House antitrust chair calls Apple App Store fees 'highway robbery'
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
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.
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.
Comments
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?
Since few are getting a special deal, its fair by definition.
Android I guess costs less. So, program for Android. Nobody is stopping them.
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.
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.
I would highly disagree that small developers "cannot survive with those kinds of payments." Watch the video I posted above.
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.
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?
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.
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.
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.
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.