Apple is facing a billion-pound lawsuit over claims that it’s systematically overcharging UK users through its App Store.
The claim, filed on behalf of around 19.6 million UK iPhone and iPad users, alleges that Apple deliberately shuts out potential competition and forces ordinary users to use Apple’s own payment processing system.
This, it’s alleged, generates illegally excessive levels of profit for the company, with around 30 per cent of the money spend in the App Store going to Apple.
“This is the behaviour of a monopolist and is unacceptable. Ordinary people’s use of apps is growing all the time, and the last year in particular has increased our dependence on this technology,” says Dr Rachael Kent, an expert in digital economy and a lecturer at King’s College, London who is leading the action.
“Apple has no right to charge us a 30 per cent rent for so much of what we pay for on our phones — particularly when Apple itself is blocking our access to platforms and developers that are able to offer us much better deals.”
The 30 per cent commission, Kent argues, bears no relationship to the cost of providing the service, and is monopolistic and unlawful. Apple wouldn’t be able to charge customers this much if its devices were open to competitors, she says. As a result, the claim alleges, Apple’s conduct violates section 18 of the UK Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union.
“Apple has created a captive market where people who own Apple devices are reliant on it for the provision of both apps and payment processing services for digital purchases,” says Lesley Hannah, Partner at legal firm Hausfeld & Co LLP, which is leading the litigation.
“It has been exploiting that market for years, by charging excessive fees that in no way reflect the actual cost of providing those services and making sure no one else can compete. App purchasers have been paying the price. This action seeks fair redress for those purchasers.”
The claim relates to most popular apps on iPhones and iPads, including Fortnite — whose developer, Epic Games, has already accused Apple of anti-competitive behavior. But it also applies to YouTube, Tinder and many others that require payment at point of download, subscriptions, or allow for in-app purchases.
It doesn’t, though, apply to apps providing physical goods or services that will be consumed outside of the app, such as Deliveroo or Uber, which don’t pay Apple the 30 per cent commission.
Earlier this year, Apple halved its commission to 15 per cent for smaller app developers. However, last month, the European Commission said Apple had ‘abused its dominant position’ in the music streaming app market.
And a US Congress enquiry last year concluded that while Apple’s annual global revenue from the App Store is at least $15 billion a year, its costs in running the platform are just $100 million.