Apple settles ‘forced commission’ row with app developers

Apple is to allow app developers tell customers about alternate payment methods through email and other channels, potentially avoiding the commission charged by the tech giant.

The move comes as part of a legal settlement with a group of app developers, announced overnight on Thursday, and will apply to Apple's global business.

The deal, if approved by a judge in the US, will also see Apple keep its commission rate for small developers, currently at 15 per cent, for at least three years, and expand the number of prices open to developers from the current 100-500 by the end of next year.

Apple will also create a $100 million (€85 million) fund for payouts to small app developers selling through its US store. The fund is open to developers who made less than $1 million a year in the US App Store from June 2015 through April 2021, with payments ranging from $250 to $30,000 each.

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Any communications from developers on potential payment methods must have customer consent and give them the right to opt out, Apple said.

The settlement could appease developers and regulators concerned with Apples control over mobile apps, including strict policies designed to force developers to pay it a cut of their sales.

The settlement appears to be a small price to pay for the world's richest company to avoid another extended legal fight that could have posed major risks to its business by targeting the iPhone App Store. In practice, some major companies, such as Spotify, already push their customers to evade Apple's commissions.

The EU has also accused Apple of unfair competition relating to a complaint from music-streaming service Spotify over the 30 per cent fee for subscriptions through the App Store. Although this settlement is not focused on the EU case, Apple’s spokeswoman said the company hoped it would be seen as a positive step.

According to Apple, 85 per cent of the apps in its store are free of charge, with 15 per cent currently paying a commission to Apple. Those developers who currently offer apps free of charge will be offered the same opportunity to communicate with customers.

Apple will still bar developers from telling customers inside their iPhone apps about other ways to pay.

Validation

An Apple representative said the settlement validated the App Store policies and represented a break between the smaller developers, who make up a large part of those who pay commission, and larger developers, who are still pushing back against the company.

Apple is awaiting a decision from a US federal judge in a separate lawsuit filed by Epic Games, maker of the popular game Fortnite. The suit seeks to force Apple to allow app developers to avoid App Store commissions altogether.

Consumers have also sued Apple over its app commissions, in a case that the US Supreme Court has allowed to go forward in federal court and that is seeking class-action status.

Some companies already push customers toward other ways to pay. Spotify, for example, has long blocked customers from signing up for subscriptions to its music service in its app – and it has at times advertised this. Apple’s decision on Thursday appears to remove a rule that it was already selectively enforcing.

Steve Berman, a lawyer for the plaintiffs in the suit, which sought class-action status, said, "We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of US iOS developers, could help to bring about so much important change."

Dissent

The Coalition for App Fairness, a group of companies that are fighting to change Apple’s App Store policies, said in a statement that the agreement was a “sham settlement” designed to appease courts, regulators and lawmakers.

"This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem," said the group, which includes Epic Games, Spotify and Match Group.

“Allowing developers to communicate with their customers about lower prices outside of their apps is not a concession and further highlights Apple’s total control over the app marketplace.”

In the settlement, Apple also agreed to publish an annual report on the number of apps it rejects or removes from its App Store, as well as data on its search results. The New York Times reported in 2019 that Apple had been favouring its own apps over those of rivals in search results.

Apple agreed in the settlement to ensure that its search results “will continue to be based on objective characteristics” for at least three more years.

Separately on Thursday, Apple said it would allow news organisations to pay the reduced 15 per cent commission on subscriptions sold through their iPhone apps, but only if they participated in Apple’s news service, Apple News.

The New York Times and some other news organisations have pulled out of Apple News in recent years because, they said, it took control of their relationship with readers and potential subscribers. – Additional reporting: New York Times