Apple has reached a tentative settlement in a class-action lawsuit filed in 2019 by a group of U.S. app developers who asserted that Apple engaged in anticompetitive practices in relation to the App Store and that it charged developers exorbitant commissions on in-app purchases.
Apple confirmed the settlement terms, which still require a judge’s approval, in a lengthy news release issued Thursday evening. Apple confirmed that significant changes are coming to the App Store and its behind-the-scenes systems and procedures. Apple will pay $100 million into a Small Developers Assistance Fund to support independent developers with more advantageous terms on app transactions and commissions. It will also expand the number of price points available to app developers from less than 100 to more than 500.
Under the settlement, Apple cannot block app developers’ efforts to steer users to third-party payment platforms where Apple does not get a cut of any sales. The tech giant said it was “clarifying that developers can use communications, such as email, to share information about payment methods outside of their iOS app” — but Apple will still forbid such messaging within the apps themselves.
In addition, Apple has agreed to limit its ability to favor certain developers and apps when users search the App Store. Apple’s statement affirmed that “search results will continue to be based on objective characteristics like downloads, star ratings, text relevance, and user behavior signals.” The current App Store search protocols will stay in place for at least the next three years.
The settlement with about 67,000 developers in the case known as Cameron et al v. Apple is separate from the other high-profile litigation that Apple is embroiled in at present with Epic Games over the hugely popular “Fortnite” gaming franchise. Both of the lawsuits are playing out in U.S. District Court for Northern California and both turn in part on objections to the standard 30% fee that Apple charges developers for in-app purchases. Developers call it the “Apple tax.”
The tech giant with a $2.43 trillion market cap (as of Thursday) gave no ground on whether the App Store has been an overall positive in the economic prospects for software entrepreneurs. The settlement in the Cameron et al v. Apple class-action suit, first filed in federal court in Oakland, Calif., in June 2019, touted enhancements and new features rather than the legalese of the settlement.
“From the beginning, the App Store has been an economic miracle; it is the safest and most trusted place for users to get apps, and an incredible business opportunity for developers to innovate, thrive, and grow,” said Phil Schiller, the Apple executive who oversees the App Store. “We would like to thank the developers who worked with us to reach these agreements in support of the goals of the App Store and to the benefit of all of our users.”
But companies who have chafed against Apple’s rules say the settlement is more evidence that the tech behemoth abuses its market power and needs to be reined in even more on what critics say are anticompetitive business practices.
“Apple has long claimed that its Apple tax was for ‘trust and safety,’ ” said Dallas-based Match Group in statement. The company owns a clutch of dating apps including Tinder and Match.com. “Now they’re changing the rules, proving it was never about trust and safety — just their pocketbooks. This is a raw demonstration of their monopolistic power: making capricious changes designed to spur good PR for their benefit right as legislation, regulatory scrutiny and developer complaints are closing in on them. We hope everyone sees this for what it is — a sham.”
The Coalition for App Fairness, a lobbying group of 60-plus companies including Spotify, Epic Games and Match Group that wants Apple and Google’s app stores to offer more equitable terms, also blasted Apple’s proposed settlement as a “sham” and “nothing more than a desperate attempt to avoid the judgment of courts, regulators, and legislators worldwide.”
“This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem,” CAF executive director Meghan DiMuzio said in a statement Thursday. “Allowing developers to communicate with their customers about lower prices outside of their apps is not a concession and further highlights Apple’s total control over the app marketplace.”
Just over half of the class-action group will receive payments of $250 as part of the settlement, according to court documents. Another 6% will receive $2,000 and 1% will receive as much as $30,000. The détente in the Cameron case is a separate issue from the larger battle that Apple is waging over App Store business terms with Epic Games over the lucrative “Fortnite” franchise.
“In a validation of the App Store Small Business Program’s success, Apple and the developers agreed to maintain the program in its current structure for at least the next three years,” Apple stated. “Businesses earning less than $1 million annually will continue to benefit from the reduced commission, while larger developers pay the App Store’s standard commission on app purchases and in-app payments.”