Payment methods

Apple to let app developers alert users to alternative payment methods

Apple Inc.

AAPL 0.75%

on Thursday announced changes to its App Store regulations that will allow software developers to tell customers how to pay for services outside of Apple’s ecosystem, as part of a proposed class action settlement.

The change will make it easier for some apps to direct customers to other forms of payment, rather than using the App Store, where Apple charges a commission of up to 30%. Last year, the company cut most commissions in half to 15% for developers who don’t generate more than $ 1 million in revenue through the software platform, and the potential settlement will preserve that change.

In 2019, a group of app makers sued Apple, accusing the company of violating antitrust laws in the way it ran its App Store.

The company will also establish a $ 100 million fund for small developers. The Small Developer Assistance Fund will allow developers with sales of less than $ 1 million per year from June 2015 to April 2021 to earn between $ 250 and $ 30,000. It will benefit more than 99% of developers, according to the complainants.

The potential deal is a partial concession to app makers, who have long wanted customers to pay them directly for services rather than through Apple to avoid the commission. The company previously prohibited developers from using customer information they obtained through Apple to directly inform them about other payment options. The potential regulation removes that ban, according to the plaintiffs. Consumers must consent to such communication, according to Apple.

“This hard-won settlement will bring significant improvements to US iOS developers who distribute their digital products through the App Store, especially for smaller developers who bring so much creativity and energy to their work,” said Steve Berman, the ‘one of the lawyers representing the application developers in the lawsuit.

Apple said the settlement followed a “productive dialogue” with developers and said the changes would help improve the App Store for users and software makers. It is “the safest and most reliable place for users to get apps,” said Phil Schiller, who oversees the App Store.

The settlement must be approved by U.S. District Judge Yvonne Gonzalez Rogers.

The deal will not resolve an antitrust lawsuit brought by “Fortnite” maker Epic Games Inc. against Apple over broader claims that the App Store is an inappropriate monopoly. In that lawsuit, which ended in May, Epic argued that Apple inappropriately restricted the distribution of apps on the iPhone and required in-app purchases through its own payment system.

Apple took issue with the claim that it has a monopoly, noting that people play video games on many platforms, and said its control over software downloads and payments is necessary for user safety.

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In the Epic case, which Judge Gonzalez Rogers also presided over, she lobbied Apple CEO Tim Cook during his testimony on why Apple doesn’t allow developers to suggest options. cheaper for in-app purchases outside of the Apple system. “I understand this notion that Apple brings the customer to gamers, to users, but after that first time, after that first interaction… developers keep their customers, Apple just takes advantage,” she said.

Mr Cook disagreed and said Apple has the right to choose a business model that relies on app commissions and in-app purchases. He also said that the many free apps available on the App Store attract customers and benefit game developers.

“If we allowed people to connect like this, we would essentially forgo our full return on intellectual property,” Cook said.

Write to Bradley Olson at [email protected]

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Appeared in the August 27, 2021 print edition under the title “Apple to Shift on App Store Payments”.

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