Looming Antitrust Probe Signals Apple’s Concessions To Keep Coming

Looming Antitrust Probe Signals Apple’s Concessions
Cheyne Gateley/VIP

Apple could find itself under even more intense scrutiny by the federal government. 

The Justice Department, in addition to a group of state attorneys general, is taking the first steps to begin an antitrust probe of Apple, Politico reported earlier this week. 

The probe is concerned with Apple’s App Store, the gateway to nearly 1 billion iPhones that Apple controls. Apple takes a 15%-30% cut of one-off digital goods purchases and subscriptions sales from certain apps, a practice aggravating to the developers that must concede to Apple’s wishes to be able to reach its valuable iOS customer base.

For those that keep a close eye on Capitol Hill news, this must seem like familiar territory. The DOJ confirmed it was launching an antitrust probe into “market-leading online platforms” last July. Names weren’t disclosed, though it was widely assumed that the FAANG players (minus Netflix) were the companies in question. 

More recently, Reuters reported in February that the DOJ had reached out to app developers as part of this big tech investigation. The latest report from Politico signals more concrete action from prosecutors is coming Apple’s way. 

The growing governmental focus on Apple’s App Store tactics lines up with interests of Attorney General Barr, who leads the DOJ. AG Barr has “made top priority” of looking into U.S. tech giants and has been “steeped” in the subject of antitrust law, the NY Times reported on Thursday. 

Fortunately for Apple, however, it has already started to take small steps toward appeasing its biggest critics that yell antitrust. 

On the kickoff day of WWDC20 earlier this week, Apple revealed a few key features coming to its various products that aim to help even the playing field and protect consumers:

  • The ability to set browser and email apps like Chrome and Gmail as defaults.
  • An App Store policy that will require apps to ask for permission to track users.
  • HomePod smart speaker will be integrating third-party music streamers.

Apple during the keynote avoided specific discussions of its App Store policies relating to the Hey debacle, a separate public mess that also fanned the Apple-antitrust flames in recent weeks, but still appeared to be mindful of it. In a Monday press release, Apple announced that developers will soon be able to challenge App Store rejections, a clear response to the recent events.

None of what has been revealed is necessarily game-changing for Apple or developers — Apple isn’t considering allowing apps similar to Hey to operate without surrendering a “significant cut” of their income, per TechCrunch, which is the root source of developer anger. 

But it seems unrealistic to expect Apple to universally surrender its double-digit cuts on in-app purchases and subscriptions, especially at a time in the Apple company life cycle that is increasingly reliant on Services revenue, rather than hardware revenue. 

Additionally, what was revealed at WWDC is still a step in the right direction in terms of Apple lowering its walls to third parties and showing a willingness to compromise to better meet developer needs. 

These are valuable actions for Apple to point to as it faces heightened regulatory scrutiny by the DOJ and state attorneys general. 

What may be best for Apple next is to extend an olive branch exclusively to little, lesser-known apps that offer in-app purchases and subscriptions. This could take the form of creating a program that exempts certain smaller apps from subscription and in-app purchase fees for a period of time. Apple could also try offering to increase the exposure of these smaller apps in the App Store.

Apple has already created a program that exempts some bigger video streaming apps like Prime Video from its App Store fees, so this wouldn’t be uncharted territory for it either.