European App Store Antitrust Investigation

Will Oremus (tweet):

It’s a function of Apple policy. With some exceptions, the company doesn’t let users pay app makers directly for their apps or digital services. They can only pay Apple, which takes a 30% cut of all revenue and then passes 70% to the developer. (For subscription services, which account for the majority of App Store revenues, that 30% cut drops to 15% after the first year.) To tighten its grip, Apple prohibits the affected apps from even telling users how they can pay their creators directly.

European Commission (via Tom Warren, Hacker News, MacRumors):

The European Commission has opened formal antitrust investigations to assess whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules. The investigations concern in particular the mandatory use of Apple’s own proprietary in-app purchase system and restrictions on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps.

The investigations concern the application of these rules to all apps, which compete with Apple’s own apps and services in the European Economic Area (EEA). The investigations follow-up on separate complaints by Spotify and by an e-book/audiobook distributor on the impact of the App Store rules on competition in music streaming and e-books/audiobooks.

Apple (via MacRumors):

Apple today announced the App Store ecosystem supported $519 billion in billings and sales globally in 2019 alone. The new study, conducted by independent economists at Analysis Group, found that the highest value categories were mobile commerce (m-commerce) apps, digital goods and services apps, and in-app advertising. The results encapsulate the full sweep of the dynamic, competitive, and flourishing app economy, which has unleashed a torrent of innovation across 175 countries and revolutionized the way the world learns, works, and connects.

Note that, as it says on the first page, the study was funded by Apple.

Nick Heer:

The key words in the study and the way Apple describes it are “facilitated” and “supported”. That means that dinners ordered through DoorDash, goods bought through the Amazon app, and transactions made through Venmo or WeChat are all estimated in this study as being commerce facilitated by the App Store.

Next, let’s study the commerce facilitated by HTTP. Of course, there’s no way to study the opportunity cost customers and developers have been paying for the App Store being run in this way.

Did you catch that? “Selling physical goods” is, apparently, just another way of monetizing an app. While you might consider apps from DoorDash or Amazon just native front-ends for their business, this study reverses that logic and suggests that the apps’ existence is facilitated by the goods and services sold through them.

Apple:

It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else… We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.

Manton Reece:

This is the worst, most insulting statement from Apple that I’ve ever seen. Everything in it is backwards.

See also: Ryan Jones, Michael Love.

Previously:

• HEY Rejected From the App Store
• How to Improve the App Store
• The App Coalition
• Amazon Prime Video Now Allows In-App Rentals and Purchases
• App Store Monopoly Lawsuit
• Spotify: Time to Play Fair
• Antitrust, the App Store, and Apple
• Apple and Google Face Growing Revolt Over App Store “Tax”

Update (2020-06-18): Damien Petrilli:

I didn’t know about the Apple statement until you published your article.

So infuriating and arrogant.

Constantin Jacob:

The second quote from Apple on here makes me want to quit developing on this platform all together

Savannah Reising:

It’s in Apple’s best interest to be proactive and tackle the antitrust problem itself rather than waiting for the government to step in. To help Tim Cook get ahead of the scrutiny, we’ve compiled some reasonable suggestions for Apple that don’t require government regulation. The idea here is that Apple would probably want to tackle the problem itself instead of having the government step in to break apart the platform (we’ll dive deeper into that later). We want to see the App Store level the playing field for third-party developers and promote a rich app economy for consumers, and we’re ready to offer our own post-sherlocked wisdom on how to do that.  

Update (2020-06-19): Nick Summers:

Some developers feel differently, though. The Omni Group, the developer behind OmniFocus and a slew of other productivity applications, is generally content with the App Store’s rules and fees.

“It can be a lot of work to adapt one’s business model to work within the App Store,” Ken Case, CEO of the Omni Group told Engadget. “We spent years doing that ourselves! That said, we know that it costs money to build and operate the App Store, and we don’t begrudge giving Apple a share of our revenue to keep that going—so we’ve implemented in-app purchases in all our apps, and we think it’s generally appropriate for other developers to do the same.”

Juli Clover (also: Hacker News):

Antitrust regulators are currently investigating competition in digital marketplaces, focusing on Facebook, Amazon, Google, and Apple.

Microsoft is not involved in the investigation, but Microsoft joined the conversation today when president Brad Smith said at a Politico event (via Bloomberg) that it’s time for regulators to take a look at app stores. Smith was careful not to name Apple or Google, but those are the two companies that have major digital software marketplaces and that are the focus of the investigation.

John Gruber:

I get the strong sense — reading between the lines of Smith’s carefully measured opening public salvo here, and listening to private sources behind the scenes — that this is not just an offhand remark but a sign that Microsoft is strategically positioning itself to push for antitrust regulation here. They have much to gain and nothing to lose — and they have experience, to say the least, with antitrust regulators.

Just mind-boggling on a 25-year time scale that Microsoft and Apple are now on these sides of a serious antitrust controversy.

Update (2020-06-22): Steven Sinofsky:

Much of the DOJ v Microsoft antitrust case was perceived to be about browsers or even “bundling” but in fact it was really about the terms and conditions that came with selling a Windows PC. The regulation that followed was much more about that.

[…]

Who was the customer? The OEM or the PC buyer? Ask the person with a broken PC and they almost always thought of this as a Windows problem. They would call Microsoft and through a complex phone tree ended up with Dell’s phone number good for 90 days from purchase. 13/ While Microsoft was paid for Windows, it was from OEM. So OEMs reasoned they could do whatever they want to Windows essentially acting as the customer would. But Microsoft viewed the OEM as a distributor and the end-user was the licensee. Really complicated in a legal sense.

Antitrust App Store Apple Business European Union Google Play Store In-App Purchase iOS iOS 13 Legal Microsoft

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