ProMarket: Regulators Turn Their Attention Towards Apple’s Exploitation of App Developers. Now What?

June 24, 2020 Media

Last week, the European Commission announced it was investigating Apple’s treatment of independent app developers. The EC’s investigation appears to focus on the scope and size of the commissions that developers must pay to access Apple’s customers in the App Store.

The investigation reportedly builds on a complaint from Spotify, the streaming music service, which asserts that Apple’s hefty commissions on subscriptions by formerly ad-supported customers—which can reach up to 30 percent—are exploitative and potentially motivated by reasons relating to Apple’s competitive streaming service.

Part of the EC’s concern is the misappropriation of a potential rival’s data and the unlevel competition between an independent app like Spotify and Apple’s similarly situated app. As Randy Picker notes in a companion ProMarket piece, variations in Apple’s commissions do not appear to be correlated with Apple’s owning a rival app, which suggests that the exploitative fee issue is different from the problem for which the EC is investigating Amazon and Google. I’ve written about how to address misappropriation and discrimination here.

Spotify is not the only app to cry foul. Email service provider Hey similarly alleged that Apple required the upstart to permit in-app payments that could be monitored and thus tolled by Apple. And Epic Games complained that Apple takes a cut of revenue from Fortnite players for digital currency that can be redeemed for in-game items.

If we think that an online platform is exercising power vis-à-vis atomistic input providers, the natural policy intervention is to level the playing the field by permitting the input providers to collectively bargain for their share of revenues. As Matt Stoller points out in his blog Big, Netflix, Dropbox, and Uber have special arrangements with Apple, “probably because they are too big for Apple to push around.” In addition to signaling market power, such price discrimination implies the lack of countervailing power among smaller app developers.