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Apple App Store woes seem never ending as it faces its latest battle in China

Apple has another App Store fire to put out after China’s Supreme Court allows a user’s antitrust lawsuit to proceed.

Adding to Apple’s App Store woes, China’s Supreme Court last month dismissed Apple’s plea and ruled that an antitrust lawsuit filed by a consumer against the company’s China entity can proceed, South China Morning Post reported. In its plea, Apple had argued that the lawsuit should not be allowed because its China entity does not deal with App Store operations. The court, however, said that Apple had potentially abused its market position and undermined competition, and hence the case can be heard, the report stated.

This ruling paves the way for the Shanghai Intellectual Property Court to adjudicate the case. A decision in China has significant implications for Apple because the country accounts for a fifth of its iPhone sales. The ruling also sets precedent in that other individual consumers can also mount antitrust challenges against the company.

What is the lawsuit about?

Similar to legal challenges mounted in other parts of the world, the complainant in China has argued that Apple is potentially abusing its market dominance by charging a 30 percent commission on App Store purchases. The complaints alleged that the prices of in-app services offered by apps in Apple’s App Store are higher than in Android app stores because of this commission. Notably, Google’s Play Store, which charges the same commission as Apple, is not available in China and Android apps are made available through various local app stores that charge anywhere between zero to fifty percent commission, the report stated.

The lawsuit also demanded that Chinese consumers be allowed to make payments through methods other than Apple Pay such as Alipay and WeChat Pay, SCMP reported.

US court ruling and South Korean law

On September 10, US Judge Yvonne Gonzalez Rogers gave his verdict on the monumental Apple vs Epic lawsuit, ruling that Apple must allow iOS apps to direct users to purchasing mechanisms other than the one offered by the company. A South Korean law passed in August also requires Apple to allow alternative in-app purchase mechanisms.

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While both these measures give developers the freedom of choice when it comes to payment processors and make it hard for Apple to charge its 30 percent commissions effectively, they actually do not prevent the company from charging this commission in some other way. Notably, the judge in the US ruling said that Apple is within its rights to charge a 30 percent commission, leaving room for Apple to find other ways to earn its share.

How are other countries dealing with app store regulations?

India: In India, both Google and Apple are facing regulatory scrutiny over their app stores. While the Competition Commission of India ordered a detailed investigation into Google Play Store last November, it is currently reviewing an antitrust complaint filed against Apple App Store last month.

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 with the same access to developer tools

EU and UK: The European Union has launched an investigation into Apple App Store following a complaint from Spotify and the United Kingdom has launched a broad 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). Both investigations are ongoing.

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