Pixel Envy

Written by Nick Heer.

The E.U. And Australian App Store Antitrust Investigations

The European Commission:

The Commission’s concerns, as outlined in the Statement of Objections, relate to the combination of the following two rules that Apple imposes in its agreements with music streaming app developers:

  • The mandatory use of Apple’s proprietary in-app purchase system (“IAP”) for the distribution of paid digital content. Apple charges app developers a 30% commission fee on all subscriptions bought through the mandatory IAP. The Commission’s investigation showed that most streaming providers passed this fee on to end users by raising prices.

  • “Anti-steering provisions” which limit the ability of app developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to use music subscriptions purchased elsewhere, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper. The Commission is concerned that users of Apple devices pay significantly higher prices for their music subscription services or they are prevented from buying certain subscriptions directly in their apps.

Note carefully what the Commission is saying: it is not either but both. The combination of these two rules — combined with the rest of Apple’s first-party advantages, like being able to advertise across its platforms — make it onerous for other music streaming services to compete with Apple Music. You could make a similar argument about Apple’s other services and the third-party services they compete against, but the Kindle marketplace and streaming video services other than Apple TV Plus seem to be doing okay.

Tom Warren, the Verge:

Spotify previously claimed that Apple uses its App Store to stifle innovation and limit consumer choice in favor of its own Apple Music service. That complaint was followed up with a similar one by Rakuten, alleging that it’s anti-competitive for Apple to take a 30 percent commission on ebooks sold through the App Store while promoting its own Apple Books service.

Epic Games also joined many developers and companies opposing Apple’s App Store policies, and filed an antitrust complaint with the EU earlier this year. It’s part of an ongoing dispute with Apple, after the Fortnite developer publicly criticized Apple’s App Store policies around distribution and payments. This resulted in Epic attempting to circumvent Apple’s 30 percent cut on in-app purchases in Fortnite, and Apple quickly removing the game from its App Store.

Meanwhile in Australia:

The ACCC’s second Digital Platform Services Inquiry interim report finds that Apple’s App Store and Google’s Play Store have significant market power in the distribution of mobile apps in Australia, and measures are needed to address this.

From the report (PDF):

The ACCC’s examination of the operation of the Apple App Store and the Google Play Store in Australia has identified a number of significant issues which warrant attention. These include: the market power of each of Apple and Google; the terms of access to app marketplaces for app developers, including payment arrangements; the effectiveness of self- regulation, including arrangements to deal with harmful apps and consumer complaints; and concerns with alleged self-preferencing and the use of data. These issues affect competition with potentially significant impacts for both app developers and consumers.

Michael Tsai has a good collection of developer and press reactions to the App Store antitrust investigations in both of these regions.

This is the flip side of Apple’s long-mandated subscription rules — developers are increasingly furious at the gatekeeping imposed by the company on a majority of smartphone users in the United States and Japan and a large percentage of other markets like Australia and the United Kingdom. Apple’s commission-based model works because it is the easiest — and sometimes only — way to reach all of these users.

The irony of Apple’s model for third-party developers is that it would have an easier time if it were more selective about which apps were allowed to be on its platform. If the iPhone were only open to developers that Apple preselected — something like the old Apple TV model — it would simplify the argument that iOS is not a wholly open platform. By opening it up just enough — by allowing developers to build apps but not launch them without complying with the App Store’s rules, and by mandating that the App Store is the only avenue for distribution — it has written policies that amount to rent-seeking.

Regardless of the outcome of these legal battles, Apple’s position makes its platforms worse for consumers in the long term. Apple can keep playing these games over how it splits revenue with developers, nitpicking app text so that it becomes vague and unhelpful, finding circuitous paths where a digital purchase may not use in-app purchases, and so on, but users always lose. Apple has often had poor developer relations, but it is worrisome that it has broken down into an adversarial relationship with so many high-profile companies.