Previously, Apple required developers to use its in-house system to accept payments, charging hefty fees of up to 30 percent. But Apple still intends to take a 27 percent cut for the link-out to external payment systems, and the company declared a right to audit developers’ accounts to verify they are paying up.
The high commission rate drew fury from app developers. Epic Games CEO Tim Sweeney called it a “bad-faith compliance plan” in a post on X and said Epic will contest it in district court.
“Apple has introduced an anticompetitive new 27% tax on web purchases,” Sweeney wrote. “Apple has never done this before, and it kills price competition. Developers can’t offer digital items more cheaply on the web after paying a third-party payment processor 3-6% and paying this new 27% Apple tax.”
David Heinemeier Hansson, creator of app-development framework Ruby on Rails, called Apple’s 27 percent fee for external payments “insane” in an X post recirculated by Sweeney. “Apple is making the same mistake Microsoft did in the 90s,” he wrote. “Given absolute power, they act with absolute disdain toward” developers, he wrote.
Music streaming app Spotify called Apple’s move “outrageous” and said it followed similar efforts by the company to circumvent regulation in South Korea and the Netherlands. “Once again, Apple has demonstrated that they will stop at nothing to protect the profits they exact on the backs of developers and consumers under their app store monopoly,” Spotify said in a statement.
Apple said in its filing that it is fully compliant with court orders as of Jan. 16 and defended the 27 percent rate as fair recompense for helping iPhone users discover apps and creating a “safe environment” by reviewing the software. “All App Store developers … benefit from (among other things) Apple’s platform integrity, proprietary tools and technologies protected by intellectual property,” Apple’s filing said. Apple declined to comment beyond its statement to the court.
Apple said earlier its App Store generated $1.1 trillion in developer billings and sales in 2022.
Many in the industry had been skeptical about Epic Games’ chances when the Cary, N.C.-based maker of the popular Fortnite video game sued both Apple and Google in 2020 over their high app store payment processing fees. Epic has succeeded in forcing changes at both tech giants, even as Sweeney calls the changes far from sufficient.
In a surprise to many antitrust experts, a jury in San Francisco handed a victory to Epic against Google in December, ruling its app store an illegal monopoly. Google has said it will appeal.
As for the Apple case, Epic failed to get a federal appeals court to rule Apple’s App Store an illegal monopoly under federal law in April. But the court upheld a lower court’s September 2021 decision that Apple had violated California competition law, and that the company needed to stop blocking app developers from directing customers to outside payment systems.
Apple is also facing other antitrust scrutiny in Washington and in Europe over its practices aimed at keeping users from straying outside an Apple-controlled environment. The Justice Department is in the late stages of a years-long antitrust investigation into Apple involving its practices for the iPhone, though it is unclear if and when charges may be filed, a person familiar with the matter confirmed to The Washington Post. The New York Times reported earlier this month about the probe.
In Europe, Apple is one of six major tech companies — along with Alphabet, Amazon, ByteDance, Meta and Microsoft — that will need to make changes by early March to comply with the European Union’s Digital Markets Act, which prohibits the companies from favoring their own app stores and other services over third-party ones.
Shira Ovide in San Francisco contributed to this report.
