TOPLINE Apple has agreed to make some changes to its App Store policy as part of a proposed lawsuit settlement which will enable developers to contact customers about alternate payment methods for in-app transactions that will allow them to circumvent Apple’s sizeable commission fee, a move that comes at a time when the iPhone-maker is facing major antitrust and legal challenges around the world.
KEY FACTS
Is a press release, Apple says it will allow app developers to reach out to their iPhone and iPad customers via email or other communication channels to inform them about alternate payment methods that don’t carry Apple’s fee—something Apple previously did not allow.
One caveat to this allowance is that users will need to consent to the communication and they will have the right to opt-out of receiving such communications.
The proposed settlement also expands the number of price points that developers can charge for subscriptions, in-app purchases, and paid apps.
Apple has also agreed to create a $100 million fund for payouts to small app developers.
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The iPhone-maker has also agreed to not raise its commission rate for small developers—which it slashed from 30% to 15% last year—for at least three years.
The proposed changes will have to be approved by a U.S. federal court judge who is also presiding over Epic Games’ lawsuit against Apple.
CHIEF CRITIC
The Coalition for App Fairness—a group that includes the likes of Spotify and Epic Games as its members issued a statement dismissing Apple’s settlement offer as a “sham.” Meghan DiMuzio the executive director of the group said: “Apple’s sham settlement offer is nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide… If this settlement is approved, app makers will still be barred from communicating about lower prices or offering competing payment options within their apps.”
CRUCIAL QUOTE
“We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of U.S. iOS developers, could help to bring about so much important change,” Steve Berman, a lawyer for the plaintiffs in the suit, told the New York Times.
KEY BACKGROUND
Apple’s settlement appears to be a rather minor concession from the world’s richest company as its App Store business practices face increasing antitrust scrutiny worldwide. Some app makers, like Spotify, already block new customers from signing up for subscriptions inside their iOS app. In the past, the music streamer has also sent out emails urging existing subscribers to ditch Apple’s payment system for a discount. Apple’s new proposal will simply formalize this for all developers. The company, however, made no concessions about payment methods within iOS itself, and app developers are still forced to only use Apple’s payment system for all in-app transactions taking place on an iPhone or iPad. The proposed settlement comes at a time when Apple is awaiting a decision from a federal judge in a separate lawsuit filed by Fortnite-developer Epic Games which seeks to allow developers to circumvent Apple’s App Store commissions altogether.
TANGENT
On Wednesday, a South Korean parliamentary committee voted to move forward a key legislative amendment that would ban Apple and Google from forcibly charging app developers a commission on all add-on purchases by requiring them to use their proprietary payment systems. Previously this month, a group of bipartisan U.S. senators introduced a similar bill that would bar companies from forcing their payment system on app developers. Last year, the European Union unveiled a set of proposals that would force the likes of Apple and Google to divest parts of their business if they fail to adhere to fair competition rules.
FURTHER READING
Apple Settlement Gives App Developers a Way to Avoid Its Commission (New York Times)
Apple strikes App Store deal with small developers as it waits for ‘Fortnite’ ruling (Reuters)
By Siladitya Ray, Forbes Staff
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