Telegram's the Latest Company to File an Antitrust Suit Against Apple

Illustration for article titled Telegrams the Latest Company to File an Antitrust Suit Against Apple
Photo: Geoffroy Van Der Hasselt (Getty Images)

Just one day after its CEO painted the company’s choice to snoop on rival apps as a pro-privacy flex, Apple’s been hit with an antitrust suit from the encrypted messaging app Telegram, claiming that no matter how much Tim Cook wants to argue otherwise, he’s created an ecosystem where Apple’s the only app game in town.

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First spotted by the Financial Times, the suit concerns what some folks call Apple’s “App Store Tax”: a 30% cut from any in-app revenue that a dev might earn from their product. While Apple has a laundry list of defenses for the tax, it’s becoming pretty obvious that most app developers disagree with the idea that Apple should be entitled to more than a quarter of their earnings.

This news comes on the heels of an open letter published by Telegram CEO Pavel Durov earlier this week. The title? “7 Myths Apple Is Using to Justify Their 30% Tax on Apps.”

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“Apple spends a lot of money on PR and lobbying in order to keep their monopoly power,” Durov writes, noting that despite Apple’s claims to the contrary, the 30% cut that Apple takes from the countless developers on its platform leaves the company with far more cash flowing in than what’s actually needed to maintain its gargantuan app st0re.

“[Running] an app store costs only a fraction of what Apple takes from app developers,” he explains. “Every quarter, Apple receives billions of dollars from third-party apps. Meanwhile, the expenses required to host and review these apps are in the tens of millions, not billions of dollars.” And despite what Cook says, nobody can really create their own rival OS if they want to escape Apple getting a cut of their cash. Apple—and Android—are really the only options available.

“There’s a vicious circle: devs don’t build apps if the OS doesn’t have enough users, and users don’t buy phones if there aren’t enough third-party apps for them,” he wrote. “If [developers] want to create a service that is socially relevant, they will have to build apps for both platforms in the mobile duopoly.”

These are the same sorts of claims Tim Cook spent hours shutting down—successfully or otherwise—during yesterday’s hearing, and these are the same sorts of claims that led the EU to open two probes into the company’s app store and app payment system back in June. Earlier that month, it was hit with a complaint from the Japanese ecommerce giant Rakuten, saying that Apple was using that 30% cut to keep its e-book offshoot—Kobo—from becoming big enough to topple Apple books. A few months earlier, Spotify filed its own complaint against the company, alleging that Apple was using its cut to keep Spotify from getting too large to compete with Apple’s own music service, Apple Music.

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Time will tell if more irate App devs will come forward against the company. In the meantime, let’s the European authorities will treat Apple’s monopolistic ways a lot more seriously than their American counterparts.

I cover the business of data for Gizmodo. Send your worst tips to swodinsky@gizmodo.com.

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DISCUSSION

Agamemnerd

I disagree that Apple’s ecosystem is a de-facto monopoly (and if we do go after Apple as a monopoly it’s 12th down on my list of targets) but I do believe Apple has a chance to do much better.

(1) establish progressive rates for small fee “apps” costing no more than $15 initially - which Apple wants to promote for iPhone & iPad: 0% of first 5k sales, then an additional 1% fee collected for each additional 10k in sales up to a maximuj of 25% store fee. This gets the sort of apps into the store that Apple wants as “apps”, and their success is shared. Apple will promote and advertise to get these apps sales - this will cover the app store services. In-app purchases will charged at a 1.5x fee at whatever the current rate is (up to 1.5x max rate of 25%). seller agrees to update purchaser’s software sold under this license for 18 months (minimum; can be longer includig ‘lifetime’ as a sales bonus at which point in-app purchase % is decreased to 90% of current app store fee) and seller may not release a ‘superceeded’ version of the same software without upgrading existing customers curing their upgrade window (IE: versions can be versions, but may not be new sales cut offs).
(2) for larger “applications” costing over $15: 10% initial fee up to 50k sales then 1% for each additional 30k in sales up to a ceiling of 30%. These tend to be tentpole products and are important (and not as sensitive to Apple’ ads so no need to have Apple chip in with promotions) but this is Apple’s ecosystem - and it includes their distribution network for delivery and antivirus analysis, standards analysis (etc.), Apple’s continued development of OS & free tools, etc. - not an unreasonable fee structure. In-app purchases are charged at 1.5% of current app sales rate. seller agrees to provide updates for 24 months (minimum; may be longer) from date of purchase and may not release a ‘superseded’ version requiring a new purchase as per above.
(3) Subscriptions of content (music, video, etc.) charged flat 1% no matter what the app cost is. If streaming requires Apple servers/hardware/bandwidth vs. just subscriptions, then that raises to 3%. A monthly cap on subscription fees after a given amount collected per app for any given month (IE: $5 million) should be established - this fee is to support the store and ecosystem - not be a parasite on someone else’s business.
(4) Subscriptions of a software ownership/update rental nature: 35% starting at 0 purchases. If you’re renting out your software, pay the landlord. This is meant to discourage software rental (and seriously if you are doing this how are you not OK with Apple’s flat 30% cut right now?).