A class-action damages claim has been filed against Apple on behalf of UK-based developers. The suit, which seeks compensation that could be as high as £800 million (over $1 billion), accuses the tech giant of abusing a dominant position by charging an “anticompetitive” 30% fee on in-app sales made by app makers on its iOS App Store. It also argues that UK consumers are missing out because developers are deprived of money that could be spent on R&D to keep app innovation going.
Sean Ennis, a professor of competition policy at the University of East Anglia who has held positions at the OECD, the US Department of Justice and the European Commission, brought the class action for over 1,500 UK-based developers.
“I’ve been studying questions of competition for decades – and digital competition for a long time. I’ve written about it in technical economic papers but also in less technical work. And I’m really convinced that the kind of behavior we’re talking about in this case is very problematic. That’s why I’m interested in taking on a role to help get some redress for what I feel has been harmed by the behavior,” he told TechCrunch, discussing his motives for filing the case – which is funded by UK litigation funder Harbour.
The lawsuit is an opt-out class action, which means UK-based developers do not need to register to be included in any potential victory. If litigants prevail against Apple, the level of damages due to each developer will be calculated based on their iOS app business – so payouts can be substantial and even millions of pounds in some cases.
The core argument made by the litigants is a familiar one. The likes of Spotify and Epic railed for years against Apple’s unfair “tax”, while they faced it – filing their own high-profile complaints against the policies and fees of the App Store with regulators and courts on both sides of the Atlantic, with varying degrees of success. Even Elon Musk called Apple’s commission on in-app purchases a de facto tax on the internet world.
Apple has always rejected accusations that it profits at the expense of developers by arguing that the fees it charges enable it to provide iOS users with a premium experience, saying that its management of the store includes reviewing apps for security and privacy concerns, among other quality controls (however, scams – the subject of a first developer lawsuit related to the App Store that Apple settled in last year – still not passed).
However, many developers continue to push the other side: Arguing that Apple’s payment is unfair – both in the unequal way it is applied (because some apps / types of content are charged, while others are not) and as a result of the size of the cut taken (in 2020 Apple reduced its payment to 15% for the first $1 million of revenue in this revenue of 3 million of revenue in this revenue of 3. 0% cut off).
This UK suit aims to test the arguments in a bid to get developers compensated for what the litigants argue is Apple’s abusive, anticompetitive behavior.
The law firm supporting Ennis in bringing the suit is Geradin Partners. Talking about the argument that they intend to make for the developers in an interview with TechCrunch, the partner Damien Geradin highlights a couple of elements that he proposes to be the focus points for the suit – firstly pointing out that Apple’s fee is not used equally, with only 16% of the apps subject to it as a result of how (inconsistently) Apple provides news services such as digital charges, and streaming service applications to apply its contents. the burden of payment while other apps fall under the radar.
He also flagged the fact that Apple also charges developers an annual program fee ($99). And proposed developers would increasingly have to pay Apple to buy search ads to have a chance of their software being discovered by iOS users. The point is, Apple has different routes to monetize the store.
“Another critical element is that even if the fee is zero, you will still have the same App Store because Apple cannot sell a device without valuable apps such as Tinder, Spotify, Netflix, news apps, game applications and others,” he also suggested. “It is only because they have created a distribution monopoly for themselves that they are able to collect this incredible commission.”
The details (and fairness) of the App Store’s T&Cs have been chewed over by several competition regulators, including the UK’s own Competition and Markets Authority (CMA) – which opened its review in March 2021.
In some markets, including Europe and Asia, we have also seen enforcement action by regulators focused on the terms of Apple’s payment service in the App Store forcing it to allow third parties to use alternative payment processors, with some (limited) impact on the fees it charges.
But it’s fair to say that the company has yet to face a major regulatory crackdown on the 30% charge.
Injury cases can move the ethical needle, however. However, it can take years, plural, for cases like this to deliver a verdict (and any blockbuster payouts for developers).
By launching their legal action today, the litigants say they hope their suit can be joined by an existing (consumer damages-focused) App Store suit – aka Dr. Rachael Kent v. Apple – which filed back in 2021, and is seeking £1.5 billion in damages for UK consumers. The suit has been certified and is awaiting the hearing of the Competition Appeal Tribunal.
Pressed on the time of their suit, and especially why they did not decide to wait for the investigation of the App Store by the CMA to run its course before the litigation, they suggested that they no longer need to wait for the competition regulators to provide additional proof of damage – pointing to the work of the assessment that has already been done in some jurisdictions (including a major study of the mobile market ecosystem that the CMA has recently concluded).
“If you look at the CMA mobile ecosystem market study, released a few months ago, you will see the same findings,” argues Geradin. “You see that the profit of the App Store is between 75% and 100%. It is literally an ATM. It is a money printing machine. And we will talk about that. And so we do not mention that they provide a service but not to the tune of 30% commission collected in a discriminatory way.
The litigants also pointed to an economic analysis they commissioned from Compass Lexecon – which they suggested showed that Apple’s market dominance gave it “extraordinary and excessive profits at the cost of the value provided to app developers,” as they said.
“A report by the US House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law said that Apple’s net revenue from the App Store alone is estimated to be about $15BN in 2020, rising to $18.8BN in 2022. According to the same report, Apple’s former Senior Director of the App Store in the App Store also confirmed that it costs less than $100 to run the App Store for a $10M release,” wrote they are also Apple’s former Senior Director of the App Store Review of a $10M run of a $10M release lower the cost of running the App Store. announced their suit today.
Geradin added that they expect the legal discovery process to provide any other relevant data needed to bring their claim home for UK-based iOS developers.
In the case of the CMA against Apple’s App Store, despite more than two years of investigation, the proceeding has not yet led to any public enforcement. Recently there has been a set of case notices regarding extensions to its review and analysis timelines for examining accumulated intel. But it remains unclear when the regulator might make a decision. There are no statutory deadlines for such cases – which means that a complex investigation can continue to be prolonged if the CMA deems more time necessary to ensure a robust and thorough review. (Or, well, for any other reason deemed important.)
“You don’t know the competition authorities,” Geradin also said, further explaining why they did not wait for the CMA to give a ruling. “I spent my life waiting for them to act. So maybe something will happen next week, or maybe something will happen next year. That’s why it’s always a bit dangerous to wait for what they will do – considering that you don’t know when they will act and what the range of action will be. “
He also emphasized that the lawsuit seeks compensatory damages on behalf of the developers for what they allege are anti-competitive wrongs that Apple has already committed. Meanwhile the competition authorities focus on correcting abusive practices in the future.
“They are [the CMA] can ask Apple to change its behavior but has not done so in the past. While a claim for damages for the past, and we think that the developers of the app are taking advantage and they should be compensated for past actions. So these are complementary tools,” he said. “But again, we don’t know what the scope of the CMA’s investigation will be – the CMA is very quiet and very discretionary about what they look at.”
In recent years, many UK class action styles have been unsuccessful against major technology companies seeking damages for breaches of privacy law – often building on challenges related to establishing a class (for example, a recent health data claim against Google DeepMind, or the Safari tracking case against Google). However, privacy suits may not provide much direction on what competitive class actions can do.
Asked about this, the litigants expressed confidence vis-à-vis establishing equality – because “all our developers who sell digital content are treated in the same way,” said Geradin.
They also suggest that proving the harm involved in antitrust abuse should be more straightforward than in privacy cases where arguments about harms and effects can be more subjective.
“There’s a lot of equity in the damage here because we’re talking about a 30% commission,” Ennis suggested. “So compare that to the harm you have suffered because of the violation of privacy compared to others . . . I will not speculate about the facts of the cases but, here, the level of the commission is known and common, and that facilitates some aspects of the formation of a class.
