Apple settles app store lawsuit
Restrictions on payment rules are loosened
BERKELEY, Calif. – Apple agreed to let developers of iPhone apps email their users about cheaper ways to pay for digital subscriptions and media by circumventing a commission system that generates billions of dollars annually for the iPhone maker.
The concession announced late Thursday, which covers emailed notifications but does not allow in-app notifications, is part of a preliminary settlement of a nearly 2-year-old lawsuit filed on behalf of iPhone app developers in the U.S. It also addresses an issue raised by a federal court judge who is expected to soon rule on a separate case brought by Epic Games, maker of the popular video game Fortnite.
Apple announced the news in a “background” briefing with reporters in which it insisted on anonymity for participating executives and would not allow any direct quotations.
Under long-standing Apple rules, makers of iPhone apps were forbidden to email users with information on how to pay for services outside the app, which would circumvent Apple commissions of 15% to 30%.
The concession now opens one way for app developers to more aggressively encourage its users to pay in other ways, so long as the companies obtain consumer consent.
Apple will also set up a $100 million fund to pay thousands of app developers covered in the lawsuit sums ranging from $250 to $30,000. App developers will get more flexibility to set different prices within their apps, expanding the options from about 100 to 500 choices.
The compromise addressed a concern that U.S. District Judge Yvonne Gonzalez Rogers repeatedly raised while presiding over the high-profile Epic-Apple trial. She openly wondered why Apple couldn’t allow developers to display a range of payment options within their apps, much like brick-andmortar retailers can show a range of different credit cards they accept in addition to cash.
Apple still isn’t allowing developers to use in-app notifications to prod consumers to explore different payment options.
But just being able to email users to explain why they should pay outside the app is a breakthrough for developers who have complained about Apple’s commissions as a form of price gouging for years.
Richard Czeslawski, one of the app developers that filed the lawsuit Apple is settling, hailed the freedom to email users as a “game-changer” in a declaration field with the court in Oakland, California. App developers “will take fill advantage of this change in customer communications as a way to further reduce the commissions paid to Apple,” predicted Czeslawski, CEO of Pure Sweat Basketball.
Apple already has been tinkering with its app store commission system in response to legal pressure and mounting scrutiny.