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In a major concession, Apple to allow apps like Netflix and Spotify to link out to the web for sign ups

The current app store policies of Google and Apple have invited criticism from app developers across the world.

Apple announced an update to its App Store policy that will allow developers of “reader apps” to include an in-app link to their website for users to set up or manage an account. The change was made to close an investigation by the Japan Fair Trade Commission (JFTC). Notable, the change will be applicable to all reader apps globally starting in early 2022.

This is the second concession that Apple has made in less than a week and it comes at a time when both Apple and Google are facing increased regulatory scrutiny and legal battles across the world with respect to their app store practices.

What are reader apps?

Reader apps are apps that provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video, Apple said in its announcement. It does not cover apps that offer in-app purchases. As such, apps like Spotify and Netflix, which offer music and video subscription services respectively, fit the criteria for reader apps.

“Because developers of reader apps do not offer in-app digital goods and services for purchase, Apple agreed with the JFTC to let developers of these apps share a single link to their website to help users set up and manage their account,” the company said.

Why is this a big deal?

Apple’s current policy: Apple’s current App Store guidelines state that apps cannot “encourage users to use a purchasing method other than in-app purchase” and “developers cannot use information obtained within the app to target individual users outside of the app to use purchasing methods other than in-app purchase (such as sending an individual user an email about other purchasing methods after that individual signs up for an account within the app).” The guidelines also clearly state that “apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”

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What is the issue with the current policy? Developers prefer users paying through alternate payment methods, such as through their own website, because the in-app billing system requires paying Apple a 30 percent commission. But the current policy severely limits the ability of developers to communicate this with their users.

Didn’t Apple announce a change to this policy recently? Yes. Last week, Apple in a settlement to a 2019 US lawsuit proposed allowing developers to let users know about payment methods available outside the in-app billing system through communication methods outside the app like email. But this minor change did not go far enough to appease the developer community because apps were still not allowed to use in-app prompts to share information about or directly link to external payment methods.

Spotify and Netflix don’t offer in-app sign-ups due to current policy: Spotify and Netflix, two of the most downloaded apps, currently do not have an option for users to subscribe through their apps. More importantly, the apps do not display any details on how users can subscribe because this would violate the App Store policy. Spotify points out the inconvenience this causes in a dedicated website calling out Apple’s unfair app store practices: “If users want to upgrade from our Free service to Premium, great, we’d love to have them! But Apple bars us from offering that option in our app […] And to top it off, we can’t even tell them that or point them in the right direction. You have to figure it out all on your own.” But with the new policy change, these two apps can link users to their account page on the web where users can sign-up.

What the new policy does not allow? Apple still does not allow developers from taking other forms of payment inside apps, a practice that Epic tried with its Fortnite game, and for which it was suspended from the App Store. The announcement also does not say if reader apps can talk about the pricing of services within the app.

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Apple will still help developers protect users: “While in-app purchases through the App Store commerce system remain the safest and most trusted payment methods for users, Apple will also help developers of reader apps protect users when they link them to an external website to make purchases,” the company said. But this could be problematic as The Verge notes because Apple could have specific guidelines for how these links appear.

How is the new South Korean law different? South Korea’s National Assembly on August 30 passed a first-of-its-kind bill that forces Google and Apple to open their app stores to alternative payment systems. This goes much further than Apple’s latest policy update because it basically allows all kinds of apps to use their choice of payment systems possibly within the app as well.

Other regulatory and legal battles that Apple and Google are facing

Epic Games lawsuit: Epic Games, maker of the popular Fortnite game, publically challenged Google and Apple last year by adding their own payment system within their app that allowed them to avoid the 30 percent commission. Owing to this violation, both Google and Apple removed Fortnite from their app stores, leading to a legal challenge from Epic Games. The hearings in the much-publicised lawsuit concluded last month and a verdict is awaited.

New antitrust bill in the US: On August 11, US lawmakers introduced a new bill titled Open App Markets Act that proposes:

  • Operating systems must allow third-party app stores
  • Developers must be allowed to choose their choice of in-app payment system
  • Pricing for various app stores or in-app payment systems can be determined by developers
  • Developers can freely communicate pricing offers with users
  • Google and Apple cannot use non-public data to build competing apps
  • No self-preferencing in app stores
  • Third-party developers must be provided the same access to developer tools

Lawsuit in the US: In July this year, three dozen states in the US and the District of Columbia filed an antitrust lawsuit against Google alleging that its Play store is an illegal monopoly.

Retaliation to Google policy update in India: Back in September 2020, Google clarified that it will enforce its billing system on all apps downloaded from the Play Store for in-app purchases of digital goods and services and gave developers until September 30, 2021, to integrate into its billing system. Multiple Indian startup founders pushed back against Google forcing developers to use its billing system. Bowing to pressure, Google deferred the enforcement of its billing system policy only for India to March 2022.

Investigation in India: In November 2020, the Competition Commission of India (CCI) ordered a detailed investigation into Google’s payment policies and alleged manipulation within Play Store. The apex body for anti-trust matters said that there was prima facie evidence that Google may be abusing its dominant position in India, with regards to Play Store’s exclusivity and Google Pay (GPay) services. The CCI ordered an investigation into these aspects of Google’s practices:

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  • High commissions 
  • Exclusivity regarding the choice of payment systems for app purchases
  • Preference to Google Pay for payments
  • The advantage gained from data collection

Investigation in EU/Spotify complaint: The European Commission in June 2020 opened formal antitrust investigations to assess whether Apple’s rules for app developers violate EU competition rules in response to a complaint by Spotify. It particularly focuses on the mandatory use of Apple’s in-app purchase system and restrictions on the ability of developers to inform users of alternative cheaper purchasing possibilities. In April this year, the commission informed Apple of its preliminary view that it distorted competition in the music streaming market as it abused its dominant position for the distribution of music streaming apps through its App Store.

Investigation in the UK: In June, the UK government launched an investigation into Google’s and Apple’s effective duopoly over the supply of operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome). The investigation will examine the amount of power Google and Apple have in the distribution of mobile apps and the extent to which there are suitable alternatives to the default app stores. It will also examine if Google and Apple are using their position to launch competing apps and services and if these are favoured over third-party apps when showcased to consumers. The final report of this investigation will be published by 14 June 2022, based on which the government will establish a new pro-competition regulatory regime for digital markets.

Russia warning: Russia’s Federal Antimonopoly Service (FAS) on August 30 gave Apple a warning over abusing its dominant position in the distribution market for iOS apps and asked the company to eliminate signs of violations before the end of September. FAS reported that several iOS users and app developers reported concerns that users are not allowed to be informed about the possibility of cheaper purchase options outside of the app.

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