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European Commission Investigates App Store Antitrust Issues

By Chand Bellur

June 20, 2020 at 3:32 p.m. PT

  • The App Store is a virtual monopoly, forcing Apple device owners to purchase and install apps only from this online distributor.
  • Regulators throughout the world have called out Apple on this monopolistic practice.
  • Developers point out that Apple’s revenue share is excessive and exploitative.

App Store Evades Antitrust Scrutiny for Over a Decade

Apple’s App Store is more a marvel of modern politics than engineering. Online software distribution was around for over a decade before the App Store. Much like Apple Music or Apple TV+, the App Store is nothing unique or original. The most amazing thing about it is that Apple managed to evade regulators for years, operating one of the biggest monopolies on the planet.

If you wish to install an app on your iPhone, iPad, or iPod touch, the App Store is the only place to shop. Operated by Apple, they force developers to forgo up to 30% of their revenues, for merely hosting a small app download. Even worse, if the developer offers a subscription, Apple will take a 30% share for the first year, eventually lowering it to 15%. That’s a lot of money for hosting a small download and providing billing services.

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This practice is not uniform across the Apple ecosystem. For now, macOS allows users to sideload applications outside of the App Store. In fact, most major software developers sell macOS software without the App Store’s “assistance”. Major players, like Ableton, sell their macOS software on the Web to avoid paying 30% of their revenues to Apple.

Apple’s excuse for monopolistic practices is that they’re keeping customers safe. Third-party app stores or downloading apps from the Web could install malware. This explanation doesn’t hold water, however. They let macOS users install apps from the Web. Why not iOS and iPadOS?

If anything, this would indicate that these operating systems offer inferior security; however, Apple claims they’re safe. If iOS and iPadOS are secure, Apple’s motivation seems to be a 30% share of app revenues, with no exceptions — a monopoly.

European Regulators Investigate App Store Monopoly

Not fooled by Apple’s safety and security rationalization, the European Commission recently launched an investigation into the App Store’s monopolistic tendencies. In-app purchases are the focus of the investigation. The EC contends that Apple forces end-users to use their in-app purchasing system. They also disallow developers from informing users about purchases they can make outside of the App Store.

The European Commission’s case seems valid, as in-app purchases don’t present a security risk. If you sign up for Netflix through their website, it won’t compromise your iOS device when you use the same login. At face value, Apple’s claim of protecting user security and privacy are patently false.

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Spotify raised the chief complaint against Apple with the European Commission. The streaming music company argues that Apple uses two App Store rules to favor Apple Music over Spotify. By requiring in-app purchases be made only within the App Store, and preventing developers from offering services outside of the App Store, Spotify is at a competitive disadvantage. Apple gets 15% of its revenues, adding insult to injury, as Apple Music is a complete ripoff of Spotify.

For small developers like Spotify, raising concerns with European regulators is the only option. Unlike Apple, they’re not a trillion-dollar company. They can’t fight a long legal battle. This is how Apple can copy Spotify, engage in anti-competitive practices, and get away with it.

Consumers Benefit from Ending App Store Monopoly

Apple claims that the App Store benefits consumers by protecting privacy and providing security. To some extent, this is true. They evaluate every submitted app, rejecting anything harmful to consumers.

At the same time, the company seems to be engaging in robber baron tactics. Similar to Leyland Stanford’s railroad monopoly, Apple’s App Store monopoly can work against developers.

Apple is well known to steal third-party developers’ ideas and incorporate them into their products. Right now, it appears that they’re about to launch their own competitor to Tile, while displaying messages about apps that use location services in the background. This practice may make some consumers suspicious of Tile and favor Apple’s competing product.

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There’s a long list of these “Sherlocking” activities. The name comes from Apple’s development of Sherlock, which copied features from a third-party search app known as Watson. Apple eventually included Sherlock in OS X, essentially making Watson superfluous. Apple followed a similar tactic in replacing F.lux with Night Shift. The list of Sherlocked apps goes on and on.

Consumers may believe that Apple is doing the right thing. By providing a free app that replaces a third-party paid app, customers get a break. Unfortunately, this also stifles third-party development ambitions. If you’re developing a fantastic app that could be an iOS or iPadOS feature, Apple can legally steal the idea. As this becomes more commonplace, developers may choose to stick with games and apps that Apple can’t incorporate into their operating systems.

The 15-30% fee on subscription revenues is terrible for consumers. It gives Apple a huge competitive advantage. It makes subscriptions more expensive for consumers.

It’s no surprise that European regulators are reining in Apple’s monopolistic tendencies. The only surprise is that nothing has happened thus far. Apple spends very little on lobbying and political influence. Their legal team, however, is adept at combatting antitrust regulations. This can only go on for so long.

Microsoft faced anti-competitive action for simply bundling Internet Explorer with Windows. Apple does that with Safari, and also forces users to install apps from the company store. Given their bold practices, it’s highly likely that Apple will have to change their ways, while paying massive fines in the process.

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