Apple will finally let developers tell users about purchase options available outside the iOS App Store. The iPhone maker agreed to this and other concessions—including $100 million in payments to developers—in a proposed settlement of a class-action lawsuit filed by two app developers in 2019.
Apple and the developer plaintiffs who sued the company filed motions today urging a federal judge to approve the settlement. The case is in US District Court for the Northern District of California.
"Apple has agreed to revise its App Store Guidelines to permit developers of all app categories to communicate with consenting customers outside their app, including via email and other communication services, about purchasing methods other than in-app purchase... This injunctive relief is extremely valuable. By informing customers of alternative payment options, developers can avoid paying Apple's commissions and, moreover, exert competitive pressure on Apple to discipline its pricing," the plaintiffs' brief said.
The settlement term would not let developers tell users about non-App Store purchase options within apps themselves, requiring such communication to take place outside the apps. App makers would be able to contact customers using email addresses and phone numbers obtained within their apps and tell them how to purchase subscriptions and other digital content from the developers' own websites or elsewhere.
Apple currently does not allow developers to "use contact information (emails, phone numbers, etc.) obtained within an app to contact their user base outside the app," which effectively "prevents developers from alerting their customers to alternative payment options," the plaintiffs' brief said. "The proposed settlement lifts this restriction, and it does so for all app categories."
It isn't clear whether Apple will make the change in the near future or wait until the settlement is approved and implemented. There was no mention of the Mac App Store in the settlement motions.
Apple calls deal “a win-win”
Apple described the settlement in a press release, saying it will let developers "use communications, such as email, to share information about payment methods outside of their iOS app. As always, developers will not pay Apple a commission on any purchases taking place outside of their app or the App Store. Users must consent to the communication and have the right to opt out."
Apple's motion for approval called the settlement "a win-win situation" that benefits developers and Apple. The benefits for Apple are that the "class members 'expressly agree to the appropriateness of Apple's commission structure,'" and "release their claims against Apple, including 'any claim, contention, argument, or theory that they were 'overcharged' during the Class Period by virtue of commissions charged by Apple on paid downloads or in-app purchases of digital content (including subscriptions) through the App Store.'" Apple said those concessions by developers "are important acknowledgments."
Apple said it also agreed to "expand the number of price points available to developers for subscriptions, in-app purchases, and paid apps from fewer than 100 to more than 500."
Apple said it is "confident" that it would win at trial and that the evidence "establishes that the practices challenged in this and other cases are both lawful and well-justified by business necessity—including the protection of Apple's intellectual property, and protecting the security and privacy of Apple's customers." However, Apple said it "would rather work with developers than litigate against them," and that the settlement "will avoid the expense and distraction of further litigation."
Antitrust bill could force bigger changes
The concession takes place as Apple faces antitrust pressure, including legislation that could force Apple to allow sideloading of applications on iOS and third-party App Stores. That bill, the Open App Markets Act, was proposed by US Senators Richard Blumenthal (D-Conn.), Marsha Blackburn (R-Tenn.), and Amy Klobuchar (D-Minn.).
Blumenthal issued a statement calling today's settlement a "powerful sign that Apple and Google's stranglehold over app store markets is purely self-serving."
"This marks a significant step forward, but does not rectify the full and vivid range of market abuses and practices still widespread across app markets that [the] Open App Markets Act would address," he said. "Today's move only adds to the momentum and further exposes rampant anticompetitive abuses in the app markets. The fox-guarding-the-hen-house status quo will remain until there are clear and enforceable rules for Apple and Google to play by."
Group that includes Epic Games calls it a “sham settlement”
Apple is also facing a lawsuit over the App Store filed by Epic Games, the maker of Fortnite. The Coalition for App Fairness advocacy group launched by Epic and other companies such as Spotify and Match Group called the Apple settlement a "sham." The group's statement said:
Apple's sham settlement offer is nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide. This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem. 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. If this settlement is approved, app makers will still be barred from communicating about lower prices or offering competing payment options within their apps. We will not be appeased by empty gestures and will continue our fight for fair and open digital platforms.
67,000 developers eligible for payments
Apple agreed to pay $100 million into a Small Developer Assistance Fund for a settlement class consisting of about 67,000 developers who "earned proceeds in the App Store of no more than $1,000,000 in calendar years 2015 through 2021." Developers will get payments based on their "historic proceeds" from selling apps on Apple's App Store, apparently meaning their total sales since 2015.
The smallest minimum payouts of $250 each would go to developers who made $100 or less on the store, which consists of 51 percent of the 67,000-member class. Minimum payments will go up to $30,000 for developers who earned over $1 million during the class period, but about 95 percent of the class would receive minimum payments of between $250 and $2,000.
Those really are "minimum payments," the developers' brief said. "They would apply only if every member of the Settlement Class submits an approved claim," the brief said. The proposed deal requires the settlement administrator to send notices by email and mail to the 67,000 class members. However, the proposed settlement administrator "estimates a claims rate of 35 percent in this matter," and "minimum payment amounts will increase proportionally in each tier" to distribute money that would have gone to developers who are eligible but don't make claims.
Apple also agreed to maintain some of its current policies for at least three years after the settlement. That includes the small-business commission pricing that lets businesses earning under $1 million annually pay 15 percent of App Store proceeds to Apple instead of 30 percent. Apple said it also "agreed that its Search results will continue to be based on objective characteristics like downloads, star ratings, text relevance, and user behavior signals," and to "maintain the option for developers to appeal the rejection of an app based on perceived unfair treatment."
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