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Apple loosens rules for developers in major concession amid antitrust pressure

Apple said app developers could inform customers how to pay outside of its App Store.

Tim Cook, Apple's chief executive officer, in 2018. Apple announced it would make major changes to its App Store as part of a proposed lawsuit settlement with developers, following years of mounting regulatory scrutiny and legal challenges. (Giulia Marchi/Bloomberg)

Apple announced it would make major changes to its App Store as part of a proposed lawsuit settlement with developers, following years of mounting regulatory scrutiny and legal challenges.

The company will let developers tell its iPhone and iPad customers about ways to pay outside the official App Store, it said in a news release late Thursday. It also expands the types of prices that developers can offer for subscriptions, in-app purchases and paid apps, among other initiatives. The settlement still needs to be approved by the court.

The change is in response to a suit brought by small app developers, in which they alleged Apple’s pricing tiers and lack of outside purchasing options were monopolistic. Apple is also expecting an imminent judgment in a suit by Epic Games over similar allegations in front of the same judge in federal court in the Northern District of California.

The move would be the biggest change Apple has made in response to accusations that it has monopoly powers. Companies including Fortnite-maker Epic have alleged Apple wields too much control over how people can purchase apps for iOS devices, forcing them to go through the official App Store which charges a 30 percent commission.

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The settlement is the iPhone giant’s greatest allowance to aggrieved developers following years of regulatory scrutiny of its App Store rules. Earlier this summer, a bipartisan pair of senators introduced legislation that would have prohibited companies from requiring developers to use their payment system.

Some lawmakers offered tentative praise for the move. Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary antitrust subcommittee, said that Apple has significant control over apps, particularly as the world goes more mobile.

“This power raises serious competition concerns and impacts consumers and app developers alike,” she said in a statement. “This new action by Apple is a good first step towards addressing some of these competition concerns, but more must be done to ensure an open, competitive mobile app marketplace, including common sense legislation to set rules of the road for dominant app stores.”

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Sen. Richard Blumenthal (D-Conn.), who has proposed the legislation to regulate Google and Apple’s app stores, said that the settlement marks “a significant step forward” but doesn’t fix all the problems.

“Today’s move only adds to the momentum and further exposes rampant anticompetitive abuses in the app markets,” he said in a statement. “The fox guarding the hen house status quo will remain until there are clear and enforceable rules for Apple and Google to play by.”

The proposed changes could be relatively minimal for Apple. People are still blocked from downloading iOS apps from outside app stores or on the Web. No other app store is able to sell iOS apps on iPhones and iPads. While app developers can now email and text customers who opt-in to the communications, they cannot include directions or link outside payment options in their apps. Its commissions on purchases made within the App Store will remain the same.

The Coalition for App Fairness, comprised of Epic, Spotify and others, said Apple’s proposed deal did not go far enough.

“Apple’s sham settlement offer is nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide,” executive director Meghan DiMuzio said in a statement. “This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem.”

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The company’s App Store rules are also being scrutinized by the U.S. Justice Department.

Apple’s previous attempts to extend the olive branch to developers have failed to assuage a growing firestorm of criticism. The company last year cut the commission it collected from developers with less than $1 million in annual revenue.

The company has been defending its App Store from regulation around the world. European regulators earlier this year accused the tech giant of breaking antitrust laws by imposing unfair rules on music streaming competitors, following a complaint from Spotify.

Apple CEO Tim Cook has long claimed the tightly controlled store is necessary to weed out malware, scams and other unsavory apps. However a June analysis by The Washington Post found that of the 1,000 highest-grossing apps on the App Store, nearly 2 percent were scams.

In addition to adding the ability to tell customers how to pay for purchases outside the Apple ecosystem, the global changes will include the ability to charge a larger range of prices for apps and in-app purchases, including subscriptions. Apple said it would also create a $100 million fund to help small developers in the U.S. There will be more information about rejections in its app review process, and the company will begin issuing an App Store transparency report that includes information such as how many apps were rejected.

The proposed App Store changes, announced in a news release, are still pending court approval and Apple did not give a date on when they would be released.