I.
Say your company makes a new email platform. In 2020, that means building not just a website but also an app — several of them, actually. You’ll probably want clients for Mac and Windows, iOS and Android, the open web, and — if you’re showing off — Linux. In some of these places, like the web, there is no cost for operating this service beyond building and hosting it. And in others, such as the Mac and iOS app stores, there is a significant cost: 30 percent of revenue generated from within the app. This is true even though Apple runs its own email platform, which is free but charges for extra storage, and gets to keep all that revenue for itself.
The above is the situation now unfolding for Hey, a clever and genuinely original email platform released on Monday by the makers of Basecamp. (
I wrote about it at some length for The Verge on Monday, because for me trying new productivity apps is a form of self-care.) Hey costs $99 a year, and you can only sign up and pay on its website. It managed to get its iOS app into the App Store. But then it tried to submit some bug fixes, and Apple informed the company that it had to begin taking signups on iOS — and give Apple a 30 percent cut of that revenue — or get kicked out of the store.
The reason, writes David Pierce
at Protocol, is “
rule 3.1.1 of Apple’s guidelines for app developers, which says in essence that if you want people to be able to buy stuff in your app, you need to do it using Apple’s payments system.” The rule is not uniformly applied. If you make a music app, like Spotify, or a video app, like Netflix, you can force people to sign up on the web and Apple won’t take a cut. And if you make certain other email apps, such as
Newton (no relation to the author), you can put your app in the App Store even though you don’t let people pay with an in-app purchase.
On its face, Apple’s policy enforcement here feels arbitrary and capricious — and, I suspect, it may become part of the antitrust investigations now underway against the company. Apple has a duopoly in the smartphone market with Google, and charges developers 30 percent of their revenue to compete with it in certain categories, such as email. I’m no lawyer, but that certainly
sounds like a formidable barrier to entry — and one erected by
a company that has $192.8 billion in cash it has no clear use for, to boot.
Apple declined to comment on the decision, but told Pierce its mistake was in ever permitting Hey into the App Store to begin with. Still, you could imagine the company saying, look, if you don’t want to pay the rent, just don’t make an iOS app. But that’s not feasible, says David Heinemeier Hansson, the co-founder of Basecamp, in a Twitter message. “That’s exactly what monopolists always say! Take it or leave it! Because they KNOW you can’t leave it.”
He went on:
They can get to essentially extract any cut they want. They’re under no market pressure to be competitive. This is Monopoly Squeezing 101.
As I said in my testimony before congress, why is it that credit card processing fees hover in the 1.8-2.8% range, while Apple’s App Store have sat steady at 30% on the high end? Because there’s no competition! And they have a monopoly grip!
There’s zero impetus on Apple to lower prices, stop being abusive, or even enforce their own policies with any sense of consistency or justice.
I was glad Heinemeier Hansson brought up justice, since it’s at the heart of every content moderation decision — and whether an app gets to be in the App Store is a content moderation decision like any other. Often in this column I’ll write about a controversial post on Facebook, or a controversial video on YouTube, and what makes people so mad is that they fundamentally have no recourse against the platform, even though for many of those people it has become their livelihood. It might be legal, but it doesn’t feel just.
The thing about anti-competitive behavior, though, is that it may be illegal.
II.
Spotify has at least one advantage over Hey, in that it can exist in the App Store even though it doesn’t sell subscriptions there. Instead, if you want to subscribe to Spotify’s premium service, you have to go to its website — a fact that, per App Store guidelines, the company is not allowed to advertise. Meanwhile, Apple offers a mediocre Spotify alternative, Apple Music, which it advertises throughout the operating system. (I’ve received several push notification advertisements inviting me to subscribe).
Last May, Spotify
filed a formal complaint against Apple with the European Union, alleging that Apple is harming consumers and stifling innovation via the 30 percent tax and other policies that raise barriers to competition. Competition is particularly difficult in the music industry, given that the lion’s share of all revenue that they generate goes to the record labels that own the music. For Spotify, Apple’s businesses could represent an existential threat. (Among other things, it has pushed
Spotify to buy up the crown jewels of American podcasting, to reduce its head-to-head competition with Apple over music streaming.)
In any case, on Tuesday the European Union heeded Spotify’s call — and opened an antitrust investigation into Apple. Here’s
Tom Warren at The Verge:
The first investigation will probe whether Apple has broken EU competition rules with its App Store policies, following complaints by Spotify and Rakuten over Apple’s 30 percent cut on subscriptions and sales of ebooks through its App Store.
“We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books,”
says Margrethe Vestager, the head of the EU’s antitrust division. “I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”
Vestager opened a concurrent second investigation against the company related to Apple Pay, over fears that the company’s policies around which merchants are allowed to use phone payments are similarly anticompetitive.
For its part, Apple was rather hilariously dismissive of the whole affair.
“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else,” says an Apple spokesperson in a statement to The Verge. “We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.”
The truth is that many, many developers complain about these policies — but precisely because they are so dependent on Apple, very few are willing to do so publicly. As for whether there is a level playing field, the idea that Apple charges people a 30 percent tax to compete with it in some categories but not others seems laughable on its face.
III.
By now we are more or less used to the European Union taking the lead in regulating the big tech companies. But since Democrats retook the House of Representatives in 2018, the United States has also shown a belated interest in competition, and some of those efforts are accelerating.
One of the most significant developments on that front to date took place over the weekend, when Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai told the House Judiciary Committee
they are open to testifying about competition. Amazon CEO Jeff Bezos
has said he will testify as well. The apparent deal is that the CEOs will show up and testify as long as all of the other guys, do, too, so they can distribute the pain equally. (This will help ensure that the coverage is nicely generic — “Congress yells at Big Tech” — and not “Congress yells at Jeff Bezos for some frankly pretty valid and specific reasons.)
Apple, meanwhile, told the committee that it would send a senior executive yet did not clearly commit its leader, Tim Cook, to appearing before lawmakers, according to one of the people with knowledge of the matter. That approach could ratchet up tensions between the iPhone giant and lawmakers in Washington.
If nothing else, agreeing to go before Congress indicates that three of the four Big Tech CEOs feel comfortable defending themselves against charges of anticompetitive behavior. Given everything unfolding at the moment in Apple’s domain, then, it is perhaps unsurprising that Tim Cook has been less willing to participate.
Correction: This article originally said Superhuman enables in-app purchases. It does not, and so has been removed.
