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Explained: Apple’s strategy to fight off antitrust regulators

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Apple has implemented major changes to its app store after seeing investigations, lawsuits and anti-trust legislation pile up in several countries against its practices.

Explained: Apple’s strategy to fight off antitrust regulators

There has been increasing pressure from around the world to regulate monopolies of tech giants like Apple and Alphabet, the parent company of Google. The threat of antitrust regulation has been looming large over these tech monopolies amidst criticism of Apple’s App Store practices.

In the United States, a bipartisan group of senators has already introduced a bill in the Senate that would “rein in app stores” of the companies that exert disproportional control on the market, including Apple Inc and Google, reported Reuters in early August.

Democratic Senators Richard Blumenthal and Amy Klobuchar with Republican Senator Marsha Blackburn are sponsors of the bill which aims to prohibit big app stores from requiring app providers to use their payment system, which involves a significant percentage of revenue up to 30 percent for the big app stores including Apple. Additionally, the bill would also prohibit Apple from punishing app developers and providers that offer different prices through another app store or a different payment system.

"I found this predatory abuse of Apple and Google so deeply offensive on so many levels," Blumenthal said in an interview to Reuters. “Their power has reached a point where they are impacting the whole economy in stifling and strangling innovation."

In a matter of days, Apple has implemented major changes to its app store after seeing investigations, lawsuits and anti-trust legislation pile up in several countries against its practices. Critics and experts have long called on governments to do more “against the abuse of global dominance” by Apple and other big tech companies.

What are the changes introduced by Apple?

Apple’s major changes deal specifically with the App Store rules that allowed the tech colossus to take a percentage cut up to 30 percent for all purchases of apps and payments made inside apps downloaded via the Apple App Store.

Apple and also Google, which has the same policy on its app store, have argued that this is fair compensation for the global platform due to the reach they provide to app developers.

But developers like the popular gaming app Epic are engaged in a high stakes legal battle with Apple over the 30 percent commission, reported TechXplore.

Sensing the pressure from a class-action lawsuit from small app developers, Apple has agreed that beginning from the end of August they will loosen payment restrictions on their App Store. The small app developers accused Apple of being a “monopoly” in their lawsuit.

Apple’s concessions are “extraordinary” but “calculated”

Experts believe that Apple’s concessions were proof that it is trying to avoid a fight with governments that are increasingly interested to regulate the big tech companies.

Joshua Davis, a University of San Francisco law professor said that these changes were extremely calculated on Apple’s part and barely make a dent in its bottom line.

Apple's strategy, at this point, seems to be to try to find a compromise where it can maintain most of its practices and the profits it makes from those practices. It gives away as little as it can, according to Professor Davis, reported AFP.

Apple’s Bottom Line

The changes introduced by Apple are not a threat to the company’s business model, which generated $72 billion in revenue from the App Store in 2020, according to Sensor Tower, which is a data insight company.

While Apple lauded the policy changes as helping users, app providers who are directly impacted by this move were not satisfied with these changes and asked for more.

However many users of Apple’s app store feel the steps taken are not sufficient. The app developers want clear, fair rules that apply to all apps, according to Daniel Ek, founder and CEO of Spotify music streaming service.

He said that Spotify will continue to push for a “real solution”. It is not just the US but Europe, Japan and Korea who have started taking action against Apple’s monopoly and are working on enacting laws to address these issues.

Just a week ago, Korea passed a law that bans major app store operators like Google and Apple, from requiring developers to exclusively use their payment systems to process sales, reported CNBC.