Apple Inc. will change its App Store policies in a legal settlement, the first major concession the iPhone maker has made amid multiple antitrust investigations.
In a proposed settlement of a 2019 class-action lawsuit from developers, Apple AAPL, +0.62%agreed to allow app makers to direct their consumers to payment options outside the App Store, which could allow them to avoid paying fees of up to 30% that Apple charges developers for online purchases in iOS apps. The company also agreed to a democratic approach to the App Store’s search function, greater pricing freedom and an annual transparency report about the companies’ app-review policies and their effects.
Perhaps the biggest concession from Apple would let developers finally communicate directly with customers about alternative payment options, with their permission, using information collected inside their apps.
The changes apply to developers worldwide — not just small developers in the U.S. covered by the settlement.
The fees charged to developers, and the rules Apple has enforced that require Apple’s payment option be used in apps with no direction to other payment options, were at the heart of a separate lawsuit, Epic Games Inc. v. Apple. That landmark antitrust case, brought by the maker of the “Fortnite” videogame, is being decided by the same judge who will now weigh this proposal, with a ruling in the Epic case expected soon.
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Thursday’s settlement proposal is in a case that was seeking class-action status for small developers — those who make less than $1 million annually — who felt wronged by Apple. Apple still defended its App Store practices in a legal filing for the proposed settlement of the Donald R. Cameron et al v. Apple lawsuit.
“The evidence of record establishes that the practices challenged in this and other cases are both lawful and well-justified by business necessity—including the protection of Apple’s intellectual property, and protecting the security and privacy of Apple’s customers,” the filing reads. “Nevertheless, Apple would rather work with developers than litigate against them.”
Apple also agreed to pay $100 million to developers, which it mentioned last in its announcement about the proposed settlement and called “a fund to assist small U.S. developers, particularly as the world continues to suffer from the effects of COVID-19.” The plaintiffs’ filing noted that the fund would directly pay developers sums of $250 to $30,000, depending on their previous App Store proceeds.
The settlement will next be weighed by Judge Yvonne Gonzalez Rogers of the U.S. District Court in Oakland, Calif., who also presided over and is deciding the Epic antitrust case. A decision in that case is expected soon.
An Apple legal strategist said the class-action settlement was a separate issue from the contentious case with Epic, and an act of good faith to smaller developers. In November 2020, for example, Apple halved its commission fee to 15% from 30% on App Store sales from companies that generate no more than $1 million in revenue via the software platform, including in-app purchases.
Epic did not immediately respond to an email message seeking comment on the settlement. A few hours later, it shared its opinion as a founding member of the Coalition for App Fairness (CAF):
“Apple’s sham settlement offer is nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide. This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem,” CAF Executive Director Meghan DiMuzio said in a statement. “Allowing developers to communicate with their customers about lower prices outside of their apps is not a concession and further highlights Apple’s total control over the app marketplace.”
Another developer group, however, praised Apple. “The actions announced today by Apple will help strengthen the app ecosystem and support the thousands of developers who make a living through mobile apps,” App Association President Morgan Reed said in a statement.
At least one antitrust expert dismissed the agreement as an extension of the status quo. “This looks like class-action lawyers getting a $30 million check for doing Apple’s public relations work,” Matt Stoller, research director of the American Economic Liberties Project, told MarketWatch. “I see nothing here that constrains Apple in any meaningful way.”