Apple Avoids Another Legal Fight With App Developers

Apple, in a legal settlement announced on Thursday with a group of app developers, said it would allow developers to urge customers to pay them outside their iPhone apps.

The move would allow app makers to avoid paying Apple a commission on their sales and could appease developers and regulators concerned with its control over mobile apps, including strict policies designed to force developers to pay it a cut of their sales.

The settlement appears to be a small price to pay for the world’s richest company to avoid another extended legal fight that could have posed major risks to its business by targeting the iPhone App Store. In practice, some major companies, such as Spotify, already push their customers to evade Apple’s commissions.

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Apple is still awaiting a decision from a federal judge in a separate lawsuit that was filed by Epic Games, the maker of the popular game Fortnite, and that seeks to force Apple to allow app developers to avoid App Store commissions altogether. Consumers, too, have sued Apple over its app commissions, in a case that the U.S. Supreme Court has allowed to go forward in federal court and that is seeking class-action status.

Under the new settlement, Apple also said it would create a $100 million fund for payouts to small app developers and agreed to not raise the commission rate for small developers, which it reduced last year to 15 percent from 30 percent, for at least three years.

In a briefing with reporters, an Apple executive said it was a major concession for Apple to allow developers to tell customers, via email and other channels, about alternative payment methods. Apple will still bar developers from telling customers inside their iPhone apps about other ways to pay.

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The Apple executive added that Thursday’s settlement showed that small app developers were mostly fine with maintaining the current App Store policies, including the reduced commission. Larger developers, which pay the higher rate, continue to complain, however.

Apple restricted reporters from naming the Apple executive or quoting her directly.

Some companies already push customers toward other ways to pay. Spotify, for example, has long blocked customers from signing up for subscriptions to its music service in its app — and it has at times advertised this. Apple’s decision on Thursday appears to remove a rule that it was already selectively enforcing.

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Steve Berman, a lawyer for the plaintiffs in the suit, which sought class-action status, said, “We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of U.S. iOS developers, could help to bring about so much important change.”

The Coalition for App Fairness, a group of companies that are fighting to change Apple’s App Store policies, said in a statement that the agreement was a “sham settlement” designed to appease courts, regulators and lawmakers.

“This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem,” said the group, which includes Epic Games, Spotify and Match Group. “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.”

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In the settlement, Apple also agreed to publish an annual report on the number of apps it rejects or removes from its App Store, as well as data on its search results. The New York Times reported in 2019 that Apple had been favoring its own apps over rivals in search results. Apple agreed in the settlement to ensure that its search results “will continue to be based on objective characteristics” for at least three more years.

The settlement is subject to approval by Judge Yvonne Gonzalez Rogers of U.S. District Court for the Northern District of California, the same judge who is presiding over the Epic Games and consumer suits against Apple.

Developers who made less than $1 million a year in the App Store from June 2015 through April 2021 are eligible for payouts between $250 to $30,000 each from Apple’s proposed $100 million fund, according to the plaintiffs’ lawyers.

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Separately on Thursday, Apple said it would also allow news organizations to pay the reduced 15 percent commission on subscriptions sold through their iPhone apps, but only if they participated in Apple’s news service, Apple News. The Times and some other news organizations have pulled out of Apple News in recent years because, they said, it took control of their relationship with readers and potential subscribers.

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