Adding to the growing list of investigations targeted at app stores, Russia’s Federal Antimonopoly Service (FAS) on October 27 launched an antitrust investigation into Apple’s App Store for not allowing developers to link to third-party payment systems.
What prompted this investigation?
On August 30, FAS gave Apple a warning over abusing its dominant position in the distribution market for iOS apps and asked the company to eliminate signs of violations before the end of September. But since the company did not comply with this warning, the FAS has launched a formal investigation.
FAS said that several iOS users and app developers reported concerns that users are not allowed to be informed about the possibility of cheaper purchase options outside of the app. Apple App Store, like Google Play Store, requires app developers to only use the billing system provided by Apple for in-app purchases of digital goods. Those who do not comply are not allowed on the App Store. This impacts competition and results in a hike in prices, the FAS observed.
Although Apple on August 27 proposed a number of changes to its App Store policy including allowing developers to let users know about other payment methods available through external communications like e-mail, critics have argued that this doesn’t go far enough because Apple still does not allow apps to include “buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.
“If Apple is found violating Russia’s Competition Protection Law, it will face a fine equal to a percentage of the company’s revenue,” FAS stated.
Apple, Google face regulatory challenges around the world
- India: In India, both Google and Apple are facing regulatory scrutiny over their app stores. While the Competition Commission of India (CCI) ordered a detailed investigation into Google Play Store last November, it is currently reviewing an antitrust complaint filed against Apple App Store in September.
- South Korea: A South Korean law passed in August requires app stores to allow alternative in-app purchase mechanisms allowing developers to use their own billing system and avoid paying Google’s or Apple’s service fees.
- Japan: Earlier in September Apple made a concession to settle an investigation by Japan’s Fair Trade Commission into the Apple App Store. The concession allows developers of “reader apps” like Netflix and Spotify to include an in-app link to their website for users to set up or manage an account.
- Epic lawsuit: Epic Games, maker of the popular Fortnite game, filed lawsuits against both Apple and Google in August 2020 alleging that the two companies are engaging in anti-competitive practices in their respective markets for distribution of apps and in-app payment processing. While a verdict has been reached in the Epic vs Apple case, both the companies have appealed it. Meanwhile, the hearing is yet to begin in Epic vs Google case, but Google recently filed a counterlawsuit.
- Netherlands: The Dutch antitrust authority has found that Apple’s rules requiring app developers to use its own payment system are anti-competitive. While the Netherlands’ Authority for Consumers and Markets has not fined Apple, it has demanded changes in the company’s in-app payment policies.
- China: China’s Supreme Court in September dismissed Apple’s plea and ruled that an antitrust lawsuit filed by a consumer against the company’s China entity can proceed. In its plea, Apple had argued that the lawsuit should not be allowed because its China entity does not deal with App Store operations. The court, however, said that Apple had potentially abused its market position and undermined competition, and hence the case can be heard.
- US proposed bill: On August 11, US lawmakers introduced a new bill titled Open App Markets Act that proposes:
- Operating systems must allow third-party app stores
- Developers must be allowed to choose their choice of in-app payment system
- Pricing for various app stores or in-app payment systems can be determined by developers
- Developers can freely communicate pricing offers with users
- Google and Apple cannot use non-public data to build competing apps
- No self-preferencing in app stores
- Third-party developers must be provided with the same access to developer tools
- EU and UK: The European Union has launched an investigation into Apple App Store following a complaint from Spotify and the United Kingdom has launched a broad investigation into Google’s and Apple’s effective duopoly over the supply of operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome). Both investigations are ongoing.
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