Apple has hit back at claims from Australian antitrust authorities over the distribution of apps on iOS and the App Store regarding what is a key issue of the raging global antitrust debate.
The 15-page document covers a multitude of issues, including Apple’s own rebuttal to the claim that iOS developers are bound to the App Store if they want to distribute apps. Apple begins by refuting the notion it dominates the market and says the relevant market is not iOS itself, but iOS and all of the other platforms it competes with:
Apple perceives and treats other distributors of apps, for platforms other than iOS, as significant competitors whose pricing and policies constrain Apple’s ability to exercise power over developers. For the reasons detailed below, Apple is not in a position to disregard the environment in which its app marketplace operates and does not accept the Commission’s characterisation of the Apple App Store as “the most dominant app marketplace by a large margin”.
Apple says the “sound market definition” should include native and internet (including web app) distribution to iOS users, App stores like Google Play, personal computers, and specialist platforms like the Xbox Games Store, Steam, the Epic Games store, smart TVs and streaming devices like Amazon Fire or Chromecast, and event wearables like Fitbit and Samsung Watch, as well as social media platforms.
Apple says that it faces “competitive constraints” because of distribution alternatives within the iOS ecosystem:
Apple faces competitive constraints from distribution alternatives within the iOS ecosystem (including developer websites and other outlets through which consumers may obtain third-party apps and use them on their iOS devices) and outside iOS. Apple’s “reader” and “multiplatform” rules contemplate and permit precisely this because of the competitive importance of providing developers with flexibility in competition with other operating platforms.
Apple further states it would be “economically irrational” to undermine the popularity of the App Store by not attracting the best developers or restricting the availability of popular apps, as this would destroy the value of the ecosystem “to the detriment of consumers, developers, and Apple itself”.
Apple has been criticized for restricting developers to the iOS App Store if they want to put their apps on devices like the iPhone 12, but Apple says even this isn’t true:
Even if a user only owns iOS-based devices, distribution is far from limited to the Apple App Store because developers have multiple alternative channels to reach that user. The whole web is available to them, and iOS devices have unrestricted and uncontrolled access to it. One common approach is for users to purchase and consume digital content or services on a website.
Apple says web browsers are used as distribution portals and hosting web applications like Amazon’s Luna mobile gaming service. Apple says developers can also give iOS users access to digital content within an iOS app even if it was bought outside of the iOS app, such as on a website, citing examples like Spotify and Netflix.
Apple says it competes with a multitude of platforms because consumers “generally own multiple types of devices” such as desktop PCs and gaming consoles, and often want the same apps on multiple devices.
Regarding App Store pricing, another key criticism often leveled at Apple, the company says:
Most notably, App Store prices (i.e., the App Store commission) continue to decrease. Apple has never had the market power to increase or even maintain its commission. Over the years, Apple’s commission has decreased, or Apple has increased options for developers to avoid its commission (like the Reader Rule and Multiplatform Rule) in order to remain competitive and differentiate itself against other app marketplaces.
The company also has a strong rebuttal for the claim that in-app-purchases is a payment processing system:
It has been suggested by some that IAP is “payment processing” and that the 30% commission is Apple’s fee for processing payments. This is a deliberate mischaracterisation of IAP. IAP is not a payment processor. Third-party payment processors, such as PayPal and Stripe, do not drive business to developers or provide tools, services, and intellectual property to help them create apps. Payment Processors also provide no benefits to iOS users that rely on the use of a single, centralized payments feature. Likewise, Apple does not charge a 30% commission for payment processing. The 30% commission reflects Apple’s business judgment as how to obtain a return on its significant investments in its third-party technology platform and the value of its distribution platform.
Apple concludes by stating it would be happy to discuss issues further with the staff of the ACCC. Other topics covered include Apple’s desire to have people switch from Android to the iPhone, as well as Spotify. You can read the full report here.