Apple cites web, third-party markets as evidence against App Store dominance

AppleInsider

In a submission to the Australian Competition and Consumer Commission, Apple rejected the notion that the App Store is the world's dominant app marketplace, noting users can acquire digital content from the web and other sources.

Apple and Google are targets of an ACCC probe into app store policies, with the antitrust watchdog examining potential issues arising from purported marketplace dominance.

The investigation is part of a larger inquiry into digital platform services and seeks to determine whether third parties can compete in a market alongside the App Store and Google Play. Also under review are app store regulations, fees imposed on developers, rankings systems, marketplace access, and the collection of consumer data.

Responding to the ACCC's original issues paper release in September, Apple said it "perceives and treats other distributors of apps, for platforms other than iOS, as significant competitors whose pricing and policies constrain Apple's ability to exercise power over developers." Further, the company disagrees with the body's characterization that the App Store is "the most dominant app marketplace by a large margin." Apple does not believe it has a "substantial degree of power" in any market relevant to the ACCC inquiry, nor does the company see market failures that need to be addressed through legal action.

Apple's submission (PDF link) was filed in February and made public on Wednesday. ZDNet reported on the document earlier today.

There are a number of channels through which iOS users can access digital content, Apple says, citing main competitors like the web, web-based app stores including Steam, and alternative hardware and software platforms like Google Play. Additionally, developers have alternative methods at their disposal, both for distribution (reader apps) and collection of fees (outside subscriptions).

Apple argues there is "vigorous" cross-platform competition to retain developers, adding that numerous App Store innovations have been driven by the need to keep up with other ecosystems. In-app purchases, pricing terms, App Store editorial content, subscriptions, Apple Arcade, promotional codes, App Clips and more are cited as examples of responses to, or catalysts of, change in the marketplace.

The tech giant maintains that it faces significant competitive constraints as developers have the option to walk away from the App Store to other platforms.

"Most notably, App Store prices (i.e., the App Store commission) continue to decrease," Apple says. "Apple has never had the market power to increase or even maintain its commission. Over the years, Apple commission has decreased, or Apple has increased options for developers to avoid its commission (like the Reader Rule and Multiplatform Rule) in order to remain competitive and differentiate itself against other app marketplaces."

Apple typically takes a 30% cut of in-app purchase revenue, but that slice was recently reduced to 15% for developers earning less than $1 million a year. Google in March followed suit with an identical program.

The document notes that app marketplace commissions are not unique to the App Store, as Amazon, Google, Microsoft and Samsung each levy fees on their respective stores.

Today's publication comes days after Apple told the ACCC that it was "surprised" to hear developers had concerns with the App Store review process.

foregoneconclusion

One of the most ironic things about Epic's lawsuits is that Apple is constantly criticized by gamers for not taking games seriously enough. Why can't Apple have as many AAA games developed for its operating systems? Why doesn't Apple have it's own 1st party controller? Why doesn't Apple turn the ATV into a gaming console? Why isn't Apple Arcade more like Steam? You always hear people repeating these same types of things about how Apple isn't competitive enough for them. Meanwhile, Epic tries to argue in court that Apple is in total control of the market for games. It's really preposterous on a lot of levels. 

MacPro

I write this as someone who owned an international Mac-only software company and knew many others that did too back in the 1990s and early 2000s. 

 Sometime in early 2008.

"I've got this idea... Software companies have a hard time and low margins. They have to pay for duplication, packaging, manuals, shipping. They have to pay for booths at shows, salaries for traveling salespeople with hotels, airfares meals, and so on. The cost of advertising on the Mac magazines is high. They must be lucky to end up with ten percent net profit in many cases; on top of that, piracy is killing them, look how many go bust."

"What's the idea, Steve?"

"We take on all those costs for them. We host their software in an online store; I'll think of a catchy name."

"Wow, what would their net profit be, 20%?"

"No, I was thinking 70%."

"Steve, your insane that's far too generous when you look at Apple's costs to pull that off."

"I think it would benefit everyone in the end. Even a one-person company could do well, even compete with the big guys."

"Ok, we should give it a try; you know the software companies will be thrilled and eternally grateful."

gatorguy

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

foregoneconclusion

gatorguy said: Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

Who is saying this? Did they provide any legal judgements that would support a regulator in a particular country having that view? Law is about precedent. From what I've seen, there isn't much of a precedent worldwide for what Epic is claiming, i.e., an individual OS should be viewed as operating in a competitive vacuum. 

EDIT: oh, it's from 9to5Mac's "antitrust guide"...no wonder it doesn't make much sense. That site has no clue what it's talking about per antitrust. For example, they treat Apple lowering the cut to 15% for developers making less than one million per year as if it's proof that the 30% cut represents something anticompetitive...which doesn't really make any sense considering 1) 30% still applies to companies making more than one million  AND 2) Google made the same cut despite Android already allowing alternate stores.

tundraboy

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution.

The first sentence is downright stupid.  There has never ever been any case where the relevant market is defined that narrowly.  We might as well accuse BMW of monopolizing the relevant market called "Cars with BMW engines".  Or closer to home, Microsoft is monopolizing the relevant market called "Xbox games".

AppleZulu

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

This doesn't respond well to a bricks-and-mortar store or mall analogy. I can't think of any store, mall or even flea market that would respond well if I were to waltz into their store, mall or flea market and set up a kiosk to sell my wares without paying the store, mall or flea market operator a cut of the profit or a rental fee. If anything, the app store is most like a consignment shop. The shop owner covers the overhead and handles sales transactions, only taking a cut from those transactions. I can't even think of a consignment shop that would also go so far as to provide a space for people to give away things for free, including things that will lead to revenue outside of the shop's control. There's no monopoly in any of this.

dewme

MacPro said:

I write this as someone who owned an international Mac-only software company and knew many others that did too back in the 1990s and early 2000s. 

 Sometime in early 2008.

"I've got this idea... Software companies have a hard time and low margins. They have to pay for duplication, packaging, manuals, shipping. They have to pay for booths at shows, salaries for traveling salespeople with hotels, airfares meals, and so on. The cost of advertising on the Mac magazines is high. They must be lucky to end up with ten percent net profit in many cases; on top of that, piracy is killing them, look how many go bust."

"What's the idea, Steve?"

"We take on all those costs for them. We host their software in an online store; I'll think of a catchy name."

"Wow, what would their net profit be, 20%?"

"No, I was thinking 70%."

"Steve, your insane that's far too generous when you look at Apple's costs to pull that off."

"I think it would benefit everyone in the end. Even a one-person company could do well, even compete with the big guys."

"Ok, we should give it a try; you know the software companies will be thrilled and eternally grateful."

Yeah, in a world with people who act reasonably, cooperatively, and recognize that they are sharing a planet with other people, Apple's moves would be celebrated by developers trying to create a business for themselves with fewer hurdles to jump over. But we're living in a world where it's every person for themself, everyone else is here to serve them, and everything comes down to either winning or losing, at any cost. The Epic losers of the developer community whose existence would not be possible without the groundwork laid by Apple's massive investments want it all and they want it their way. Biting the hand that feeds them isn't good enough, they want the whole damn arm.

gatorguy

foregoneconclusion said:

gatorguy said: Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

Who is saying this? Did they provide any legal judgements that would support a regulator in a particular country having that view? Law is about precedent. From what I've seen, there isn't much of a precedent worldwide for what Epic is claiming, i.e., an individual OS should be viewed as operating in a competitive vacuum. 

EDIT: oh, it's from 9to5Mac's "antitrust guide"...no wonder it doesn't make much sense. That site has no clue what it's talking about per antitrust. For example, they treat Apple lowering the cut to 15% for developers making less than one million per year as if it's proof that the 30% cut represents something anticompetitive...which doesn't really make any sense considering 1) 30% still applies to companies making more than one million  AND 2) Google made the same cut despite Android already allowing alternate stores.

Specifically as it relates to Australian antitrust actions:
https://www.lexology.com/library/detail.aspx?g=1f7e6823-29bc-4e21-95e4-eb61bebb176b

As" dominance in a market" is determined by the European Union for competition law issues:
https://www.oecd.org/daf/competition/abuse-of-dominance-in-digital-markets-2020.pdf

And as seen through the eyes of the party currently in full control of the US House, Senate and White House. 
https://www.americanprogress.org/issues/economy/reports/2020/07/28/488201/using-antitrust-law-address-market-power-platform-monopolies/

gatorguy

AppleZulu said:

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

This doesn't respond well to a bricks-and-mortar store or mall analogy. I can't think of any store, mall or even flea market that would respond well if I were to waltz into their store, mall or flea market and set up a kiosk to sell my wares without paying the store, mall or flea market operator a cut of the profit or a rental fee. If anything, the app store is most like a consignment shop. The shop owner covers the overhead and handles sales transactions, only taking a cut from those transactions. I can't even think of a consignment shop that would also go so far as to provide a space for people to give away things for free, including things that will lead to revenue outside of the shop's control. There's no monopoly in any of this.

Note the fourth item in this list:

The CCA (Australian Competition and Consumer Act) : 

• prohibits cartels and anti-competitive conduct such as concerted practices and abuses of market power
• provides for private damages actions for anti-competitive conduct on a ‘single damages’ basis
• imposes personal liability for individuals, such as executives and management personnel knowingly involved in cartel conduct
• imposes access obligations on monopoly infrastructure owners, which allows others to access and use that infrastructure in certain circumstances
• prohibits misleading or deceptive conduct, as well as unconscionable conduct, in commercial and consumer transactions
• prohibits unfair terms in contracts involving small businesses and consumers
• sets out statutory guarantees related to the safety and quality of goods and services in consumer contracts
• establishes a strict liability regime for manufacturers that produce defective goods.

So now it would depend on how the Australian competition authorities look at Apple's iOS infrastructure and whether it operates in a monopoly position, and if so whether it allows for sufficient competition. I'm certainly not qualified to make that decision, nor are you in all probability. Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google WRT Android and Search.

avon b7

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

That perspective makes all the sense in the world and is the perspective I feel  most anti competition bodies will be taking into account.

In its claims, Apple is simply skirting the core issue. You are not going to have any app store competition once you purchase an iPhone.

This restriction is not communicated to the buyer at any time prior to purchase and that is where I believe they will fall foul to anti competition investigations.

foregoneconclusion

gatorguy said: Specifically as it relates to Australian antitrust actions:

https://www.lexology.com/library/detail.aspx?g=1f7e6823-29bc-4e21-95e4-eb61bebb176b

As" dominance in a market" is determined by the European Union for competition law issues:
https://www.oecd.org/daf/competition/abuse-of-dominance-in-digital-markets-2020.pdf

And as seen through the eyes of the party currently in full control of the US House, Senate and White House. 
https://www.americanprogress.org/issues/economy/reports/2020/07/28/488201/using-antitrust-law-address-market-power-platform-monopolies/

Your first link is just a description of how Australia defines things like "market" and "market power" etc. It doesn't actually provide any legal precedents. And take a look at all nine of the points listed in the "market power" section: which ones could you really argue were applicable to the App Store? I see two, and only because they relate to vertical integration. 

You second link has this disclaimer at the beginning of the report: 'The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the European Union.'

Your third link is to editorial content, not court opinions. The writer gives his opinion as to what Apple "might" be in violation of, but does not cite any relevant court cases. He uses public complaints, filed lawsuits, and various investigations only, not actual legal judgements. 

AppleZulu

gatorguy said:

AppleZulu said:

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

This doesn't respond well to a bricks-and-mortar store or mall analogy. I can't think of any store, mall or even flea market that would respond well if I were to waltz into their store, mall or flea market and set up a kiosk to sell my wares without paying the store, mall or flea market operator a cut of the profit or a rental fee. If anything, the app store is most like a consignment shop. The shop owner covers the overhead and handles sales transactions, only taking a cut from those transactions. I can't even think of a consignment shop that would also go so far as to provide a space for people to give away things for free, including things that will lead to revenue outside of the shop's control. There's no monopoly in any of this.

Note the fourth item in this list:

The CCA (Australian Competition and Consumer Act) : 

• prohibits cartels and anti-competitive conduct such as concerted practices and abuses of market power
• provides for private damages actions for anti-competitive conduct on a ‘single damages’ basis
• imposes personal liability for individuals, such as executives and management personnel knowingly involved in cartel conduct
• imposes access obligations on monopoly infrastructure owners, which allows others to access and use that infrastructure in certain circumstances
• prohibits misleading or deceptive conduct, as well as unconscionable conduct, in commercial and consumer transactions
• prohibits unfair terms in contracts involving small businesses and consumers
• sets out statutory guarantees related to the safety and quality of goods and services in consumer contracts
• establishes a strict liability regime for manufacturers that produce defective goods.

So now it would depend on how the Australian competition authorities look at Apple's iOS infrastructure and whether it operates in a monopoly position, and if so whether it allows for sufficient competition. I'm certainly not qualified to make that decision, nor are you in all probability. Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google..

You're right, I'm certainly not an expert in Australian law. Nonetheless, it's nonsensical to ignore competitive platforms, say that the relevant market is just "the iOS ecosystem" and therefore declare it to be a monopoly. The bricks-and-mortar parallel isn't just rhetoric. If the app store represents an internal monopoly, how would anyone differentiate that from the same monopoly operation currently carried out inside every store and mall in the world? Those businesses have complete control over who gets to do business on their platform and on what terms those vendors are allowed in. If the terms are untenable, competition down the road (with the exact same control over vendors) will get all the good vendors and take all the customers. For that matter, a side-road strip mall that only attracts second-tier vendors can't claim that the better-located, better managed mall has a monopoly just because they're able to attract a more lucrative customer base. That's not how any of this works. If Australian courts declare the iOS ecosystem to be a monopoly, if I were Apple, I would immediately insist on the right to establish pop-up Apple Stores inside various retail stores and malls throughout Australia, rent and commission-free. It's the same thing.

tenthousandthings

dewme said:

MacPro said:

I write this as someone who owned an international Mac-only software company and knew many others that did too back in the 1990s and early 2000s. 

 Sometime in early 2008.

"I've got this idea... Software companies have a hard time and low margins. They have to pay for duplication, packaging, manuals, shipping. They have to pay for booths at shows, salaries for traveling salespeople with hotels, airfares meals, and so on. The cost of advertising on the Mac magazines is high. They must be lucky to end up with ten percent net profit in many cases; on top of that, piracy is killing them, look how many go bust."

"What's the idea, Steve?"

"We take on all those costs for them. We host their software in an online store; I'll think of a catchy name."

"Wow, what would their net profit be, 20%?"

"No, I was thinking 70%."

"Steve, your insane that's far too generous when you look at Apple's costs to pull that off."

"I think it would benefit everyone in the end. Even a one-person company could do well, even compete with the big guys."

"Ok, we should give it a try; you know the software companies will be thrilled and eternally grateful."

Yeah, in a world with people who act reasonably, cooperatively, and recognize that they are sharing a planet with other people, Apple's moves would be celebrated by developers trying to create a business for themselves with fewer hurdles to jump over. But we're living in a world where it's every person for themself, everyone else is here to serve them, and everything comes down to either winning or losing, at any cost. The Epic losers of the developer community whose existence would not be possible without the groundwork laid by Apple's massive investments want it all and they want it their way. Biting the hand that feeds them isn't good enough, they want the whole damn arm.

This reminds me of an observation by Steve Lieber on Twitter this past New Year’s Eve:

“Y2K was 21 years ago. Looking back, I think the only thing we learned is that if a bunch people work really hard to stop a problem from happening, lots of other people will assume it was never really a problem.”

gatorguy

tundraboy said:

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution.

The first sentence is downright stupid.  There has never ever been any case where the relevant market is defined that narrowly.  We might as well accuse BMW of monopolizing the relevant market called "Cars with BMW engines".  Or closer to home, Microsoft is monopolizing the relevant market called "Xbox games".

I see the AppStore as being quite similar to how Ticketmaster operates (and I'm not the only one). Are there any antitrust cases involving Ticketmaster? 

EDIT: Here's one legal opinion (Apple v.Pepper) where Apple and Ticketmaster are equated, and why they believe a SCOTUS ruling re:Amex should have been applied. 
https://truthonthemarket.com/2019/05/13/dementia-sets-in-at-scotus-as-the-justices-collectively-mislay-amex/

foregoneconclusion

gatorguy said:  Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google.

Question: why would Google be motivated to match Apple's 15% rate cut if the iOS ecosystem was not in competition with the Android ecosystem? That appears to be a very obvious sign of competition outside of iOS. 

gatorguy

foregoneconclusion said:

gatorguy said:  Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google.

Question: why would Google be motivated to match Apple's 15% rate cut if the iOS ecosystem was not in competition with the Android ecosystem? That appears to be a very obvious sign of competition outside of iOS. 

For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

I'm no legal scholar and there's probably few if any members here who are well-versed in the intricacies of competition law and government policy. Some things that may not make sense to one person will make sense to another, and the only members of those two groups who matter are the ones with input in the process.

I believe the Aussies will define the relevant market as "iOS".  Others will choose to believe otherwise. IANAL. That is not my legal-based opinion, simply a personal one based only on the limited reading I've done and how the issues were explained. At some point the ones who matter will offer their far more legal opinion. 

AppleZulu

gatorguy said:

foregoneconclusion said:

gatorguy said:  Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google.

Question: why would Google be motivated to match Apple's 15% rate cut if the iOS ecosystem was not in competition with the Android ecosystem? That appears to be a very obvious sign of competition outside of iOS. 

For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

At least, Google wouldn't want to be caught out as the target after their competition over at Apple reduced their rate...

foregoneconclusion

gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.

steven n.

gatorguy said:

Per another source there's a difference in what each side would like to claim as the marketplace:

"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."

The problem with this is you can define ANY market so narrowly that it is possible to claim every company on the planet as a monopoly and then use state as a tyrant to take over any industry. 

gatorguy

foregoneconclusion said:

gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.

Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.

 I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?