The Washington PostDemocracy Dies in Darkness

Apple settlement in developers’ court case won’t lessen the political heat

Critics deride the deal as a publicity stunt. ‘It’s not real change,’ said Sen. Richard Blumenthal.

Apple announced on Thursday that it would loosen the rules for developers using its App Store as part of a potential class action settlement, notably allowing them to inform iPhone and iPad customers about ways to pay outside of the official App Store — and thus circumvent the commission that Apple extracts from developers. (Patrick Semansky/AP)
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Apple’s olive branch to small developers, announced late Thursday night as a proposed lawsuit settlement, is unlikely to shield it from the growing regulatory heat in Washington and around the world, interviews indicated on Friday.

Democrats who have proposed a bill to regulate both Apple and Google’s app stores say the company’s proposed changes — which must still be approved by the federal judge hearing the case — are insufficient, and they still want to push ahead with legislation to ensure there’s fair competition on smartphones.

European regulators who announced antitrust action against Apple for its alleged stifling of competition in the music streaming business said it will assess Apple’s announcement with that in mind. That comes amid broader regulatory efforts abroad, as legislators in South Korea recently advanced a bill that would prohibit Apple and Google from forcing developers to pay commissions on in-app purchases.

And longtime developers who have criticized Apple’s practices, including Match and Spotify, said the deal failed to address their most basic concerns about Apple’s lock on apps that want to be distributed through its App Store. Tim Sweeney, the CEO of Epic, which manufactures the popular Fortnite game, vowed to keep “fighting on” in its separate high-profile legal challenge of the smartphone giant’s App Store practices.

Apple announced on Thursday that it would loosen the rules for developers using its App Store as part of a potential class action settlement, notably allowing them to inform iPhone and iPad customers about ways to pay outside of the official App Store — and thus circumvent the commission that Apple extracts from developers.

The proposed settlement was in response to a case that was brought in 2019 by lawyers representing small developers, including Donald R. Cameron, the developer of an iOS baby-naming app, and Richard Czeslawski, president of Pure Sweat Basketball, which makes a workout app. If approved, the settlement class would consist of about 67,000 developers earning less than $1 million in transactions annually in the App Store.

Apple loosens rules for developers in major concession amid antitrust pressure

The company’s prohibition of such notices has been a major point of contention between app makers and the iPhone giant, and marked a concession from Apple, which has been largely unwilling to bend its policies, even amid mounting international antitrust scrutiny.

Sen. Richard Blumenthal (D-Conn.), who has introduced legislation to regulate the App Store, said the settlement does “virtually nothing” to protect developers or address Apple’s “core misconduct.”

“They’re trying to deflect interest and deceive the public,” Blumenthal said in an interview. “It’s all about a talking point for them. It’s not real change.”

Apple announced its potential settlement with the app developers as its App Store policies are landing the company in increasingly treacherous political territory in Congress and beyond. Any day now, a federal judge could issue a ruling in the high-profile legal battle between Apple and Epic in a case that centers on the company’s App Store policies. The judge in that case, Yvonne Gonzalez Rogers, also will pass judgment on the proposed settlement.

The company’s App Store is also being scrutinized by the Justice Department, amid a broader push to bring competition challenges against tech giants.

In a statement to The Post following Apple’s Thursday announcement, the European Union’s executive arm declined to comment on the implications of the settlement, saying it would assess it in the context of its ongoing investigation into Apple.

Lawmakers remain concerned that the settlement still allows Apple to maintain its tight grip on the App Store in a multitude of ways.

Under the settlement, developers would be able to communicate about other ways to pay for subscriptions and purchases outside the app via email, but they still won’t be able to alert them to alternatives inside the app. They’ll still be required to use Apple’s payment tools for any purchases that happen in-app, which are subject to Apple’s fees. And people will still have to use the App Store to download and install apps on their phone, as the company prohibits a practice known as side-loading.

Blumenthal, along with Sen. Marsha Blackburn (R-Tenn.), introduced legislation that would force Apple and Google to change many of these practices, called the Open App Markets Act. Sen. Amy Klobuchar (D-Minn.), a co-sponsor of that bill, said she’s actively working to drum up support for it so it can be advanced in committee.

Senators want to rein in Apple and Google’s app store dominance

“We need to do much more to inject true competition into this arena,” Klobuchar, who chairs the Senate Judiciary antitrust panel, said in an interview.

Blumenthal thinks the settlement might even help the lawmakers’ case. “It shows that Apple conceding the sky won’t fall if changes are made, and maybe there’s a need for changes,” he said.

In addition to allowing greater communication around ways to pay outside the App Store, the proposed settlement would expand the price points that developers can offer for in-app subscriptions and other purchases. It also creates a $100 million fund that would dole out sums ranging from $250 to $30,000 to developers who have collected less than $1 million in annual revenue through the App Store.

That’s a small price to pay for Apple, a company valued at more than $2 trillion and which counts App Store commissions as a sizable portion of its growing services revenue, said Dan Ives, an analyst at Wedbush Securities.

“It’s a rounding error,” he said in an interview. “Investors view settlements like this as a positive for Apple, because ultimately it’s all about them keeping developers happy and focused on broader prize, which is monetization of an unparalleled install-based developer community.”

The settlement announcement comes after Apple has made other moves to smooth tensions with the smallest iOS developers. Last year, the company announced it would decrease the commission that it collects on purchases in apps that earn less than $1 million a year, to 15 percent. The settlement would lock in that commission structure for at least three years. Meanwhile, large developers would still have to pay 30 percent.

Apple cuts some App Store fees, but critics call it a ploy to avoid regulation

Many developers said they, too, were unimpressed by Apple’s moves, calling them a distraction from broader efforts to address the company’s behavior.

“This is not Apple yielding any ground,” said Kosta Eleftheriou, the founder of the keyboard app FlickType. “It’s not what developers have been asking for.”

Eleftheriou, who describes himself as a professional App Store critic on Twitter, is a member of the Coalition for App Fairness, a group that counts Epic, Match, Spotify and other large Apple critics among its members. The group called Apple’s settlement a “sham” and said the settlement was “not a concession.”

Yet the lawyer representing the developers in the lawsuit defended the settlement as a “very significant” development.

“It’s the first time Apple’s blinked,” said Steve Berman, managing partner of Hagens Berman. “You’ve got the Senate, you’ve got states, the E.U., UK, various regulatory bodies all over the world. This is the first breakthrough.”

Reis Thebault in Brussels contributed to this report.

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