By: Magdalene Eallonardo

After the creation of the first iPhone, Apple Inc. opened its App Store in 2008.[1] The company charges app developers a 30% fee to sell their software in the store, including all subscriptions and in-app purchases.[2] Its policy also prevents developers from informing their users on how to make these purchases elsewhere.[3] While Apple contends that this rule was instituted to maintain user privacy and prevent fraud, these commissions have turned into a $20 billion-a-year business.[4]

Now, developers are pushing back with antitrust claims.[5] Apple reached a settlement with a class of 67,000 in August, allowing small developers to alert their users to payment options outside of the App Store and altering the commission percentage.[6] Congress recently introduced antitrust legislation that aims to reduce Apple and Google’s control over the app market, and, earlier this month, the Northern District of California court issued its opinion on Epic Games, Inc. v. Apple Inc.[7] Epic Games, the maker of the videogame Fortnite, filed antitrust and unfair competition claims against Apple based on these App Store policies.[8] While the court did not find Apple to be an antitrust monopoly, it concluded that requiring apps to direct their users to the App Store for purchases is anti-competitive and ordered Apple to adjust their practices.[9]

These App Store policies have also triggered an international response.[10] South Korea passed legislation requiring companies that oversee app stores to allow users to pay for in-app purchases through a variety of payment systems.[11] Known as the Telecommunications Business Act, this law is the first of its kind in the world and will prevent companies like Apple and Google from requiring certain payment methods.[12] Apple is facing a similar claim in India, filed by Together We Fight, a non-profit that represents the interests of consumers and startup companies.[13] This case is to be reviewed by the Competition Commission of India (CCI) so the details are not made public, but CCI will review the case and conduct investigations accordingly.[14]

Similarly, the Japan Fair Trade Commission (JFTC) launched an investigation into Apple’s practices in October 2016 as an alleged violation of Japan’s Antimonopoly Act.[15] JFTC announced its plans to conclude its investigation in September 2021 after Apple agreed to allow some developers to direct their users to payment outside of the App Store.[16] The European Commission also opened a formal antitrust investigation into Apple’s App Store restrictions in June 2020 following complaints filed by Spotify and an e-book/audiobook distributor.[17] Apple is allegedly in violation of Article 101 and 102 of the Treaty on the Functioning of the European Union which prohibits anticompetitive practices and abuse of power in the EU’s Single Market.[18]

These new installments will affect technology companies, app developers, and consumers alike.[19] While Apple and Google are the focus of the investigations, all companies that fall under their umbrella will feel the effects of these agreements.[20] In the wake of the international response, Apple has made exceptions to its 30% commission; consequently, some app developers will see an uptick in revenue, and app users might notice a decrease in product prices or aesthetic changes.[21] However, these ongoing investigations may force Apple to make additional concessions.[22] Apple has shown the most resistance toward reducing the commission for gaming apps which made up 81% of the App Store revenue in 2016.[23] However, after the Epic Games decision, a fee reduction is more likely than ever.[24] At this point, Apple is making small amendments to satisfy arising contests, but pending legislation and future claims may impose further restrictions.[25]

 

[1] Kellen Browning & Daisuke Wakabayashi, Apple Gives Ground in a Strategic Retreat From Strict App Store Rules, N.Y. Times (Sept. 2, 2021), https://www.nytimes.com/2021/09/02/technology/apple-app-store.html

[2] Browning & Wakabayashi, supra note 1; Cat Zakrzewski, Apple settlement in developers’ court case won’t lessen the political heath, Wash. Post (Aug. 27, 2021), https://www.washingtonpost.com/technology/2021/08/27/apple-developer-settlement-react/.

[3] Zakrzewski, supra note 2.

[4] Browning & Wakabayashi, supra note 1; Vlad Savov & Sohee Kim, Apple, Google Mobile Dominance Faces Tough Test in South Korea, Bloomberg (Aug. 26, 2021), https://www.bloomberg.com/news/articles/2021-08-29/apple-google-mobile-dominance-faces-tough-test-in-korea

[5] See Browning & Wakabayashi, supra note 1.

[6] Zakrzewski, supra note 2.

[7] Zakrzewski, supra note 2; Bobby Allyn, What The Ruling In The Epic Games V. Apple Lawsuit Means For iPhone Users, Nat’l Pub. Radio (September 10, 2021), https://www.npr.org/2021/09/10/1036043886/apple-fortnite-epic-games-ruling-explained.

[8] Allyn, supra note 7; Epic Games, Inc. v. Apple Inc., No. 4:20-cv-05640-YGR, 2021 BL 343244, at *4 (N.D. Cal. Sept. 10, 2021).

[9] Epic Games, Inc., 2021 BL 343244 at *130.

[10] See Browning & Wakabayashi, supra note 1.

[11] Jin Yu Young, South Korea forces Google and Apple to allow third-party in-app payments, N.Y. Times (Aug. 31, 2021), https://www.nytimes.com/2021/08/31/business/south-korea-google-apple.html

[12] Id.

[13] Aditya Kalra, EXCLUSIVE Apple hit with antitrust case in India over in-app payments issues, Reuters (Sept. 2, 2021), https://www.reuters.com/technology/exclusive-apple-hit-with-antitrust-case-india-over-in-app-payments-issues-2021-09-02/

[14] Id.

[15] Press Release, Japan Fair Trade Comm’n, Closing the Investigation on the Suspected Violation of the Antimonopoly Act by Apple Inc. (Sept. 2, 2021) (on file with author).

[16] Press Release, Japan Fair Trade Comm’n, supra note 15; Browning & Wakabayashi, supra note 1.

[17] European Commission Press Release IP/20/1073, Antitrust: Commission opens investigations into Apple’s App Store rules (June 16, 2020).

[18] Id.

[19] See Allyn, supra note 7.

[20] See Allyn, supra note 7.

[21] See id.

[22] Cf. Browning & Wakabayashi, supra note 1.

[23] Browning & Wakabayashi, supra note 1.

[24] Cf. Allyn, supra note 7 (“‘Apple has so far gotten a pass in the Big Tech antitrust scrutiny of the past several years, but this says that is not going to continue . . . Apple’s control over what goes on the phone and at what price may get hard for Apple to sustain.’”).

[25] See Zakrzewski, supra note 2.