Apple announced Thursday that it had reached a legal settlement with app developers accusing it of abusing its control over the mobile app market.
Resolving the dispute was complex, and different people in the tech industry reacted to it very differently. Apple and the people who sued it have described the deal as a huge concession from Apple and a victory for the developers. Some Apple critics, including companies that pay billions in app fees, have called it a “sham” that did little to change Apple’s control over apps.
Here is an explanation of the settlement and what it means.
First of all, what is the controversy about?
Courts, regulators, lawmakers, and developers have vetted Apple’s practice of charging up to 30 percent commission on other companies’ sales on its App Store, a deal that by some estimates sells for nearly $ 20 billion a year Apple brings in.
Many companies that reach their customers through apps do not want to pay Apple a hefty cut and are increasingly struggling to change the rules. Apple argues that its commission rewards it for creating the app store’s “economic miracle” and is fighting to maintain the status quo.
Billions of dollars are at stake in one of the most momentous battles for big tech power.
What did Apple do without in the agreement?
Little. She has agreed to keep her commission rates constant for three years and to base the search results in her App Store on “objective characteristics” such as downloads and user ratings for three years.
On a granular level, developers can sell their apps from 100 to 500 different price points. (For example, an app might now charge $ 32.99 instead of $ 29.99 for a subscription.)
And it agreed to create a $ 100 million fund for small app developers. (More on that later.)
Most of the attention, however, has been drawn to a “clarification” in the Apple rules: companies can now inform customers via email about other payment options than in their iPhone (or iPad) app.
Is that significant?
That’s what Apple says. However, it appears to be a minor change to a set of rules that has been at the center of complaints about how Apple controls its app store.
Apple is forcing companies to use its payment system in their iPhone apps, which allows it to collect its commission on their sales. Most companies would prefer to refer customers elsewhere to complete transactions so they can avoid Apple’s fees. But Apple also generally bans companies from asking customers to pay elsewhere.
Apple has long banned such steering. It has also banned companies from using email to notify customers of other payment options once companies have received customers’ email addresses from their iPhone app.
Now Apple is saying that it is okay for companies to send such emails if the companies get the customer’s permission to do so.
Some companies seem to have already partially violated Apple’s rules. In order to avoid Apple’s commission, the music service Spotify, for example, does not allow registration for a subscription in its iPhone app. However, after someone creates a free account on the app, Spotify emails a link to their website promoting their paid accounts, although the email doesn’t specifically ask users to bypass Apple’s commission.
An Apple spokesman said companies, including Spotify, have complained for years about Apple’s restrictions on emailing certain customers.
What was the reaction like?
There has been tentative praise from some lawmakers who proposed laws to change the App Store rules. Senator Richard Blumenthal, a Connecticut Democrat, said on Twitter that the deal “marks a significant step forward but does not address the full and vibrant range of market abuse and practices that are still prevalent in app markets.”
The biggest praise came from the App Association, an organization that claims to give voice to small tech companies but is funded by big tech companies like Apple. “Our members need Apple to continue to lead the way in privacy, security and protection to maintain consumer confidence in platforms,” the group said.
Many companies that pay Apple’s commission have not been that kind. The Coalition for App Fairness, a group of companies fighting Apple’s rules, said the settlement “does not suppress anything to solve the structural, fundamental problems that all developers, large and small, face and innovation and Undermine competition in the app ecosystem ”. The group added that Apple’s restrictions on what companies could say in private communications with their customers exemplified Apple’s inadequate control over the app marketplace.
David Heinemeier Hansson, an entrepreneur and app developer who is an outspoken critic of Apple’s rules, said in a post Friday that opening a narrow road for businesses to direct customers to other payment options only offers protection to Apple, to defend his ban on such communication the places that are important, like the transaction page in an app.
“If the developer community had any hopes for this class action lawsuit, that outcome would have been a dagger in their hearts. Much worse than if no lawsuit had been filed at all, ”he wrote. “If anything, this deal cements the tremendous power that Apple has and wields. Even if a class action lawsuit is pending, bromides and bribes can buy it. “
Why was that so confusing?
There was a lot of confusion after the deal was announced, in part due to Apple’s announcement. The company told reporters about an evening press conference two hours before it started and then released a blurry press release when the meeting started.
That meant that by the time an Apple executive called the deal a win for developers, reporters were already tweeting and submitting initial draft articles. The incentives of digital news today reward those who are the first, not those who are more nuanced or accurate. (An Apple public relations officer asked reporters not to name or quote the executive in order to hear the briefing.)
As a result, the news headlines initially framed the change as an important avenue for companies to bypass Apple’s commission. This was good for Apple, as any perception that it is making material changes to its App Store rules could help appease developers, courts, regulators, and lawmakers.
In reality, it seems Apple paid a small price to get rid of potentially big legal headaches.
How does this affect Apple’s legal battle with Epic Games?
Apple is still awaiting a decision from a federal judge in a separate lawsuit filed by Epic Games, the maker of the popular game Fortnite. Epic wants to force Apple to allow app developers to avoid App Store commissions altogether.
Thursday’s settlement requires the approval of Judge Yvonne Gonzalez Rogers of the US District Court for the Northern District of California. She is also the referee in the Epic Games case.
Apple likely hopes its rule change could help convince Judge Rogers that developers’ concerns are sensibly addressed. She said in May that she hoped to pass a judgment this month.
Who will get the $ 100 million?
Apple pays $ 100 million in the settlement. The company said it was not a legal payout but “a fund to help small US developers, especially as the world continues to suffer from the effects of Covid-19.”
Developers are supposed to get $ 70 million of the money. App makers who earned less than $ 1 million per year on the App Store from June 2015 to April 2021 are entitled to payouts of between $ 250 and $ 30,000 each.
The plaintiffs’ attorneys are demanding the other $ 30 million.
Steve Berman, one of the attorneys, said in an email that attorneys typically received 25 percent of such settlements, with more money being possible by securing other benefits for their clients. “With the many business changes that will help developers, we feel an upward adjustment is appropriate,” he said.