In January 2024, Apple, Inc. (NASDAQ: AAPL) introduced a significant change to its App Store by allowing external payment options. This means users now have the option to make purchases through links to developers’ websites rather than solely within the confines of the App Store. However, this move has faced opposition from tech giants such as Microsoft, Match Group, Meta, and X (formerly Twitter). They have jointly filed a legal brief known as an amicus curiae in the United States federal court, challenging Apple’s proposal.
The crux of the issue lies in the potential impact of this new change on the app ecosystem and competition within it. Even though Apple claims that the move is aimed at introducing more flexibility and transparency into its App Store policies, critics argue that it could have far-reaching consequences. By enabling external payment options, Apple could potentially alter the dynamics of the app market, affecting developers’ revenue streams and user experiences.
Apple’s Intentions
The Amici, comprising Microsoft, Match, Meta, and X, argue that Apple’s proposed scheme, which allows external purchase links within an app, imposes unjustified restrictions on the flow of information to users. They believe that these restrictions will ultimately stifle price competition in the app marketplace. Importantly, the Amici assert that these anti-steering restrictions will not only affect gaming apps but will have broad impacts across all types of apps.
The filing from these four companies (Microsoft, Match Group, Meta, and X) comes in the wake of similar criticisms from Epic Games, the developer behind the highly popular Fortnite game. Epic Games is pursuing legal action to force Apple to fully comply with a September 2021 ruling that found Apple in violation of unfair competition laws. This includes the tech giant taking up to 30% commissions on purchases made on the App Store. The ruling ordered Apple to allow app developers to direct users to their own payment systems, rather than exclusively using Apple’s in-app purchase system.
In their filing in a California district court, the four companies highlighted the multitude of requirements and limitations developers must meet to qualify for external purchase links in their apps.
The Amici also raised concerns regarding the feasibility of app developers implementing alternative payment options, given Apple’s up-to-27% fee on in-app purchases. They argued that Apple’s requirement for developers to direct users to their own websites for purchases is unnecessary. This practice detracts users from a centralized payment site where they can conveniently manage their payment options. Instead, users are forced to enter payment details multiple times on the developer site, resulting in a less streamlined and user-friendly experience.
Having experienced Apple’s anti-steering restrictions firsthand, often while competing directly with Apple’s own apps and services, the Amici claim to possess extensive knowledge of developing apps within Apple’s guidelines.
In a Nutshell
Amidst intensifying competition from alternative app distribution platforms and mounting regulatory pressures, Apple may see this new App Store policy as a way to maintain its market dominance while simultaneously appeasing regulators and developers. The introduction of external payment options could encourage developers to remain within the App Store ecosystem, granting them greater flexibility and control over their monetization strategies. This, in turn, could help Apple retain its ecosystem of high-quality apps and services.
Nevertheless, the battle is far from resolved. Industry titans such as Microsoft, Meta, X, and Epic Games argue that Apple’s proposed system falls short of full compliance with the court order. They advocate for developers to have the freedom to integrate their own payment systems directly within their apps, thereby completely bypassing Apple’s commission structure. Such a move could potentially result in reduced prices for consumers and foster a more accessible App Store environment.
Should the courts enforce this mandate, Apple might find itself obliged to permit the complete integration of third-party payment systems, thereby exerting a substantial impact on its App Store revenue model.
