When a powerful technology company wants everyone to know it has made large concessions in its business practices, it pays to look at the fine print. Sometimes the details don’t match up with the rhetoric. That seems to be the case regarding Apple Inc.’s class-action settlement with app developers this week.
The smartphone giant announced Thursday that it reached an agreement, pending court approval, to resolve the lawsuit in which a group of 67,000 iOS developers alleged Apple’s App Store’s rules were anticompetitive and charged excessive fees. Terms of the settlement include the creation of a $100 million payout fund to app makers; a clarification that developers can email their customers about payment alternatives outside their apps; a pledge not to raise the App Store commission rate for three years; and a commitment not to change how the App Store search function works, again, for three years.
Make no mistake, Apple isn’t giving up much in this deal. For a company that earned roughly $22 billion in profit in its latest quarter, $100 million is nothing. And in this world of greater antitrust scrutiny, it is doubtful the company would be able to raise fees or change how it App Store search works even if it wanted to.
Then there is the much-discussed change that allows app makers to contact customers about paying through outside channels. According to the New York Times, an Apple executive told reporters the it was a “major concession” to allow developers to communicate to customers about alternative payment methods through email. Is it really? The company says it is clarifying its guidelines. But it’s not clear the rules against this type of email marketing were strictly enforced in the past. Spotify Technology SA and Netflix Inc. have for years pushed their customers via email to purchase services on their websites as a way of circumventing Apple’s fees.
The agreement also does nothing to lift Apple’s far more restrictive practice of forbidding links and descriptions to external, potentially cheaper, purchasing methods from within apps. That would have been a big deal, with significant implications for developers’ bottom lines. But it didn’t happen.
Perhaps the meager nature of this agreement will have a short shelf life. Any day now, US District Judge Yvonne Gonzalez Rogers is slated to rule on Epic Games Inc.’s antitrust lawsuit against Apple. During the trial in May, Rogers pointedly questioned Apple CEO Tim Cook about the anti-steering restriction inside apps and whether it was fair. It could signal a coming potential legal setback for Apple. But we’ll have to see.
In terms of this settlement, it is a nice pay day for class-action lawyers and a blessing of the status quo. Not promising to raise fees? No real change to the anti-steering rule inside apps? If this is all Apple has to do to appease regulators and app developers, it should be thrilled.
Bloomberg
