Can anyone provide a link to context on what OP is talking about, for those who don't know it? I don't understand what Apple is actually doing from this tweet/thread.
Are they are somehow managing to force even payment links from ordinary web sites in an ordinary web browser (Safari?) to go through them as payment processor? (How?) Or is this a new rule for app store apps (what is the new rule?) Or a new payment structure for in-app purchases? (what was the change?) Or no change, but pointing out how awful the status quo is? Other?
1. If you want to include a link to an website for payment of digital goods, you have to request an entitlement from Apple.
2. As part of that entitlement, you agree to pay Apple a 27% commission on any purchases made when users click those links, for up to 7 days after the link is clicked.
3. You agree to send Apple monthly sales reports.
4. You agreed to give Apple a right to audit your books at anytime.
That's the meat of it. It's a self-reported cost-per-conversion, which isn't exactly unheard of. Developers are in arms because they don't believe Apple deserves any money for distributing their app on their App Store.
That's the heart of the disagreement.
Apple believes they have a right to charge developers a fee for access to the users who shop through the App Store.
There are developers who believe that the App Store should exist as a free-thing Apple provides to developers, to encourage them to write software for the iPhone. They're willing to accept a nominal processing fee, but anything more is "anti-competitive".
Rephrased - Developers are up in arms because the cost of distribution on iOS is artificially high. It's artificially high because the cost is not subject to market forces. It's not subject to market forces because Apple has a vertical monopoly on hardware and software distribution. Vertical integration is illegal.
That's not true in the slightest, though. Sony, Microsoft, Nintendo, and Steam all take 30% for distribution and hosting, same as Apple. It's not artificially high if it's in line with the rest of the tech industry and if you want to try and claim that it's because of some monopoly, vertical or otherwise, then you have to explain why the other storefronts are also monopolies.
It's not a monopoly. Other phones and ecosystems exist.
I believe you have accurately described a cartel, however.
Epic has a game store charging 12 percent and nobody seems to care much about it.
Because developers go where the users are. That's all that matters.
Epic had to pay developers, a lot, to bootstrap the Epic store so that there were games there that mattered. And even now, with a decent selection, most PC gamers still use Steam. Because all their games are on Steam already. And every game they care about is on Steam.
So Steam can charge 30% and Epic can charge 12% and nothing really changes.
Probably has to do with market power. For my money, none of these companies should be allowed to own a game marketplace. The distribution channels should be stand alone from the hardware and software producers.
Cartel =/= same rate. It requires more than just price matching. this is why gas stations and grocery stores aren't cartels either.
There are absolutely antitrust issues with grocery stores - Kroger/Albertsons is being contested right now! It's a major contributor to food deserts. It's not a cartel because the main players aren't acting in concert, but they are attempting to monopolize regionally. Walmart has also concentrated way too much power, but that's the 800 lb gorilla no one wants to touch.
That said, gas stations and grocery stores deal in commodity products. The video game companies are much more integrated with many games that will only run on one system, stores will only run on one type of hardware, and games are not transferrable between competitor systems. Competition is extremely restrained because of these exclusive and limited distribution agreements. The fact that they all maintain the same line on prices is a very clear signal of cartel behavior when you take the context into account - they are using control of a distribution chokepoint to control competition and pricing power. That's the essence of why antitrust laws passed in the first place.
I dont have an opinion on regional monopoly, just the cartel issue, because I almost never hear it used correctly.
I believe you're arguing in bad faith. Are you just becoming aware of these companies 30% cuts? Why were you calling Apple a monopoly if you think this is a cartel issue? What evidence do you have of cartel behavior other than that people followed suite in setting rates?
You shouldn't make that assumption without significantly more proof. Why can't it be both? In the App space Apple has the dominant position in a duopoly, and in the software distribution space more broadly there is cartel-like behavior occurring regarding commissions because distribution has become a major chokepoint (I'm guessing thanks to DRM, but that's probably oversimplifying).
On consoles I can buy a digital copy, and I believe the 30% does not apply.
On Windows I can buy a digital copy on the devs website and MS gets nothing.
On Steam, I could buy the game in another storefront (GOG), or Direct, and Valve would get nothing.
On Android I could use a separate AppStore and Google would get nothing…
In other words, in all those platforms devs can opt in to participate on a centralized store taking 30%, or keeping an alternative channel with higher revenues. On iOS, not so much.
Years ago, Apple had a loving relationship with Devs. Now Apple is an over demanding Karen yelling over her alimony payments every end of the month.
Digital copies on consoles still get 30%, and console agreements may include additional royalties beyond that.
There is no way, on any major console, to "opt out" of the fee.
Mac has the same options available to developers as Windows.
Steam's third-party redemption mechanic is notable, and awesome.
On Android, different third-party stores have different fees. Samsung, for instance, charges the same 30% as Google. Epic's store charges 12%.
This is not accurate. Do more research. Steam has a tiered cut they introduced to keep big players on their store, for example. Google and Apple both offer a lower rate for small business. And alternative stores on PC successfully operate with much lower cuts (EGS, GOG, itch, humble). It's not "in line with the rest of the industry", it's "no higher than the other bad ones".
Steam also doesn't collect 30% for distribution (ie developer issued keys for things like bundles)
How is it not subject to market forces? That doesn't make sense.
If Apple's platform doesn't work for their profit margins they are free to sell their software elsewhere, including a plethora of phones from a diverse set of manufacturers. But they don't want to do that because Apple's platform makes them a fuck load of money. They just want more of it.
How about this: Apple can charge Epic the same outrageous* 12% that Epic charges game developers. Do you think that would alleviate Epic's concerns?
Can you provide a legal document or explicit law that states "vertical integration is illegal"?
* It's outrageous because Epic provides even fewer services (SDKs for example), still requires developer fees $100/submission, and has a much smaller user base. They're also not really doing anything. At least Apple makes the iPhone and improves the capabilities of it each year...
65% of domestic App Store revenue is on iOS, and the Apple app store is the only distribution channel. What market forces affect Apple's pricing power on commissions?
No, because like all things, it's about how you use it. Per the FTC - Exclusive dealing and exclusive distribution arrangements may be anticompetitive, however, if they are used to raise rivals' costs, exclude (or foreclose) competition, or facilitate tacit collusion. Exclusive dealing contracts may raise rivals' costs when the contracts are made with so many retailers, and lock up so much capacity at the retail level, that competing manufacturers are unable to attain minimum efficient scale in either the production or the distribution functions.
Apple is dealing with itself - maybe that argument holds in court (certainly has a shot with the current junta). It would certainly help if Congress would update the law for the 21st century. It's close enough to the line that it can be argued, and they are clearly nervous about it.
Be mad at someone else. I don't know or care about Epic and I don't play Fortnite. I just know that private companies should not be able levy a tax or unreasonable tolls in restraint of commerce. It's hard to justify a 30% toll on 65% of a $100B+ market without at least knowing if a third-party marketplace would offer better rates and service.
That just proves that Apple provides a lot of value through its platform and that developers are hungry to develop for it despite the platform fees, it doesn't prove that Apple's App Store isn't "subject to market forces".
This broad definition would apply from any company ranging from Nintendo to Walmart to Tesla. It's not convincing. If you are going to make the claim that "vertical integration is illegal" you should provide factual evidence stating this instead of just your broad interpretation of "Per the FTC".
Something something Apple tax, Junta, illegal something something.
That's really an argument for court. It could mean they've locked in a dominant market position they are abusing. Not for me to say, but you haven't made an argument otherwise.
Sure, but friend aren't we just discussing this on the Internet? It's all an argument for court :)
Raising the rev share they take makes the developers less incintivized to develop for the platform. Lowering the rev share makes developers more incentivized to develop for the platform. Apple is competing against other app platforms over developers of which there is a limited amount of.
So for Apple to lower the amount they take there would need to be another platform that is stealing developers from Apple's ecosystem. If developers stop developing apps for Apple's devices then that makes them less desirable for users so they would be incintivized to let developers keep a bigger portion of the revenue.
Is it? The only related info I could find is https://www.investopedia.com/ask/answers/012615/what-are-leg..., which says it _can_ be illegal (in the USA) if it is achieved through a merger.
https://en.wikipedia.org/wiki/Vertical_integration mentions quite a few examples of existing vertically integrated companies, mentions a few court cases, but doesn’t say it’s outright illegal.
Also, if vertical integration is illegal in the USA, somebody should tell Musk he should split up Tesla and SpaceX.
It can be in certain cases if it is in restraint of trade.
How are those companies related in terms of market power? I don't see it. Plus, space is so capital intensive and reliant on government contracts that pursuing it would be pointless.
The cost is subject to market forces if you believe that other phones exist.
Vertical integration is not, in any way, illegal.
"you agree to pay Apple a 27% commission on any purchases made when users click those links, for up to 7 days after the link is clicked."
So if the publisher says, "Click here for a renewal reminder and a 10% discount" and then sends a renewal E-mail on the 8th day, they're in the clear.
RAW, yes.
No. They’re allowing alternate payment processing with a link from an an iOS app to a webpage, and reducing their commission to either 12 or 27% representing a 3% discount for not doing the payment processing themselves. They’re basically following the ruling based on some California law being applied nationally that the Supreme Court declined to hear on appeal. The judge said Apple would have to allow links out to alternate payment and would be required to collect their commission, which she suggested might be a bit high, but didn’t order any changes because everyone else also charges 30%, too. They are basically trying to act as an affiliate or partner with commission, which is pretty much the way it was before, but accounting gets more complicated now. (The judge was okay with Apple continuing to collect commission on sales.)
Apple is still requiring they also make Apple in-app purchases available for the same digital goods. And also being pretty restrictive on how to link out. I have no idea if that is in the spirit of the ruling, but I think so, because the law that was cited had to do with allowing links to app publisher’s site for alternate payment, and that Apple couldn’t deny apps including such links.
I wonder how Apple thinks they're going to measure the transactions that take place. Simply clicking on the link and visiting the third-party-payment site doesn't prove anything, because the user could bail out before paying.
Because iOS apps talk to the Notarisation Service on launch.
So they know total app installs as well as the installs purchased from the App Store.
But how does it know I bought 13 tokens for $20, or 100 tokens for $149 (best value!)? If the account balance is on the application server side.
The developer has to agree to allow Apple to audit them.
Sounds expensive for Apple, and like it will be enforced unevenly.
Yes, that's what the judge warned in the ruling. Epic got what they asked for on this point because they were technically correct on the merits, but both the judge and the appeals court were skeptical that demanding it would do anyone any good:
https://casetext.com/case/epic-games-inc-v-apple-inc-2
More expensive not to do it.
That metric doesn't work accurately even in the simplest case (buying an app), let alone for more nuanced transactions -- in-app purchases, subscription tiers, etc.
It's unclear how how Apple-the-middle-man can insert itself to effectively rent seek from customers/developers now.
Charging both sides of a market _typically_ results in crash of the two sided (platform-hosted) market. With iOS and Android being basically near feature parity, this is to Google's favor.
It's not rent seeking.
App installs does not equal transactions.
Mainly two ways.
One is by tracking outgoing links via a specific framework that needs to be used, the ruling only provides for Apple having to allow linking out, no restrictions on Apple’s part for requiring a certain way of doing it.
The other is the courts explicitly affirming Apple’s right to audit as a part of them stating that the commission will still be owed regardless.
The latter is important because it allows Apple to claim a legitimate interest in defense if somehow a case is brought specifically about Apple’s requirements on how to link to a URL outside the app.
Think: “Judge you said the commission would still be owed and you stated we can audit, you even lamented on how cumbersome it would be for all parties involved to settle the commission owed to us if third party payment options would be used, us requiring a specific framework to be used to link outside the app alleviates some of that. We have a legitimate interest in imposing these requirements because it helps us measure links to external purchase flows, which in turn helps us automate measuring these external transactions.”
If you read the appellate court’s judgment, the annoyance towards the district court is palpable. Because the district court both stated the unlawfulness of the anti-steering provision under California statutes as well as stating how cumbersome after the fact collection is of the commission as well as stating that the commission is still owed.
All of this is marginally contradictory, but because the district court didn’t err in sufficient ways for the appellate court to step in and all of it ultimately is in line with the law and standing jurisprudence, the appellate court’s hands were tied, because the appellate court isn’t for do-overs, it’s merely there for significant errors that cause harm.
SCOTUS refused to take up the case, so until further notice the law of the land is that a) developers are allowed to steer users away from the the app while b) Apple remains entitled to their commission regardless because c) there's nothing inherently illegal about Apple's commission because d) it primarily is a payment mechanism for usage of Apple's IP by virtue of how it's structured in the developer agreement and e) as such it's legal because Apple can't be forced to give away their IP for free.
Thanks for the rundown. What's the basis of the perceived annoyance though? What was the district court supposed to do differently?
Honestly, I’m not entirely sure.
I’ve read enough case law to notice when jabs are made between the lines, but it’s not always clear what the desired alternative is by the writer.
In this case the repeated mentioning by the appellate court that the district court brought up an alternative scenario of… well exactly this, that developers use alternative payment methods and that Apple would have to audit them, only for the district court to brush it aside because it’s too complicated, conveys an annoyance.
These alternative options were brought up by the district court on their own initiative. Normally courts only consider what parties bring up in arguments, but it’s not disallowed or anything for a court to come up with their own suggestions. I think the appellate court didn’t like the fact that the district court brought it up on her own and that it added a bit of complexity as a result.
The real issue or weirdness if you will, is that 99% of the case that is based on federal laws says that everything is kosher on Apple’s side, it’s only the California statute that bans anti-steering and in doing so, creates a bit of a schizophrenic outcome in which anti-steering isn’t allowed (the California part) but commission is still owed because all the rest is fine (federal law).
Here are some quick examples from the appellate judgment of what I’m talking about in terms of the appellate court’s annoyance:
Quick translation: LRA = less restrictive alternative.
It’s pretty common terminology in antitrust cases, when one party complains about the other party’s actions but those acts are argued to be legitimate or necessary (e.g., we have App Review for safety reasons) the complaining party tries to counter that by offering up an LRA (e.g., well they can ensure safety by doing X, Y or Z instead and it would be less restrictive to us).
Here the district court recognized that IAP are a legitimate way of collecting the commission that due for using Apple’s IP, but instead of Epic bringing up an LRA to collect the commission, it was the district court that brought it up. I think that annoyed the appellate court because it highlighted the cumbersome outcome.
Here’s their entire judgment by the way if you’re interested in reading it: https://cdn.ca9.uscourts.gov/datastore/opinions/2023/04/24/2...
They're claiming they have the right to demand accounting.
This is leading to awful, awful outcomes.
If I owned a large payment registers company or similar type of capital that is hard to switch immediately, I'd be licking my predatory lips.
You’d have been licking your lips way sooner because that’s completely legal in the US.
In fact increasing the switching cost either monetarily or in other ways (e.g., time sink) is a very common way of locking customers in.
That’s why cancellation fees are so common in many industries.
And why users love the subscription management in Apple app store.
https://developer.apple.com/support/storekit-external-entitl...
And there is more to this issue than people realise.
Apple has had major lawsuits over the years [1] due to kids racking up large credit card bills via in-app purchases. And similar concerns exist for gambling apps. So this explains why they need to show such a large warning because they don't want to be held responsible for actions of a third party. Which is fine because most companies do this.
It will also likely be their argument (whether it's true or not) about why they won't allow developers like Epic to offer a third party, one-click, in-app purchasing system and instead force users to go to the home page and take deliberate actions to buy the product.
[1] https://appleinsider.com/articles/14/01/15/apple-settles-app...
This sounds even worse for Apple. If it’s too easy to make an in-app purchase, why don’t they make it harder to complete one by adding password requirement for payments through their App Store? Of course they won’t do that because it hurts /their/ bottom line. Following this logic, letting people complete payments outside of Apples control should absolve Apple of the legal liabilities between payments made between the user and a third party. If this is not the case, can you sue Apple for unauthorized payments made over Safari?
a) They always require your password for in-app purchases unless you disable it.
b) People have been conditioned over 15 years to treat all app purchases as being managed by Apple. So they expect refunds, disputes etc to be done in the App Store. This is changing. And so it's completely reasonable to clearly inform users about this. Because we have a long history of IAP being a major addiction vector.
No they don’t. Biometric only is the default for all IAP/in app subs.
Android is the only one who makes you enter a password to subscribe, because Google is incompetent.
No, password is default.
Biometrics is offered as an alternative after the first time, but it is opt-in.
If you restore or transfer settings then it’ll ask for password first time and then honor biometric preference if that’s what you opted-in for on the other device.
That is only for the first purchase via Google Play on a device, as there is a checkbox to skip the password and use biometrics for future purchases.
They do. Passwords are required for every purchase, they just give the user the option to either disable this or to use biometrics by default instead, which is considered a password analogue in the security chain of Apple.
But if you don’t have biometrics setup then you’re always asked for a password and if you do have it setup then after the first time asking for a password it’ll ask if you want to use biometrics instead going forward.
Even on a new device, if you’ve transferred your settings eland other stuff, it’ll still ask for your password the first time before honoring your transferred setting to use biometrics instead.
It should absolve them of liabilities, but that doesn’t stop people from trying to sue Apple and being able to point to a warning will increase the changes of getting a summary dismissal.
You can sue Apple for any reason. I can sue you too tomorrow for whatever reason I think warrants a suit.
In fact, it is standing practice for trial lawyers (and they’re welcome to pitch in) to sue any party that remotely can be tied to a cause of action as a co-defendant, especially if they have deeper pockets than the party that would be the most logical primary defendant.
This increases the chances of a pay out and there’s a marginal effort and cost to lump them into the case while you’re at it.
So in an example related to the matter at hand it’s very likely that someone would sue the third party developer and Apple, regardless of their precautions. Because the world’s most valuable and richest company (or second most valuable company, courtesy of MS) is great to have on the other side to take a shot at, if only because they might simply settle because the cost/benefit analysis on their side to litigate it might favor a quick settlement.
I think they did this. I'm pretty sure you can activate a password-entry requirement for in-app purchases, if it's not enabled by default.
That's a bad faith argument that even Apple wouldn't make. Otherwise, why don't they throw up warnings every time you use Safari?
As it seems many are not clear, here is a quick and abbreviated background:
The case is primarily about Epic's Fortnite game. Fortnite is free to play, but makes billions of dollars based on in-game microtransactions for things like in-game cosmetics. Apple charges developers 30% on each of these transactions. Epic didn't like this and so started offering users a way to pay on their own site instead of going through Apple, with a large discount. Apple responded by kicking Fortnite off their app store, and so Epic sued them for anticompetitive behavior.
The gist of the trial and appeals (to date) is that the judge ruled that Apple must allow developers to advertise non-apple means of payment. So Apple responded to this by allowing developers to include exactly one reference (in the entire program), in plain text (non-hyperlink), to an an outside payment site, and has changed their terms to require that developers must now also pay them 27% off all revenue from these outside transactions as well.
Epic is now claiming that this was a bad-faith compliance of the court's ruling, and this will 100% end up in court again. And that's where we are for now.
Thank you! That was a clear easy explanation.
Tim Sweeney is mad about having to pay Apple's App Store commission. Developers for many years believed that by having their own "payment processing" they could pay nothing to Apple. However the district court ruled that Apple is entitled to collect a commission because it wasn't just for "payment processing," it was for its intellectual property. They are just doing it in a convoluted and less efficient way as a result of the one claim Epic won in Epic v. Apple.
Tim Sweeney should also be mad about having to pay a quarter of a billion dollar fine “for tricking users into making unwanted charges” [1].
[1] https://www.ftc.gov/news-events/news/press-releases/2022/12/...
Huge thread a day ago: "US developers can offer non-app store purchasing, Apple still collect commission" https://news.ycombinator.com/item?id=39020365
https://news.ycombinator.com/item?id=39020365