The European Commission, which regulates antitrust behavior in the European Union, charged Apple with “squeezing out” competing music-streaming sites by forcing them to use Apple’s in-app payment system. The charge originates from Spotify, which competes with Apple Music yet must follow Apple’s purchasing guidelines in order to appear on the app. Otherwise, they may face a fate like that of Fortnite, who was kicked off Apple’s AppStore for avoiding the in-app payment rules--namely a 30% commission on in-app purchases. Epic Games, which owns Fortnite, also lodged a complaint through the European Commission and has an upcoming federal trial in the U.S.
In response, Apple have defended their rules and commission rates, saying that they want apps in their stores to succeed. They pointed out that Spotify has been very successful early on through exposure gained in the AppStore despite its rules, and that it remains successful having removed paid options from the iOS app. Apple also argued that its 30% commission rate was similar to that enforced by Google Play’s App Store and Amazon App Store. Thus, their practices are common in business and offer a level-playing field across virtual ecosystems. However, many in the EU and the U.S. seek legislative action against all three companies. They say that these restrictive and costly regulations by these gatekeeper apps prevent a level-playing field for apps and that virtual app stores have become a necessity. The U.S.’s Justice Department and FTC have filed similar lawsuits, such as one notable antitrust hearing last year by the House Judiciary Committee with Apple, Google, and Amazon.
It appears to be an uphill battle to regulate massive gatekeeper apps, but more and more companies and governmental bodies seek to change such oligopolistic bodies as these.
Questions:
How and why should “gatekeeper” apps such as Apple be regulated, if at all?
What do you think will be the result of all these trials?
Do you think that limiting these oligopolies is good for the economy (consider economies of scale, incentives, recent history)?
9 comments:
Something that’s pretty interesting in this lawsuit is the fact that companies like Microsoft and Nintendo that manufacture consoles also impose high commissions for Epic Games to sell their games on each respective device. However, Epic argues that because margins are higher for Apple than for companies that have to manufacture physical products, Apple can afford to reduce commission rates. In my opinion, this doesn’t sound like a valid base for a lawsuit - it doesn’t really make sense to treat a platform company like Apple differently than a different platform because ones business model has higher returns. However, based on public opinion and the fact that anti-trust is one of the few things that is agreed upon on both sides of isle, there is a possibility that this might swing in Epic’s favor. And of course, there is no denying that Apple should decrease commissions so developers can be paid more and make the process more equitable, but morality doesn’t often fly in court cases. There are more lawsuits coming from other developers, so even though this issue started more than two years ago, it’s still far from over.
It's interesting to see the issues that have arisen with the rise of big-tech companies. Companies like Apple and Amazon have been able to expand their businesses at exponential rates; Apple started by selling computers and has within a few decades expanded to several different markets, from home-security to smartphones to music streaming services.
One question I'd like to pose is: are companies like Amazon, Apple, and Microsoft slowly forming an oligopoly and pushing out contenders like Spotify and Fortnite out of their respective markets? What happens if they become oligopolies in multiple markets? With their high budgets and increasing breadth across markets, it seems as if these companies will start dominating multiple industries-- this would be a very unique situation. From this perspective, I do think there is a clear trend of anti-competition seen through Apple's actions. If Europe and the U.S. wished to combat this trend, I think they'd need to take a new approach to anti-trust legislation.
Arnav brings up some valid points in his response to these questions. The 30% cut that apple takes In the transaction is the same policy they had 12 years ago when they first founded the App Store. The difference now is that the App Store is huge, now contributing $275 billion dollars in revenue a year. While 30% can sounds like a lot in some respects, considering that credit cards charge a 3% processing fee per payment, its unfair to call apple out now because "apple can afford it". I think that the results of this trial will go in Apples favor. There is certantly competitive behavior like Apple Music advertising for cheaper than Spotify but I think that holistically apple is not doing anything wrong. As of right now, I think that amazon's monopoly on retail is more concerning than this. Amazon is rapidly taking over the retail market and there has been controversy over them blocking retailers from selling on Amazon and then recreating the product themselves.
I think that apple doesn't need to be regulated anymore than it is. If a games wants to be a part of their company and join their brand, then they have to play by their rules. At the end of the day it is a business and apple is the boss when it comes to apps and iOS games. I don't think limiting apple's power is good for the economy because of how massive they are. What if they were to strike or protest the regulation and then what, the whole phone industry would be screwed. They are the one's with all the great ideas and have other companies paying millions for their patented ideas. They are the breadwinners and that is why they have the power they have to be able to ask for 30 percent go in app purchases.
I do not think these "gatekeeper" apps should be regulated because nothing has changed with their 30% cut at all during the life of the app store. Just because the app store is much more popular now does not mean that it is fair to dodge Apples cut now that it is very profitable to them. I think and hope that Apple comes out on top because it is Apple's phone and app that Fortnite is being sold on. If Epic Games really wants the money that bad they can make their own phone to sell Fortnite on in my opinion.
Gatekeeper apps like apple need to be regulated because they can turn into monopolies that will abuse their power. I think it will have for more companies being able to make money instead of just one company. All apple does is help distribute when this company works hours on a game and apple just gets more because they can it seems kind of annoying. There needs to be regulations to stop from companies being able to do this.
Overall, I think I legally agree with Jack in saying that Apple is correct in demanding that companies pay 30% of Apple Store income to Apple. I also don't believe there will be much required regulation because the software and application industry seems to be leaning towards a platform more based on creating free apps with in-app purchases. I know that the judge dealing with the court case is currently thinking about allowing companies to advertise paying on their own websites rather than paying through the App Store, which I think is a good start. I think it will lower the amount of control Apple has over developers, and possibly force them to lower prices to keep people from advertising their websites. I think many developers would want to avoid advertising alternate websites because it may look cheap, but simultaneously may feel it is necessary without a cut from the 30% payment they have to make. If it really hurts Apple's business, Apple may switch methods, such as having low flat rates for businesses with income below a certain threshold, and an income-dependent pricing for other businesses. Overall, I think the market will guide itself relatively well, but I think it may require some intervention to allow companies to advertise alternative payment methods other than directly through the app store.
I hadn’t heard of this issue before this blog post, and it is extremely interesting to me. I knew that there was obviously a lot of competition between Spotify and Apple, but I didn’t realize it extended to this length. Most people often argue about which music service is superior, Spotify or Apple Music. Personally, I use Spotify and believe it to be much better and more complex (music and system wise) than Apple Music. After this revelation, I do believe that gatekeeper apps like Apple need to be regulated. I don’t believe it is fair for Spotify to have to contribute to their competitors wealth each time they gain new business. I’m not entirely sure how it would affect the economy, but Apple is a massive tech company that probably would not be that fazed by their business being regulated in this smaller sense. Spotify deserves to not be hindered in their competition with Apple for customers of their music service.
Apple should absolutely be regulated - large hardware companies that own the software their hardware runs on are known for engaging in anti-competition practices with third-party software (and, to a bigger extent but not entirely relevant, with collecting user data illegally). Third-party software is incredibly important for keeping software competitive and allowing for variations in applications that can be downloaded from application stores that are run by the hardware companies. Apple should absolutely have regulatory agencies breathing down their neck to keep them from kneecapping third-party software.
As much as I hope that Apple will get more strictly regulated with their gatekeeping I think it's more likely that they'll just settle the case outside of court so that this won't happen. They are a huge tech company that can just pull strings as they please with very low regulations, so my hopes are not high for the result of these trials.
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