Apple's bad faith 27% tax on web purchases (opens in new tab)

US developers can offer non-app store purchasing, Apple still collect commission - https://news.ycombinator.com/item?id=39020365 - Jan 2024 (1204 comments)

US Supreme Court declines to hear appeals in Apple-Epic Games legal battle - https://news.ycombinator.com/item?id=39014642 - Jan 2024 (199 comments)

Apple is still requiring they also make Apple in-app purchases available for the same digital goods. And also being pretty restrictive on how to link out. I have no idea if that is in the spirit of the ruling, but I think so, because the law that was cited had to do with allowing links to app publisher’s site for alternate payment, and that Apple couldn’t deny apps including such links.

And there is more to this issue than people realise.

Apple has had major lawsuits over the years [1] due to kids racking up large credit card bills via in-app purchases. And similar concerns exist for gambling apps. So this explains why they need to show such a large warning because they don't want to be held responsible for actions of a third party. Which is fine because most companies do this.

It will also likely be their argument (whether it's true or not) about why they won't allow developers like Epic to offer a third party, one-click, in-app purchasing system and instead force users to go to the home page and take deliberate actions to buy the product.

[1] https://appleinsider.com/articles/14/01/15/apple-settles-app...

The case is primarily about Epic's Fortnite game. Fortnite is free to play, but makes billions of dollars based on in-game microtransactions for things like in-game cosmetics. Apple charges developers 30% on each of these transactions. Epic didn't like this and so started offering users a way to pay on their own site instead of going through Apple, with a large discount. Apple responded by kicking Fortnite off their app store, and so Epic sued them for anticompetitive behavior.

The gist of the trial and appeals (to date) is that the judge ruled that Apple must allow developers to advertise non-apple means of payment. So Apple responded to this by allowing developers to include exactly one reference (in the entire program), in plain text (non-hyperlink), to an an outside payment site, and has changed their terms to require that developers must now also pay them 27% off all revenue from these outside transactions as well.

Epic is now claiming that this was a bad-faith compliance of the court's ruling, and this will 100% end up in court again. And that's where we are for now.

2. As part of that entitlement, you agree to pay Apple a 27% commission on any purchases made when users click those links, for up to 7 days after the link is clicked.

3. You agree to send Apple monthly sales reports.

4. You agreed to give Apple a right to audit your books at anytime.

That's the meat of it. It's a self-reported cost-per-conversion, which isn't exactly unheard of. Developers are in arms because they don't believe Apple deserves any money for distributing their app on their App Store.

That's the heart of the disagreement.

Apple believes they have a right to charge developers a fee for access to the users who shop through the App Store.

There are developers who believe that the App Store should exist as a free-thing Apple provides to developers, to encourage them to write software for the iPhone. They're willing to accept a nominal processing fee, but anything more is "anti-competitive".

Not at all. Both the district court as well as the 9th circuit who affirmed the district court’s judgment explicitly stated that only the anti-steering guideline needs to be scrapped, that Apple is still entitled to their commission because it serves as payment for their IP and that Apple would be entitled to include an auditing provision in their developer agreement.

In fact, the courts noted how cumbersome this auditing process and after the fact collection of the commission would be.

In other words, this is not only fully sanctioned by the courts, but the expected outcome.

> But at the same time they put in as much friction as they could, including reframing the charge to developer as a lead commission

There was no reframing. It was always defined as such. Or to be more specific, the developer agreement always designated Apple as an agent to the developer, akin to a literary agent, and explicitly defined the commission as a payment for those agent services and Apple’s IP.

The commission has also never legally been tied to IAP or payment through the App Store, but rather directly tied to sales in general.

All the big parties that are now acting “shocked” that Apple would do this, such as Epic and Spotify, etc, have well paid legal departments that explained all of the above to the people in charge, so none of this is a surprise to any of them.

They just bank on you not knowing so you’ll be a willing pawn in their push to make their profits go up.

> Of course epic is going to challenge the spirit of the implementation but this definitely makes it murkier - can you still claim a monopoly if developers can technically allow purchase outside and have a choice?

There’s nothing to challenge. The courts have spoken and SCOTUS declined to hear the case.

It’s the law of the land and honestly, spelled out in a crystal clear plain language way in the judgments. None of this should be surprise to anyone.

it's borderline contempt of court

> I can respect though how they approached a potentially large setback for their business.

I'd be pretty mad if I was the judge, they might like my 2nd ruling even less

Yes, antitrust activity isn't solely based on the market concentration (HHI) but also on the _actions_ taken by large players. Monopolistic or monopsonistic activity results in net loss to consumer welfare.

Are we pretending this giant abusive corporation is some cool movie gangsta or something? What is to respect here? Some c-suits dodging laws? The cult of apple never fails to surprise me - it's not that special lol.

Plus having to buy development hardware from Apple, which is a pretty significant cost for small developers.

> but one of the benefits Apple gives customers is that you don't give your payment details to everyone, decreasing the odds it gets mishandled.

If they think that's worth an extra 15%, they can compete for it on a level playing field.

> Does that make Apple evil? Epic would have you think so. But Epic also just needed to layoff a bunch of people, despite Fortnite being a money printing machine, despite their Engine royalties, and despite their own store's fees. Sure, Apple has cash to spare, but should we really be legally forcing Apple to adopt a business model that is failing Epic itself?

What kind of backwards logic is this? If company A is swimming in cash, and company B is running out of money, it's far more likely that company A is ripping off its customers than company B. Yes, we should be forcing Apple to compete for customers like everyone else has to. Given real competition the market will converge on a fair rate where a hardworking publisher/store maintainer can make a decent but not excessive profit, and we might see some better stores out of it as well.

I don't really have a problem with that if they can't play nicely with others. Businesses come and go. But ultimately companies need some incentive to not fuck over the consumer, and "forcing successful businesses to ruin themselves" strikes me as a better option than fines at this point.

I have to build an Apple App Store app. Apple controls access to over half of US customers. Not just gamers. All customers of all types.

But you do bring up an interesting point by mentioning sideloading.

The courts have established in this case that Apple can charge their commission regardless on the premise that it’s a payment in exchange for the use of their IP. All in all not a shocking decision really because it just continues on the standing law regarding property rights.

But it might have ramifications for sideload apps, unless you really want to get down and dirty those will be using Apple’s IP as well and in some cases there’s not even an alternative unless the iPhone is jailbroken.

Because the developers of those app will be using Apple’s IP, Apple can extract payment from them.

Perhaps not the full 30% because presumably they wouldn’t have agreed to Apple’s developer agreement, but it won’t be $0 either.

Similar legal gaps exist in the impending EU regulation. Believe it or not, they too have well established property rights surrounding IP and there too there are courts who will be the final arbiters in this.

Many seem to think that just because the EU says or does something it’s the law of the land, but like with legislation in the US it can be fought and I’d say even more so there because a lot of the regulations originate from the EU Commission, which is just the EU’s sparkling executive branch.

While the dust is starting to settle here in the US, we will more than likely see some cases starting in the EU.

However I don’t see any reason Apple should be compelled to help you in using it with your own software.

Opinions should be based on principles that could be applied those you like and dont like.

Epic also has their own game store that they will happily charge 30% once they have more marketshare. They also want to be able to put their own game store on iOS.

Meanwhile the idea of an OS and how open it should be will probably be a battle for decades to come, for old, new, and yet to be made companies. May as well nip it in the bud now.

So basically your stance is that you are ok with, or at the very least indifferent to, illegal behavior as long as it’s against people you don’t like.

That’s the basis of as lawless a society as one can get.

I also like how he hasn't updated his Twitter profile image in 20 years. He's probably riding his 'rati in sunglasses at his age of 50+ thinking he's still got it. And what if he doesn't? Somebody needed to file this lawsuit sooner than later, and I'm glad he did. Big Sweeney boy is scoring relative high on my list right now.

Now open that can of popcorn and watch two corporations trying to defend their own turd. Apple's new UX/tax on third-party payments is an incredible sucking of the MBA's cock on behalf of whoever implemented that. And watching people here still defend them is even better. Why do people pay a $19.99/mo Netflix subscription when you have real life?

Have you ever gotten stuck with a monthly fee for something that's hard to cancel? It's a real pain the butt, no?

But that never really happens on Apple devices, because Apple makes it incredibly easy to cancel subscriptions. You don't have to call anyone, you don't have to struggle with a bad website -- you just click cancel on your phone and it's done. And it's all in one place too -- no bank statement required.

They are also a check on other dark patterns, like silently increasing charges without a clear notification to customers. I don't even get spammed because Apple proxies my emails from app developers.

One of the main reasons I buy things from Apple (on my device) and Amazon (if it's a physical good) is so that I have a company I sorta trust to do the right thing if things go sideways (cancelations, returns, fraud, etc.).

Once every app developer is pushing me to enter my credit card on their website, that all goes out the window. Dark patterns common on the web and on Android will take over the iOS ecosystem too.

I also am going to take an unpopular opinion and say that Apple probably earns that fee. The fact that Android isn't that valuable to app developers proves that Apple's reputation and standards are what drives a lot of their app store revenue. App devs feel like they're providing all the value, but I suspect it's often not truly the case. I know this is an unpopular opinion amongst us devs.

I don't even know if I truly buy these arguments, but I thought it'd be more interesting here if there was at least one comment defending Apple.

The court from the start basically declared that this is what everyone else does. Epic themselves operate this way - check out the licensing model for Unreal Engine.

There was no antitrust issue being litigated here. We can all believe that there should be, but there isn’t, and this isn’t the right type of court for that issue.

Technically, the court granted Epic’s wish, Apple is now giving you the freedom to choose a different payment processor and deducting the market rate cost of doing so. The only bit left to resolve is whether Epic’s argument that Apple’s compliance is not in good faith sticks.

The judge forced Apple to unbundle their payments. Apple's solution to that is probably overly restrictive. And I suspect that you're right that 27% is too large a cut to survive.

With both of those points granted, though, your argument seems to be that Apple should be obliged to host, distribute, and market apps (including the burden of moderation and malware prevention) for free. That any commission is too much of a commission.

Can I ask you to elaborate on why you believe that Apple should be singled out and mandated to perform a service for free?

And I want to put my product in Walmart for free while Walmart pays for the warehouse, staff, marketing, returns, and product inspection.

Status-signaling consumer products are always overpriced. It's what makes them useful as status signals. You used to buy expensive impractical clothes to show you could afford to buy expensive impractical clothes. Now you buy Apple devices to show that you can afford to buy overpriced tech.

If you bring the price of the status symbol down to a more natural level it ceases to be a status symbol.

Apple's defense of their control over the platform (and the higher-than-necessary prices they charge) isn't destructive to consumer welfare, it's the very thing consumers are paying for.

Part of what Apple sell app developers is that piracy is hard on the App Store.

It also benefits developers and users that tweaking apps to cheat in games is as good as impossible.

A cloned or patched iOS that allowed users to install anything could change that by no longer checking app signatures.

  With that in mind, I should be able to run any operating system on an iPhone I bought. Apple should not be required to actively support this, put in extra work to document things or whatnot, but they should not be allowed to actively make things harder.

Do you see how silly the above statement is?

As a developer you need to pay the 30% commission similar to how if you're using Unreal Engine you need to pay 5%.

You can legitimately argue this fee is way too high but the courts have already said that they are allowed to charge it.

Because they feel like they own the relationship between the user and the developer by virtue of it happening on a device they made, regardless of how much their contribution, if any, was to the formation of that relationship in the first place.

Because the judge's ruling still left the option open for Apple to continue to charge a commission fee for external payment processors.

Over 2 years ago, observers correctly predicted that Apple would still charge 30% for external payments. Example story:

https://9to5mac.com/2021/09/14/apple-can-still-charge-its-ap...

So Apple's new policy in 2024 is no surprise and the only difference is that Apple is charging 27% instead of the predicted 30%.

> First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple’s intellectual property. Even in the absence of IAP, Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission.

> In such a hypothetical world, developers could potentially avoid the commission while benefitting from Apple's innovation and intellectual property free of charge. The Court presumes that in such circumstances that Apple may rely on imposing and utilizing a contractual right to audit developers annual accounting to ensure compliance with its commissions, among other methods. Of course, any alternatives to IAP (including the foregoing) would seemingly impose both increased monetary and time costs to both Apple and the developers.

https://casetext.com/case/epic-games-inc-v-apple-inc-2

* You cannot generate human readable / human memorable coupon codes to distribute to your users, like NEWYEAR24 etc.

Instead, the codes are long random gobbledygook, single use only, and they can’t be redeemed within the app — only in the App Store itself.

It’s like they made this difficult and useless on purpose.

You’re approaching this from the premise that you pay a commission for payment processing, when in actuality the primary purpose of the commission is to collect payment for the use of Apple’s IP. All the rest is secondary to that.

Nevertheless, even from the payment processing premise there are some questions that come up when reading your comment.

> You cannot issue a partial refund.

True. It’s either all or nothing.

Closest thing to a partial refund would be pushing the renewal data back on subscriptions, either individual or for all subscribers of a specific product e.g. if you had a widespread issue

> Actually, you can't refund a customer at all.

Nope you can’t directly refund a customer.

You can have a say in refunds for consumables by informing Apple if the consumables have been consumed and you can offer a refund sheet in your app so that the customer doesn’t have to contact Apple themselves, but ultimately Apple’s decision mechanism is the final arbiter.

In my experience both by keeping tabs on users reached out to CS to ask for a a refund, tracking refund requests via the refund sheet in apps, analyzing refund history and notifications and personal experience of me as a user and that of others in my circles, refunds are issued generously, close to 100%.

It seems they have a “Yes, unless” policy, where the unless is mainly tied to having a history of requesting refunds.

A decent amount of developers actually complain about how easily Apple gives refunds going by posts I see on different forums, but I prefer it this way.

> If Apple declines the refund for whatever reason, you and the customer are just screwed. Literally had to buy a gift card to give a customer so we could make them whole.

This seems like a rather extreme solution. Was there a big issue with your app that compelled you to do this?

> You cannot offer a discount and free trial at the same time.

Depends on what you mean by this.

If you mean a free trial and after that a discounted rate you can just create a new product at that discounted rate and enabled the free trial.

If you mean a trial and then a temporary discount then no, there’s no direct native way of doing this. Presumably because you can just calculate the discount into the introductory offer instead of confusing the user with having to track two time periods, the period of the free trial and the period the discounted rate is in effect.

But close to native is using offer codes and enabling eligibility for introductory offers. Then your users will get the introductory offer first (i.e., free trial) and renew at the offer tied to your offer code (i.e., discounted rate). You can also use this to give longer free trials during certain periods, the introductory trial will stack with the trial set on the offer code.

Nevertheless, I was partial to utilizing the DeviceCheck framework before all of this was possible. Check if this device is new, if so, enable free trial and after that trial offer discounted introductory offer.

Benefit of this was that users appreciated not having to initiate a purchase flow to get access to the free trial, risking a charge at the end if they forgot.

Downside is that it’s tied to device and not Apple ID, so technically users can get a free trial on multiple times, if that’s something you’re concerned about.

> When trying to create a different subscription group to A/B test our pricing, we somehow got cursed with a reviewer who did not understand the concept long after it was released. New app builds with bug fixes completely unrelated were getting rejected. It took weeks of escalations before they finally relented.

That’s a shame. What did they get hung up on? Not being able to see certain products in the app?

> Promotional pricing is so frustrating to setup between Introductory Offers, Promotional Offers, and Offer Codes.

What did you find frustrating about it?

> You cannot generate ad-hoc pricing for anything

Depending on how “ad-hoc” you’re talking about, wouldn’t offer codes fulfill this desire?

So you were paying one cut to the software distributor, and another cut to the retail chain.

Then there were costs things like creating and shipping physical inventory, swapping out the unsold inventory in the stores when you did a major version update, shared advertising costs, etc.

You definitely were not getting to keep anywhere near 70% of the price consumers paid for your product.

Of course digital store fronts do not have many of the costs associated with physical retail, but there is still value in them bringing the customer to you.

They really only changed their tune when Fortnite became so successful they could print money via skins.

I know costs and prices are somewhat independent of each other, but even the 12.5B seems like a lot. I wish I knew how much App store's technical infrastructure costs.

0. https://www.statista.com/statistics/296226/annual-apple-app-...

If anything is expensive, is creditcard fees

- anti competitive to force users to use their *Payment Processing* platform.

- not anti-competitive to charge 30% for purchases made from the app

The justification is that you're getting access to Apple's network of customers as "leads" and by referring them to you for purchases, Apple is justified a 27% commission.

Similar, other major digital market players such as MS, Google, Nintendo, Sony, Valve all charges 30% as a platform commission fee.

The end result is what you see now. Payment flows originating from the App, Apple is entitled to 27% (-3% which was judged to be an appropriate transaction fee for the Payment Processing).

Apple will not charge you 30% for any purchases made organically through Safari. This was not in the ruling and this remains functionally as it is now.

You can debate about the 30% being too high, especially on top of an annual fee. But claiming that all Safari purchases will incur 30% is a strawman.

Yes. It's only fair that Apple should get 30% of your income, because an Apple computer obviously made it possible for you to earn your income.

A better comparison might be a flea market or fair where the organizers take 27% of gross receipts from each vendor, even if the customer went to the vendors store outside of the fair to buy. Which sounds egregious to me, moreso if it was the only fair that existed for a large demographic.

Why would a brand pay extra to be on a shelf in a supermarket? Isn't the store already making a markup? Does the store have a monopoly on food sales?

Everyone carries on about "monopoly" and thinks Apple pricing will plummet.

OK, explain Valve and Steam. With many stores, shouldn't the price be a fraction?

Here's a comment from July '23:

It's outrageous that Valve takes a 30% cut from every game sale on Steam without providing much in return.

We don't get marketing, PR, or advertising unless our game is already popular. If you're an unknown developer, you'll never get discovered. Support? Hardly. Their mandatory return policy, while beneficial for customers, can actually harm shorter games. Aside from facilitating product returns, they provide minimal assistance in other areas.

Valve doesn't offer funding or act as a traditional publisher, providing guidance or support during development. Steam is the sole platform for distribution, limiting our reach and revenue potential.

They offer no help with QA or testing. Even with their new alpha/beta system, the burden of reviewing any data falls on developers. Valve's main contribution is distribution, but the process is frustratingly outdated.

We need to demand better from Valve: more value for their cut or a reduction in percentage.

https://www.reddit.com/r/gamedev/comments/1408ng4/valves_30_...

Or, there's some value people aren't thinking about, and "the market [of developers] will bear it"...

“The value of a large network like Steam has many benefits that are contributed to and shared by all the participants. Finding the right balance to reflect those contributions is a tricky but important factor in a well-functioning network,” the company wrote in a statement on the Steam Community page. “It’s always been apparent that successful games and their large audiences have a material impact on those network effects so making sure Steam recognizes and continues to be an attractive platform for those games is an important goal for all participants in the network.”

https://www.theverge.com/2018/11/30/18120577/valve-steam-gam...

What a strange example. Over the past few years gas prices have fluctuated by 100%. Your idea comes pre-disproven.

You can’t really compare commodities with consumer discretionary spending.

> For those who see a perpetual take of 30% of your revenues (pre costs, pre taxes) as a reasonable ask

I think 30% is barely reasonable, 15% is very reasonable however and if you’ve gained enough success that you pierce through the $1M revenue ceiling, then 30% becomes more reasonable.

> I cannot wait to see you on the other end of the pointy stick…

Let’s examine your pointy stick.

> Imagine in a future not far away that car ownership has been replaced by car subscription

I need clarification on your stick. Am I already paying to use these cars through a subscription?

What kind of subscription is it? Is it a flat fee of $99 a year? Or is it a higher and/or monthly fee?

These things matter for me to understand your pointy stick.

> and all remaining 6 car manufactures decide to tell you that since you ride their fabulous IP, you must now pay a 30% surcharge on gasoline you use

In lieu of that subscription fee? In addition to an annual $99 subscription fee? I need more information.

Also, surely the smaller consumers of this service get a 15% rate, right? It’s only the big corporate users of this car service that pay 30%, no? Otherwise this analogy is already diverting a lot from what it aims to mirror.

As for the gasoline, am I earning a revenue on this gasoline consumption? What exactly is the analogy for the 85% (or 70%) in earnings as a developer?

> What happens when you have low income and cannot afford a car?

You tell me.

The situation you’re trying to capture in this analogy provides for this.

If I have low income as an app developer I pay my 15% over a lower amount, so the absolute amount I owe is also lower. I don’t see a similar mechanic in your analogy.

> Then your ISPs, then your health services, then your grocery stores, etc…

The same questions I asked above come up in those situations as well.

The real answer to your faulty analogy is that people wouldn’t use a service that charges a monthly subscription and a percentage based on consumption without any revenue that is inexplicably tied to said consumption and competitors would be tripping over themselves to offer an alternative to such a ridiculous product offering.

“Aha!” I can hear you say. “But there wouldn’t be a possibility to alternative options and this is simply the status quo as it has developed”. But that’s just fantasy.

Antitrust actions would’ve been triggered long before that, because in those case market power has been explicitly abused to attempt to create such abysmal conditions.

Which makes it entirely different than Apple’s case. The reason why Apple didn’t slapped around with antitrust remedies is because everything that you and others hate about Apple, Apple did before they gained their market power.

When they were a nobody in the relevant markets. They are merely maintaining what they then did, and in some cases even loosening the reigns. So there was no market power to speak of to be abused, which is why it doesn’t rise to the levels of antitrust.

In fact, they rose in market power despite (and in actuality because) of the rules they imposed and commission they charged, which to the courts signifies that the market didn’t actually mind it so much at the time and could withstand those elements.

If tomorrow Apple would introduce draconian measures and insist on taking 30% of every deal made on Apple devices and 30% of every purchase, physical or otherwise, on Apple devices and heck, for good measure, take 30% of everyone user’s paycheck, two things would happen.

1) the courts would rule that to be an antitrust violation because Apple, now that people are dependent on their devices and after they’ve gained market dominance, is imposing these restrictions

2) people would drop their Apple devices in a heartbeat and switch over to Windows and Android

The ramifications of 1 will be directly tied to the possibility of 2

If however Apple did this back in the early 2000s, number 1 would never happen but number 2 would, because Apple wouldn’t have enough market power to warrant #1 and the “natural balance” would be restored by #2

The more #2 is less feasible because of the market power, the more Apple is constrained in taking wild actions like that for fear of #1, but it will never be applied retroactively because the logic is that people wouldn’t have signed up in the first place if the “offender” doesn’t have market power because people would’ve chosen a different option.

> I think the crowd at HN is very smart for some things, but incredibly self-centered and out of touch with the broader reality on many topics. Not everyone makes hundreds on thousands of dollars on Tech jobs, not all devs sell millions of copies, and neither you will make that for the rest of your life.

All of this is completely irrelevant because we’re talking about a commission rate that is directly tied to the revenue of a dev. So if a dev doesn’t make any sales or or only a handful of sales, then they won’t be paying any commission or a minor amount in absolute numbers, especially when you consider that those devs would pay 15% instead of 30%.

You’re talking about this as if people owe 30% over something that isn’t directly correlated to their revenue and you analogy where gasoline usage is the main driver of what is owed, reflects this as well.

> As I said somewhere on the page, Apple owes large part of what it is today to the dev environment (Things,Devonthink, etc) which created attractive products only available on Mac. IOS or MacOs without third party apps is pretty boring.

True, but the inverse is true as well. It’s a symbiotic relationship, literally a rising tide that lifts both developers and Apple. If developers aren’t doing well, Apple isn’t doing well, if Apple isn’t doing well developers aren’t doing well. Which is why it’s a commission that’s tied to revenue. Apple gets more when I get more and Apple gets less when I get less.

I literally couldn’t do my work as a developer if Apple hadn’t provided me with the frameworks and tools I use on a daily basis.

We can argue if the value of what they’ve offered me is worth the 15% I pay or even 30%, but that’s a personal value judgement.

> Apple now has divorced developers and screaming for their share of alimony every month.

Another analogy.

You might overestimate how most developers, especially the small guys you seem so concerned about, care about the commission.

But since you like analogies so much, I think it’s more akin to Apple chartering a plane, providing a pilot, and renting out a hotel for us developers to get to a trade conference hosted by Apple to sell our stuff in exchange for a cut of the proceeds.

Now all of a sudden there are few people on the plane who have been making bank at prior conventions and they want to get off mid flight, because they prefer using their own private jet and mansions and host their own trade show.

All the while the people on the ground a yelling “Yeah! Let all those poor people get off the plane!” and I just want to get where I’m heading.