Apple must face UK complaint that its App Store commission is unfair
Apple will face a full trial in the U.K. over claims that it violated competition regulations by overcharging people on the App Store through its commission rate.
Credit: Unsplash
The London-based Competition Appeal Tribunal refused an attempt by Apple to limit or toss out a class-action complaint that was filed in 2021. Dr. Rachael Kent, a digital economy specialist and lecturer, is leading the action.
Kent praised the decision in a statement to The Daily Mail.
"I applaud the Competition Appeal Tribunal for this clear and well-thought-out decision," she said. A claim of this magnitude is always going to be heavily defended. The anti-competitive practices that we are alleging against Apple go to the heart of Apple's business strategy, and with its almost unlimited resources, it will always make this a challenging fight."
According to Dr. Kent's complaint, Apple's 30% commission on app and in-app purchases is unfair. Additionally, she argues that Apple's cut has forced developers to raise prices and push the cost to consumers.
At a court hearing in May, Apple attempted to argue against Kent's claim that the 30% cut is unfair and excessive on the basis that she had applied the wrong legal test. The tribunal, however, dismissed all of Apple's arguments.
"We do not accept Apple's argument that the pleadings disclose a legal error or defective approach, either in relation to the correct legal test for the abuse or for the consideration of economic value in that exercise," Tribunal chairman Ben Tidswell said.
This is not the first time that Apple has faced criticism for its 30% cut of App Store purchases. The company's commission rate, which was a standard among most app stores, has attracted opposition from lawmakers, developers, and others. Most famously, Epic Games launched a full-scale campaign and lawsuit against Apple because of it.
Apple has since offered alternative commission rates, including a reduced 15% commission for developers making less than $1 million in sales from the App Store.
Read on AppleInsider
Credit: Unsplash
The London-based Competition Appeal Tribunal refused an attempt by Apple to limit or toss out a class-action complaint that was filed in 2021. Dr. Rachael Kent, a digital economy specialist and lecturer, is leading the action.
Kent praised the decision in a statement to The Daily Mail.
"I applaud the Competition Appeal Tribunal for this clear and well-thought-out decision," she said. A claim of this magnitude is always going to be heavily defended. The anti-competitive practices that we are alleging against Apple go to the heart of Apple's business strategy, and with its almost unlimited resources, it will always make this a challenging fight."
According to Dr. Kent's complaint, Apple's 30% commission on app and in-app purchases is unfair. Additionally, she argues that Apple's cut has forced developers to raise prices and push the cost to consumers.
At a court hearing in May, Apple attempted to argue against Kent's claim that the 30% cut is unfair and excessive on the basis that she had applied the wrong legal test. The tribunal, however, dismissed all of Apple's arguments.
"We do not accept Apple's argument that the pleadings disclose a legal error or defective approach, either in relation to the correct legal test for the abuse or for the consideration of economic value in that exercise," Tribunal chairman Ben Tidswell said.
This is not the first time that Apple has faced criticism for its 30% cut of App Store purchases. The company's commission rate, which was a standard among most app stores, has attracted opposition from lawmakers, developers, and others. Most famously, Epic Games launched a full-scale campaign and lawsuit against Apple because of it.
Apple has since offered alternative commission rates, including a reduced 15% commission for developers making less than $1 million in sales from the App Store.
Read on AppleInsider
Comments
3% of the biggest developers are responsible for over 95% of app stores revenues. Most from IAP from games that are a free app in the app stores. Consumers are not forced to spend any money on IAP, in order to play the games. And for the most part, these game developers are not complaining about the 30% commission they also have to pay Microsoft, Sony, Nintendo or Steam, to be in their stores. And they are not flocking in masses to be in the Epic Game Store, where they would only pay a 12% commission.
https://www.thehindu.com/sci-tech/technology/app-store-gets-2-revenue-from-small-developers/article33330964.ece
Just 25 game developers account for over 50% of app store revenue. 25 game developers is not close to 3% of the developers in either app stores.
https://www.canalys.com/newsroom/top-25-us-developers-account-half-app-revenue
98% of the developers accounts for 7% of the revenue.
https://www.cnbc.com/2020/11/18/apple-will-cut-app-store-fees-by-half-to-15percent-for-small-developers.html#:~:text=Cramer-,Apple will cut App Store commissions by,15% for small app makers&text=Apple said it will cut,net sales on its platform.
The top 1% publishers generated 93% of app revenue
https://sensortower.com/blog/top-one-percent-downloads
am no expert
Just look at the F in FRAND and the fact that governments often take measures when 'abusive' pricing becomes a problem.
As the article touches on, if you are a de facto gatekeeper you have monopoly control over price structuring, commissions end up being passed onto consumers who can end up paying more through the lack of competition.
The EU attempted to trot out Spotify as an example of the commission rate being anti-competitive versus 1st party Apple Music (which isn't subject to commission), but that blew up in their face when it turned out 99% of Spotify's iOS subscribers were paying via the internet (which isn't subject to commission either).
It has control over price 'structuring'. This is referenced in the article where it is stated that developers pass on those extra costs to consumers.
The lack of competition and gatekeeper status is what will probably be key here.
Spotify isn't comparable in this case as it doesn't have platform-wide control over anything.
iOS is a closed retail environment and Apple is both the gatekeeper and middleman. That makes it radically different to most other retail environments.
It's no different that when a municipality grants a company to be the only company to offer cable in their city. Or garbage service. Or gas and electricity. The city can regulate the prices they charge because the government handed them a "monopoly" (in their cities.). So the government regulates a price that is "fair" for consumers AND the company. Not just what's "fair" for the consumers. ATT could not charge any price they wanted for their services, even though they practically had 100% of the market. ATT was handed their monopoly when the US government deemed that it was more important to have one telecommunication standard where everyone can connect to each other at an affordable rate, than to have many telecommunication competing with different services. Thus ATT had to go through a government regulatory agency in order to raise their prices. Rates went up for consumers when the the government broke up ATT.
And then you have this.
https://9to5mac.com/2020/11/30/report-98-of-devs-15-percent-commission/
How is charging a 15% commission to 98% of the developers in the Apple App Store, not "fair" for consumers?
Let us be real, both you, me and a lot of people here know that the 30% commission mainly affects the profits of 2% of the biggest developers that are making billions in profit from being in the Apple App Store. And most through games IAP, that consumers are not forced to spend any money on. Remember, for every $3 Apple makes from the 2% of the most profitable developers, the developer made $7.
Do some research. Most of these 2% top developers have their own websites where their subscribers can pay for their subscriptions, without having to go through their apps and having to pay a commission. And yet there's no 30% or 15% savings for most of those consumers paying on their websites. Why not, if consumers are the one paying the commission? The commission for paid subscribers drops from 30% to 15% after a year. Have to ever gotten a 15% discount from any developers, after subscribing to their services for over a year? Why not, if you are the one paying the commission? I never saw a 30% or 15% saving on my Netflix subscription in over 12 years of paying for it with auto payment on my CC, instead of through their app on iOS. And this would be true for nearly all streaming services.
In CA, the top 1% pays about 50% of the State income tax collected. And there are plenty of people, politicians and maybe even you, that would say they are paying their "fair share". So why shouldn't the most profitable developers be paying their "fair share", so that Apple can pay for RD and maintain iOS to their best interest, keep commission low for 98% of their smaller developers and offer their users an app store where 90% of the apps are free? While still making a reasonable profit.
https://lao.ca.gov/LAOEconTax/Article/Detail/7
As for the 30%, it is irrelevant the percentage developers it affects. The issue remains the same and that is why it is being looked at virtually everywhere.