When I wrote last year about Apple’s response to Epic’s lawsuit and the upcoming trial between the companies, I listed four possible outcomes. Today, after a few weeks in which Apple has settled not once but twice to stop lawsuits related to the App Store, it’s clear that the company is aiming for the fourth outcome: voluntarily loosening its monopoly on iOS app distribution in a way that satisfies competition authorities and courts.
Apple offered hints of this strategy with a settlement with a group of US iOS developers who had sued it for operating what they claimed was an illegal monopoly, in the form of the App Store. Apple is supposed to give some money to small developers in the US and is making some minor rule changes on the App Store but it’s clearly mostly for show.
Just a few days later came the next announcement, this time after a settlement with Japan’s competition authority: Apple will start allowing developers to link directly to their own sites to allow customers to subscribe and manage their accounts, without Apple getting a cut of the revenue and without the user having to fuss about leaving the app. While this only applies to ‘reader’ apps at first, it’s a big step for a company that until recently boldly proclaimed that its approach is right and the critics are wrong.
In the meantime, Apple got some bad news when South Korea’s National Assembly passed a law that will prohibit Apple from interfering with the payment systems developers use for in-app purchases. (This also applies to Google.)
Just the beginning
South Korea and Japan are no pushover, and Japan in particular is an important market for Apple – one in which the iPhone has a higher share than in any other major country. If Japanese authorities are content to settle for the concessions Apple has made so far, the company has got off pretty lightly.
But there are really only two regions that are absolutely crucial for Apple, and they are the EU and the US. And that’s where things could get really tricky.
Authorities in both regions have investigations underway; US regulators, for example, have begun discussing various measures that could affect Apple and the App Store. Existing competition laws may well be applied to the Cupertino company.
Too big for its own good
Apple has always been keen to control its ecosystem, while at the same time growing and reaching more users. But these two missions are not compatible.
The problem is that the iPhone is now used by so many people that competition authorities and regulators have spotted a problem: in order to reach a broad and financially viable market, developers have essentially no choice but to follow Apple’s rules. Limiting your market to Android alone is not feasible.
Not to mention the problem if authorities themselves want to release apps that all citizens should be able to use, but those apps can’t follow all the rules. Apple has already made several such exceptions, such as Bank ID in Sweden and the UK’s app for registering as an EU citizen living in the UK after Brexit. The company obviously realises that treating all developers equally doesn’t work.
If more countries follow South Korea’s lead and ban Apple from locking developers into its payment solution, Apple will have to make a choice: relax controls in the App Store or let developers release apps outside the store.
Apple’s defence of lock-in is that it protects users from fraud, and it’s true: if Apple starts allowing apps on the App Store to directly ask users to fill in card details or connect PayPal accounts, sooner or later it’s sure to lead to unscrupulous developers slipping through the controls and scamming users out of money.
But on the other hand, the company could lower its fees to compete with the alternatives, and a majority of users seem to like the security and simplicity of paying via Apple. Most developers would probably continue to use Apple’s own in-app payment methods if they didn’t expect to earn more by choosing other systems.
It’s hard to predict how this will play out, but being forced to open up to third-party stores may ultimately be a more palatable option for Apple than losing more and more control of the App Store. And it’s important to remember that Apple’s biggest revenue comes from iPhone sales themselves, and without third-party apps, hardly anyone would buy the iPhone.
The company may make it sound like it’s a privilege to release apps for the iPhone, but Apple is just as dependent on developers as a group as each dev is on Apple. It’s just that Apple isn’t dependent on any individual developer, while every one of them is at the mercy of Apple’s whims. And that’s what competition authorities and regulators should be focusing on.
This article originally appeared on Macworld Sweden. Translation by David Price.