Microsoft president Brad Smith is the latest to question Apple’s App Store practices, saying that it imposes strict rules on developers, and takes a big cut out of their revenues. “I do believe the time has come, whether we’re talking about Washington, D.C., or Brussels, for a much more focused conversation about the nature of app stores, the rules that are being put in place, the prices and the tolls that are being extracted and whether there is really a justification in antitrust law for everything that has been created,” Smith said at an event hosted by Politico on Thursday. Smith’s comments come as several app developers have criticised Apple’s App Store policies, and after the EU initiated two antitrust cases against the company for alleged anti-competitive practices (more on that below).
“They impose requirements that increasingly say there is only one way to get on to our platform and that is to go through the gate that we ourselves have created,” Smith said. “In some cases they create a very high price per toll — in some cases 30% of your revenue has to go to the toll keeper,” Smith said. While Smith did not specifically mention Apple, it was clear that he was referring to the 15-30% subscription fee that Apple charges from developers on in-app purchases, infamously called the Apple Tax. “If you look at the industry today, I think what you’ll find is increasingly you’re seeing app stores that have created higher walls and far more formidable gates than anything that existed in the industry 20 years ago,” he added, referencing to the antitrust case filed against Microsoft in the US, two decades ago.
Apple’s App Store policies have drawn ire from regulators
To be clear, even Google charges a similar cut on such purchases on apps from the Play Store, but the reason why Apple has come under more scrutiny is because, unlike Google, it doesn’t allow developers to circumvent the App Store by directing users to an alternate payment option. (Remember how Epic Games released Fortnite’s Android app outside of the Google Play Store to stop sharing revenue with the company? That wouldn’t have been possible in the Apple ecosystem.)
EU is probing Apple over alleged anticompetitive App Store policies: The 30% mandatory “Apple Tax” has resulted in two antitrust cases being initiated against Apple in the EU. One of these investigations will assess whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules, and follows complaints from Spotify and Rakuten’s e-book service Kobo. Spotify had filed an antitrust complaint against Apple in the EU in March 2019, saying it’s unfair that Apple Music doesn’t have to pay a similar fee, and that Apple doesn’t let Spotify link users out of the app to purchase a subscription, or even advertise deals to users.
US congressman calls the Apple Tax ‘robbery’: Regulators in the US have also taken note of the mandatory “Apple Tax”, as Congressman David Cicilline on Thursday called it “robbery” while talking to the Verge. “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.”
Why developers are critical of the mandatory ‘Apple Tax’
Spotify and Rakuten aren’t the only ones who have been critical of this App Store policy. Dating app Tinder’s parent company, Match Group, in a statement to MediaNama said, Apple is “a dominant platform whose actions force the vast majority of consumers to pay more for third-party apps that Apple arbitrarily defines as “digital services.”
Apple’s doubling down on email app HEY, is yet another testament to the power it wields over the App Store, developers, and the ecosystem in general. It rejected HEY to provide bug fixes and new features until it shared 15-30% of its revenue with Apple, according to developer David Heinemeier Hansson. Currently, HEY allows users to create an account on a website and pay for the service there itself, which Apple hasn’t taken kindly to. Apple also told HEY’s developers that in case it doesn’t allow users to purchase a subscription from within the iOS app, it will remove their app from the App Store.
The competition angle: Apple has also rejected Facebook’s Gaming app — which was launched on Android back in April — five times so far, saying that it prohibits apps which mainly distribute casual games, as per the New York Times. Meanwhile, Apple has its own casual games service on iPhone and iPad, called Arcade. “Apple squeezes industries like e-books, music and video streaming, cloud storage, gaming and online dating for 30% of their revenue, which is all the more alarming when Apple then enters that space, as we’ve repeatedly seen,” Match Group’s statement added.
Apple’s App Store inconsistency: Apple has also been criticised for not applying App Store policies uniformly to all developers. Big developers such as Amazon and Netflix, for instance, have been exempted from the mandatory in-app purchase option. “The overwhelming majority of apps, including Internet behemoths that connect people (rideshare/gig apps), or monetize by selling advertising (social networks), have never been subject to Apple’s payments systems and fees, and this is not right,” Match Group’s statement added.