work are well over $19.99 and they are worth even more than that as they highly increase productivity to new levels. They are considered standard tools in a filmmakers toolkit so I know they have been very successful. These apps are not made by big corporations either!

    I would highly disagree that small developers "cannot survive with those kinds of payments." Watch the video I posted above.

    Yes, great video 😢. Thanks for posting it.

    I did see a suggestion the other day on Twitter.

    Someone asked how would developers feel if they could post their apps for with no 30%, but could still charge for it. The only catch would be that Apple would not help them promote the app in any way:

    It would not feature in any of Apple's app showcases.
    It would not feature in any of Apple's pick of the day/week/whatever
    It would be ranked lower than searches for apps paying the fee.

    I wonder how many developers would take them up on it?
    JinTechjony0
  • Reply 13 of 35
    avon b7avon b7 Posts: 5,765member
    People seem to be missing the point here.

    It has nothing to do with 30%, or 10% or 40%.

    Everyone will have their own personal opinion on the appropriateness of the percentage cut. 

    This is part of a quote from the article:

    "bullying people to pay 30 percent or denying access to their market". 

    'Bullying' and '30%' are not the point. The point is if you don't accept Apple's terms it denies you access to the market.'

    It is basically the same line that the EU is looking at: competition. 

    We will have to wait and see what the the outcome is but it is far from clear cut, whichever way you look at it. 

    Personally, I see Apple being in hot water but that's just my opinion based on the concept of competiton as implemented in many parts of the world. Having 20% of the global market and claiming there is no possible monopoly doesn't cut it either. You don't have to have a monopoly to be accused of monopolistic practices.

    It is a complex problem with many angles but there is a definite case for Apple having to declare to potential buyers - before purchase - exactly where 'lock ins' and user facing restrictions exist (supposing that they get a pass on the competiton side of things).

    The consumer facing part of the problem is in addition to the app developer situation. 

    Tim Cook should expect a fair amount of turbulence in the short to mid term. 


    edited June 2020 elijahgdarkvadermuthuk_vanalingam
  • Reply 14 of 35
    fred1fred1 Posts: 779member
    JinTech said:
    There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant. 
    When Cicilline said, "It's crushing small developers who simply can't survive with those kinds of payments," it makes me wonder how many "small developers" would even be able to exist without the App Store.
    Cicilline needs to watch this video:

    App developer Joseph Riquelme, who made his fortune as the creator of video editing app Videoshop, decided to make the grand gesture to his mum and dad as a Christmas present this year - and he got their reaction on film.

    Beautiful!  Thanks for sharing this.  
    JinTechjony0
  • Reply 15 of 35
    hexclockhexclock Posts: 911member
    I don’t see how the App Store limits competition. If I think I can make a better calculator than PCalc, I am free to try. 
  • Reply 16 of 35
    EsquireCatsEsquireCats Posts: 1,165member
    - The 'highway robbery' comment shows prejudice (and seemingly ignorant to commercial costs/markups.)
    - The "app store" is identical to a typical retail arrangement. Apple is the seller, not the developer. Apple's cut is typical for a retail environment (actually cheaper than most retail mark-ups.)
    - It's not a marketplace, the developer doesn't pay for a space on the store, can't surface any products of their choosing and doesn't have direct sales interactions with the customer.
    - The friction against the App store policies are nothing more than businesses trying to reduce costs. Their staff should pay attention, it's the same management style that finds a million excuses never to give a raise.

    I fully understand the reasons for why people might see competition issues, but every market has operating conditions and Apple's is a unique system because the developers are in partnership with Apple. I rarely see a complaint from a developer where the required outcome respects Apple's own investment and cost of the platform.
    mike1jony0jimh2
  • Reply 17 of 35
    elijahgelijahg Posts: 2,156member
    All this would be so incredibly easy for Apple to fix. Halve the fees and stop dictating where people can subscribe to an app's services and everyone would be happy. Unfortunately Apple is like a stubborn old man, absolutely refuses to change until they're forced to legally or otherwise - Mac Pro 2013 as an example, seems they hoped it would go away as a problem if they left it long enough, and the constant attempts with the flawed butterfly keyboards. Considering third party apps are the lifeblood of the iPhone, Apple (and people here) act as if Apple is doing devs a favour - they are to a certain extent, but the devs aren't slaves (sorry if that word isn't allowed anymore). Without third party apps, where would the iPhone be now?
    darkvadermuthuk_vanalingam
  • Reply 18 of 35
    elijahgelijahg Posts: 2,156member
    - The "app store" is identical to a typical retail arrangement. Apple is the seller, not the developer. Apple's cut is typical for a retail environment (actually cheaper than most retail mark-ups.)

    I rarely see a complaint from a developer where the required outcome respects Apple's own investment and cost of the platform.
    No it's not in anything but the most basic sense of they both sell something. If a physical store refuses to carry a product, the manufacturer can go to one of the other 20 or so major stores with exactly the same product with no modifications to the product. When Apple refuses to carry an app, the developer has only one other choice - Android, which would also involve rewriting their app from the ground up.

    I rarely see a complaint from a developer where the required outcome respects Apple's own investment and cost of the platform.
    There are complaints all the time about Apple's own lax interpretation of Apple's guidelines. It's one of the biggest complaints devs have. Even Schiller admitting the app shouldn't have got through in the first place proves even Apple's own reviewers struggle to interpret their own rules.

    edited June 2020
  • Reply 19 of 35
    elijahgelijahg Posts: 2,156member

    JinTech said:
    What I find fascinating is all these nay sayers say how much Apple is robbing them with these fees. If a developer charges $.99 for their app and get *just* one million downloads, the developer makes a gross of close to $700,000! If they charge $1.99 they gross well over a million dollars. Some of the apps that I have purchased for film work are well over $19.99 and they are worth even more than that as they highly increase productivity to new levels. They are considered standard tools in a filmmakers toolkit so I know they have been very successful. These apps are not made by big corporations either!

    I would highly disagree that small developers "cannot survive with those kinds of payments." Watch the video I posted above.
    Devs aren't complaining as much about fees for paid apps, but fees for subscriptions where Apple pays no part. Apple gets pissy when devs offer subscriptions outside apps but not within. 
    darkvader
  • Reply 20 of 35
    SpamSandwichSpamSandwich Posts: 33,408member
    Big surprise. An uninformed lawmaker acting in a capricious and prejudicial way toward Apple in order to bully them into a corner. This used to be called “restraint of trade” and a “shakedown”. Now it’s just business as usual!
    jony0jimh2
Sign In or Register to comment.