Apple Antitrust

RELATED DOCUMENTS

• Letter Before Claim 05/14/21

THE ANTITRUST CLAIM AGAINST APPLE IN THE IOS APP MARKET

Today, a large majority of the population uses smartphones, and smartphone users install apps on them. Apps and in-app products allow smartphone users to navigate a city, catch the next train, play games, edit documents, track vital health statistics, stream music and videos, and do so much more. An app exists for nearly every aspect of modern life.

There are only two main mobile operating systems, which control between 98% and 100% of the Dutch market: iOS and Android. As many know from first-hand experience, iOS and Android are not compatible; Android apps most often don’t work on iOS devices and vice versa. Additionally, iOS apps are only made available through Apple’s App Store. Therefore, if app developers want to reach Apple device users, they must sell their iOS apps through the App Store. Furthermore, if they wish to distribute in-app digital products – for example, subscriptions, game enhancements or other digital goods available within an app – they must use Apple’s proprietary in-app purchase mechanism.

Apple attained market dominance by slamming the door shut on all potential competitors, leaving developers with no choice in these matters. As the Netherlands Authority for Consumers & Markets (ACM) concluded in a 2019 market study, “[w]ithin the iOS-ecosystem, there are no realistic alternatives for apps or the App Store, so the App Store forms a bottleneck within the IOS-ecosystem.”

As Apple’s co-founder and former CEO, Steve Jobs, said, such a developer, “won’t be able to distribute their app on the iPhone,” but he presumed no developer would make that choice because, “the developer wants to get their app out in front of every iPhone user and there is no way for even large developers to do that.”

From the very beginning of iOS app development, Apple knew that its distribution restraints had cornered the market. This has caused harm to iOS developers seeking to bring their apps and in-app purchases to consumers for a fair price. The Foundation seeks collective damages for the losses suffered by Dutch iOS app developers and Dutch consumers as a direct result of this anticompetitive behaviour of Apple on the distribution of apps and in-app products.

Consumers have also sustained losses as a result of Apple's abuse of its dominant position. Apple’s exclusion of rival apps from the App Store, and efforts to inhibit their functionality, have diminished consumer choice and app quality to the detriment of consumers. Finally, the 'lock-in' system used by Apple restricts the freedom of consumers and forces them to use (or continue to use) Apple products to a disproportionate extent

WHY COMPETITION IS IMPORTANT

National, international and EU laws and regulations have long recognized the importance of a competitive market. Competition avoids single companies setting market prices for their products as high as they like. It also motivates companies to produce high-quality goods and services and to continuously improve their quality, as this attracts more consumers. Therefore, competition boosts the economy, and also preserves consumer confidence.

In this litigation, the goal is to force Apple to change its conduct and adopt affair, competitive behaviour. Competition would bring more and better means for smartphone users to find and purchase the iOS applications they are looking for, need, or want. Thus, competition would boost output in distribution and retail transactions.

APPLE’S ANTICOMPETITIVE BEHAVIOUR

Having bullied its way to market dominance in the distribution of iOS apps and in-app products, Apple has abused its power in numerous ways.

• Most prominently, Apple charges developers a default 30% commission on the sale of iOS apps and in-app products from the App Store. In the Windows PC ecosystem, where there are rival app distributors and thus competition, commissions are much lower with some distributors charging as little as 10% and 12% per transaction.
• Apple has inflated commissions pushed onto iOS app developers and consumers.
• Apple also collects a $99 annual fee from all iOS developers who wish to (and must) sell their products through the App Store.
• Apple capitalized on developers’ need to make apps discoverable in the App Store by charging developers additional advertising fees to make their apps more discoverable.
• Apple develops its own set of proprietary apps and leverages its control over the App Store and iOS ecosystem to compete unfairly. Apple is advantaged because it can distribute apps without paying the 30% distribution fee it imposes on rival developers.
• In addition, Apple competes unfairly by (a) routinely appropriating developers’ innovations; (b) privileging its own apps in search results; (c) excluding rival applications from the App Store; (d) diminishing the functionality of rival applications; (e) pre-installing only its own apps on iOS devices; and (f) exempting its own apps from rules imposed on rivals.

THE FOUNDATION’S GOAL AND SUPPORT

Apple has profited massively off these fees by non-compliance with EU law and the Foundation seeks to compel Apple to compensate developers and consumers damaged by Apple’s anticompetitive conduct. It has support from Hagens Berman EMEA LLP whose US counterpart firm recently brought a motion for class certification in the US and retained prominent economic experts. Within the US litigation, Hagens Berman already analysed large quantities of documents and Apple’s transactional data, and deposed Apple’s senior management, including CEO Tim Cook. Leveraging Hagens Berman’s experience and expertise, the Foundation is best positioned to represent the interest of aggrieved iOS developers and consumers in the Netherlands.

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