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Apple's developer dispute draws lawmaker scrutiny of App Store

Apple's developer dispute draws lawmaker scrutiny of App Store
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Apple’s App Store is coming under increasing antitrust scrutiny from lawmakers, regulators and competitors for its treatment of third-party developers.

Much of the focus is on the fees Apple charges developers and the tech giant’s ability to torpedo apps by denying access to its store following a very public dispute with a high-profile software developer.

That dispute caught the attention of Rep. David CicillineDavid CicillineHouse passes sweeping protections for LGBTQ people The Hill's 12:30 Report - Presented by Facebook - J&J A-OK, Tanden in Trouble Six ways to visualize a divided America MORE (D-R.I.), one of the biggest antitrust hawks on Capitol Hill.

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“Because of the market power that Apple has, it is charging exorbitant rents — highway robbery, basically — bullying people to pay 30 percent or denying access to their market,” the chairman of the House Judiciary antitrust subcommittee said on a podcast from The Verge late last week.

“It’s crushing small developers who simply can’t survive with those kinds of payments. If there were real competition in this marketplace, this wouldn’t happen.”

His comments were in response to Apple’s rejection of an update to a $99-a-year email service from a company called Basecamp, which didn’t offer a way for users to sign up and pay through their app in the App Store. Apple charges a 30 percent fee for use of its payment tools.

Basecamp CTO David Heinemeier Hansson accused Apple of acting like “gangsters” for pressuring the email service Hey to add the in-app subscription feature, saying he would “burn this house down” before agreeing to the 30 percent fee.

Apple ultimately approved a new version of Hey on Monday, but the green light is only temporary. Hey will now offer iOS users a free 14-day account in order to appease Apple’s demand that customers be able to download the app and use it without having to sign up elsewhere first.

The battle sparked other reports from software developers detailing similar pressure to conform to Apple’s rules.

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Cicilline, who has been leading a House investigation into digital marketplace competition, said his committee intends to shine a light on developers who fear retaliation if they don’t follow Apple’s policies.

“Many people have come forward to share their experiences who are terrified of economic retaliation, who are afraid they can’t survive the economic retaliation that these large platforms can impose because of the power that they have, and we intend to pursue those allegations very seriously,” he said last week.

“This is a real problem in the marketplace,” Cicilline added. “This is a direct consequence of enormous market power, the fact that Apple is the gatekeeper for these developers, and we have heard many, many examples.”

Scrutiny of Apple’s App Store has come from abroad as well.

On the same day that Apple first rejected Hey’s update, Europe’s primary competition authority announced it had opened a formal probe into the App Store.

The European Commission’s investigation will focus on the mandatory use of Apple’s proprietary in-app purchasing system for distributing paid content, which requires the 30 percent commission fee, and restrictions on the ability of developers to tell users about purchasing options outside of the app.

The investigation was sparked by complaints from Spotify and a distributor of e-books and audiobooks, both of which raised concerns with Apple’s rules.

“It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” Margrethe Vestager, the commission’s vice president in charge of competition policy, said in a statement. “We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books.”

Microsoft President Brad Smith put more pressure on Apple, saying during an interview with Politico Live last week that app stores have made it too difficult for small developers to build products.

“I do believe the time has come, whether we’re talking about Washington, D.C., or Brussels, for a much more focused conversation about the nature of app stores, the rules that are being put in place, the prices and the tolls that are being extracted and whether there is really a justification in antitrust law for everything that has been created,” he said Thursday.

While he did not explicitly mention Apple, Bloomberg News later confirmed with Microsoft that his comments were about the App Store.

He also noted that Windows allows developers to distribute apps through multiple stores or directly to consumers.

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Criticism of Apple’s App Store is expected to loom over the annual Worldwide Developer Conference, which is being held online.

Apple has defended its practices amid the backlash.

“It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed,” an Apple spokesperson told The Hill in a statement Monday.

“At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality.”

Apple CEO Tim Cook has also defended the company’s app policies.

“In a challenging and unsettled time, the App Store provides enduring opportunities for entrepreneurship, health and well-being, education, and job creation, helping people adapt quickly to a changing world,” he said in a statement last week.