House antitrust chair calls Apple App Store fees 'highway robbery'

Credit: Apple

The chairman of the U.S. House Subcommittee on Antitrust characterized Apple's App Store fees as a "highway robbery" in a recent interview.

Apple takes a 15% to 30% of in-app purchases made on the App Store, and it has guidelines in place preventing developers from encouraging users to circumvent the App Store for subscriptions.

Those App Store fees have become a hot topic of conversation after reports that Apple threatened to remove email app "Hey" because of its lack of in-app purchase options.

Rep. David Cicilline, the house antitrust committee chair, recently sat down with The Verge and Basecamp CTO David Heinemeier Hansson, one of the developers of Hey, to discuss the App Store fees on the latest episode of The Vergecast.

"Because of the market power that Apple has, it is charging exorbitant rents — highway robbery, basically — bullying people to pay 30 percent or denying access to their market. It's crushing small developers who simply can't survive with those kinds of payments. If there were real competition in this marketplace, this wouldn't happen," Cicilline said.

The representative went on to explain that he has heard from "many people" who are afraid of economic retaliation. "This is a real problem in the marketplace. This is a direct consequence of enormous market power, the fact that Apple is the gatekeeper for these developers," Cicilline added.

Although Apple created the platform and associated hardware for App Store apps, Cicilline said that the company shouldn't be charging high fees for use of those solutions.

"You cannot simply allow someone merely because they invented a system or a product to continue to enjoy that kind of monopoly power," Cicilline said. "It's contrary to our laws. It's unfair to new developers, new startups, and it hurts consumers."

Heinemeier Hansson has been vocal about Apple's handling of the Hey app. Just a day prior to the interview, he took to Twitter to say that Apple blocked software updates for the platform and threatened to remove it. On Thursday, Apple reportedly rejected Hey's appeal to keep its app on the App Store in its current state, Axios reported.

The Hey app did not contain an in-app option to purchase subscriptions, which is required by Apple for most types of apps. Instead, users of Hey must sign up for the platform on the company's website and log in with their credentials.

Apple had originally approved the app, though it told Protocol that the app's approval was a mistake. The Cupertino tech giant said that it allows apps without in-app subscription options for business, but not consumer, services. It's worth noting that Spotify and Netflix do not contain in-app purchase options.

In 2019, the U.S. Department of Justice launched a probe into Apple's App Store activities. Heinemeier Hansson himself testified as part of the investigation in January.

Cicilline said that the antitrust probe is nearing its end and that a final hearing could be held as soon as July. He added that the committee has been attempting to get major CEOs to testify. The probe will result in a report, though Cicilline says that fixing any problems within it could require "regulatory action and statutory changes."

Although Apple chief executive Tim Cook declined, Amazon's Jeff Bezos, Facebook's Mark Zuckerberg and Alphabet's Sundar Pichai have agreed. Microsoft President Brad Smith, for his part, has voiced support for further investigation and possible regulatory action of app stores.

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35 Comments

tenthousandthings

said about 3 years ago

There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant.

roundaboutnow

said about 3 years ago

tenthousandthings said:

There is a “be careful what you wish for” aspect to these complaints. If Apple is forced to change this simple business model, the resulting approach could well be less friendly to small developers. I don’t know, and I don’t know if it is known, what portion of Apple’s cut goes to the costs of maintaining the App Store, the review process, advertising, and so on. I’ll guess it is significant.
I'm sure all developers, especially small developers, would like to see a reduction in Apple's cut, but I too guess that all those App Store costs must be significant. It's not like they aren't getting something in return for that percentage.

When Cicilline said, "It's crushing small developers who simply can't survive with those kinds of payments," it makes me wonder how many "small developers" would even be able to exist without the App Store.

Then when he goes on to say "If there were real competition in this marketplace, this wouldn't happen," well, certainly it's true in the iOS marketplace there is no competition to the App Store, but there is the wider marketplace outside of iOS with millions of other devices that can be marketed to--doesn't that count as competition?

Then again, if a competing, alternate iOS store were allowed, who would trust it?

larryjw

said about 3 years ago

You know how to handle the 15% or 30% cut Apple takes? Charge more.

Since few are getting a special deal, its fair by definition.

Android I guess costs less. So, program for Android. Nobody is stopping them.

mjtomlin

said about 3 years ago

"Because of the market power that Apple has, it is charging exorbitant rents -- highway robbery, basically -- bullying people to pay 30 percent or denying access to their market. It's crushing small developers who simply can't survive with those kinds of payments. If there were real competition in this marketplace, this wouldn't happen," Cicilline said.
Umm... I call bullshit! IT HAS ALWAYS BEEN 30%!!! That has nothing to do with "market power". And Apple's market grew even though that 30% was there. There is absolutely no proof that small developers are being crushed. As a matter of fact the App Store has allowed small developers to flourish., because they don't play favorites with large companies. It was said that the App Store actually leveled the playing field for small developers because there's no administrative overhead - you write your app and submit it - Apple handles everything else.

Let's also not forget that the App Store was huge in bringing down the price of mobile apps - they didn't go up. Before the App Store, mobile apps were fairly expensive on other platforms. Furthermore, Apple doesn't tell developers what they should charge - that's completely up to the developer. noting Apple gets 30% and you want to make $2 on each sale, sell it for $2.99.

All of this is easily demonstrable, so Apple doesn't have a worry here.
"You cannot simply allow someone merely because they invented a system or a product to continue to enjoy that kind of monopoly power," Cicilline said. "It's contrary to our laws. It's unfair to new developers, new startups, and it hurts consumers."

Seriously!? Someone makes a hit product and all of a sudden they are no longer allowed to decide how that product works? What's next? Break iOS away from iPhone, so other OEMs can make iOS based devices, because Apple has monopoly power over iOS!?

I agree to all of this when there's a real case for it, like when your product is merely one component of an actual product and you are trying to assume control over that actual product (and market) - That's what Microsoft did in the 90's. They made an OS. OEMs made the hardware. Microsoft's OS was the largely dominant OS and Microsoft used their position to force OEMs and IT departments into onerous licensing terms.

ne1

said about 3 years ago

Cicilline is obviously in the pocket of Google and Microsoft. Of course their CEOs will testify— they want to tear down Apple for competitive reasons, namely success. I hope the rest of Congress sees through this corporate shill. Good for Tim Cook on not agreeing to testify— he shouldn’t give this guy the time of day. Oh, wait, he probably already does, on Cicilline’s iPhone.