Apple Inc. seems the least vulnerable of the four tech giants facing antitrust scrutiny, but there are hints that could change.
In a move that seeks to appease growing objections among developers to the enormous power Apple AAPL, +1.20% wields on its digital platform, the iPhone maker in November said it is halving the commission it charges smaller developers that sell software through its App Store to 15%, starting next year. The commission rate applies to companies that generate no more than $1 million in revenue through the software platform, including in-app purchases.
Apple’s concession is clearly motivated by Epic Games’ antitrust suit filed in August against Apple over App Store rules that require developers to use Apple’s in-app payment system, which takes a 30% commission. In August, the maker of the popular game “Fortnite” launched its own in-app payment system to circumvent what it called Apple’s monopolistic practices. (In June, the European Commission opened two competition probes into Apple related to its App Store and Apple Pay.)
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Publishers earning over $1 million accounted for more than 90% of App Store revenue in 2019, so lower commissions should only hit a very small portion of the revenue base, according to Evercore ISI analyst Amit Daryanani.
“The move is a positive in terms of optics as the program is specifically designed to support small businesses, which will make a good sound bite the next time [Apple Chief Executive] Tim Cook is brought in front of Congress or in a courtroom,” Daryanani said in a Nov. 18 note that maintained an outperform rating on Apple shares with a price target of $135.
Companies clearly fear the long reach of Apple and others. In its S-1 filing on Nov. 16, Airbnb Inc. ABNB, +112.81% cautioned that should Google or Apple “use their own mobile operating systems or app distribution channels to favor their own or other preferred travel service offerings, or impose policies that effectively disallow us to continue our full product offerings in those channels, it could materially adversely affect our ability to engage with hosts and guests who access our platform via mobile apps or search.”
Apple has consistently dismissed the Epic lawsuit and criticisms from antitrust experts that is has abused the App Store.
“Epic started a fire, and poured gasoline on it, and now asks this Court for emergency assistance in putting it out,” Apple said in a 37-page opposition brief. “[E]ven though Epic can do so itself in an instant by simply adhering to the contractual terms that have profitably governed its relationship with Apple for years.”
But Apple likely faces more lawsuits from companies that feel they have been wronged by the most valuable U.S. company. On Thursday, the maker of Cydia, an app store for the iPhone launched in 2007 that predates the App Store, filed a suit. It charges Apple unleashed anticompetitive means to nearly destroy Cydia, so Apple could solidify a monopoly over software distribution on Apple’s mobile operating system.
Before Cydia, email app developer Blix Inc. filed antitrust litigation in October 2019, claiming Apple outright copied a feature from the company’s app, BlueMail, and then immediately booted it from the App Store with no warning. Apple has denied the company is a monopoly.
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All the while, the Justice Department and some state attorneys general are investigating Apple over antitrust concerns. AGs in Texas and other states, for example, are probing Apple over allegations the company slowed the performance of older phones as batteries aged.
On the European front, prominent privacy activist Max Schrems on Nov. 16 claimed Apple broke EU privacy laws in Germany and Spain by allowing iPhones to track users for advertising purposes without obtaining consent.