Yesterday the Supreme Court held a hearing in the case Apple Inc. v. Pepper. “Pepper†is Robert Pepper, an Apple customer who, along with three other plaintiffs, filed a class action lawsuit alleging that App Store customers have been overcharged for iOS apps, thanks to Apple’s 30% commission that Pepper alleges derives from Apple’s monopolistic control of the App Store.
There are three points to make about this case.
A great examination of the case by Ben Thompson.
I 100% understand where the plaintiff is coming from here with the 30% cut.
As part of company offering the same product in and out of the App Store, being forced to give Apple 30% (or raise prices, or not offer the product) is an outright bad proposition – and our (lack of) choices in this matter definitely affect the customer.
However as a consumer, the possibility that this might lead to opening up the App Store or supporting side-loading absolutely terrifies me. A HUGE selling point for I-devices and apps is that it’s less likely that they’ll start mining bitcoins or sell your contacts. There is _some semblance_ of curation and quality control by having a walled garden – even if it fails occasionally. I really like the walled garden, I don’t know, maybe it’s stockholm syndrome
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Additionally, as a developer, my software is less likely to be pirated and part of my sales proposition is that you can download my apps safely.
I’d like to release apps for Android too. I’m pretty proficient with Java and I’m getting better with Kotlin. I like writing for an OS where I feel I can almost do anything – but it absolutely sucks if you just want to sell software. Support for side-loading apps doesn’t help me (well, for testing it’s great) and if I want customers to see it, I still need to give Google a cut. I don’t want I-devices to turn into that.
Apple just needs to offer more “Value” for Developers for their 30% Cut. Currently it is not anywhere near enough.
From what I understand, Apple is the man-in-the middle that collect payments and provide access to the AppStore, hence it’s more like the second diagram ( https://stratechery.com/wp-content/uploads/2018/11/apple-antitrust-2… ) than the third ( https://stratechery.com/wp-content/uploads/2018/11/apple-antitrust-3… ) because I don’t see how users connects directly to the developers that can then provide you with the application without Apple’s or the AppStore’s intervention.
Could users directly talk with the developer and bypass completely Apple, paying the developers 30% less ? Aren’t the excessive pricing scheme of Apple’s devices enough to cover the cost of the hosting ?
Isn’t Apple intervening in the “retail process” by judging what’s good enough to figure in its exclusive application listing, even ditching some out when they finally add a similar feature to their own operating system ?
I really don’t see the monopoly here. If you wanted to make Apple the equivalent of Illinois Brick, you’d have to perceive the world differently. When we talk about “direct purchasers” of “illegally priced goods,” we’re first asking how the goods were priced illegally. In the case of Illinois Brick, there were ELEVEN brick manufacturers who conspired with each other to sell their bricks for the same prices to all their customers. That violates antitrust laws because it prevents people who want to buy bricks from being able to bargain for prices.
The equivalent with Apple is if the market is ALL mobile app platforms (iOS, Android, Windows Phone, Blackberry, Symbian, etc.). Then, if Apple conspired with the other companies to insist that all app store agents keep a 30% cut, that’d violate antitrust laws, since there’d be no way for developers to bargain with app store agents for lower cuts.
Here, the consumers want to shrink the market to be just iOS apps, as though there was no way to sell software and make a living, unless you could get your app on the iOS App Store. You can obviously develop software for any mobile phone platform and sell your app, or you can develop for non-mobile platforms and sell your app. Apple doesn’t violate antitrust laws just because they keep a cut that’s higher than some developers want to pay (and then theoretically pass a higher cost onto consumers).
I don’t know how much it costs to run the iOS App Store. There are payments to process, app reviewers to pay, developer website teams to pay, a ton of lawyers to pay for regulatory compliance, etc. I’m sure Apple makes a considerable net profit, but they are not required to run a store as a nonprofit in order to avoid antitrust laws. 30% may be corrosive, as Ben Thompson says, but it’s not illegal.
I don’t understand why people believe that companies have to build their software so that developers can do whatever they want. Apple doesn’t owe developers anything. If developers hate the way Apple treats them, they can abandon the platform. If that doesn’t get Apple to change their ways, they’ll lose customers. That’s the way markets work.
If Apple calls up Google and convinces them to not allow anyone to sell apps for Android unless Google gets a 30% cut, give me a call. That’s illegal. Until then, this is just whining.
What even is this attitude of “you’re not allowed to bring something up unless it’s already been found illegal”? They’re literally going to hear a case in court about it. It’s not whining. The courts have literally allowed the case to be heard.
What, is bringing something up in court “whining” now? You are basically arguing they shouldn’t bring it up in court unless the court has already declared Apple’s practices illegal.
I completely agree. Very often people think “antitrust is only for monopolies” and “monopolies are when there is only 1 player” or “monopolies are when 1 player has > 50% of the market”
This case is exactly what antitrust is about!
Source: https://www.justice.gov/atr/antitrust-laws-and-you
How are consumers denied competition here? Or developers? They can always develop for Android, or any other platform (mobile or otherwise), and vote with their feet. Consumers will follow the apps, thereby following the developers. In no way is anyone deprived of choice here.
Apple’s roughly 15% global marketshare generates over half of global app revenue. If a developer wouldn’t develop for iOS people wouldn’t stop buying iOS devices, they would stop buying that app. There is a reason that Google is making apps for iOS (but not Windows Phone) and that Apple is making apps for Windows and that is “market power”. It would take a lot of big developers to stop developing for iOS to change this situation.
Now lets see it from the other side of the equation. What would happen if Apple would raise the 30% to 40%. Developers couldn’t go to another vendor so they would have to:
1) Immediately give up on over half of their revenue
2) Seeing a 14% drop (60% instead of 70%) on over half of their revenue
3) Raise their prices 16% to get the same absolute revenue as before (1.16 would now be divided 0.7 vs 0.46, raising Apple from 0.3 to 0.46 on the sale with nothing extra for the developer), even assuming that consumers still keep buying the app
As you can see, Apple has an enormous power over developers and it isn’t difficult to argue that because of that consumers are not receiving the benefits of competition