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Apple Settlement Gives App Developers a Way to Avoid Its Commission

Apple agreed to pay $100 million and tweak one of its App Store rules to settle a lawsuit with app developers on Thursday, doing away with …

Apple Settlement Gives App Developers a Way to Avoid Its Commission

Apple agreed to pay $100 million and tweak one of its App Store rules to settle a lawsuit with app developers on Thursday, doing away with another legal headache for the company around its control over mobile apps.

As part of the settlement, Apple said it would create a $100 million fund for payouts to small app developers and allow developers to instruct customers in emails how to pay for services outside Apple’s payment systems; that way, the developers can avoid Apple’s commission on app sales. Apple also agreed to not raise the commission rate for small developers, which it reduced last year to 15 percent from 30 percent, for at least three years.

The settlement appears to be a small price to pay for the world’s richest company to avoid another extended legal fight that could have posed major risks to its business by targeting the iPhone App Store.

Apple is awaiting a decision from a federal judge in a separate lawsuit by Epic Games, the maker of the popular game Fortnite, that seeks to force Apple to allow app developers to avoid App Store commissions altogether. Consumers, too, have sued Apple over its app commissions, in a case that the U.S. Supreme Court has allowed to go forward in federal court and that is seeking class-action status.

In a briefing with reporters, an Apple executive said Thursday’s settlement showed that small app developers were mostly fine with maintaining the current App Store policies, including the reduced commission. Larger developers, which pay the higher rate, continue to complain, however.

She also said Apple’s willingness to allow developers to tell customers about alternative payment methods via email and other channels was a major concession. App developers will still be barred from telling customers inside their iPhone apps about other ways to pay.

Apple restricted reporters from naming the Apple executive or quoting her directly.

Steve Berman, a lawyer for the plaintiffs in the suit, which sought class-action status, said, “We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of U.S. iOS developers, could help to bring about so much important change.”

In the settlement, Apple also agreed to publish an annual report on the number of apps it rejects or removes from its App Store, as well as data on its search results. The New York Times reported in 2019 that Apple had been favoring its own apps over rivals in search results. Apple agreed in the settlement to ensure that its search results “will continue to be based on objective characteristics” for at least three more years.

The settlement is subject to approval by Judge Yvonne Gonzalez Rogers of U.S. District Court for the Northern District of California, the same judge who is presiding over the Epic Games and consumer suits against Apple.

Developers who made less than $1 million a year in the App Store from June 2015 through April 2021 are eligible for payouts between $250 to $30,000 each from Apple’s proposed $100 million fund, according to the plaintiffs’ lawyers.

Separately on Thursday, Apple said it would also allow news organizations to pay the reduced 15 percent commission on subscriptions sold through their iPhone apps, but only if they participated in Apple’s news service, Apple News. The Times and some other news organizations have pulled out of Apple News in recent years because, they said, it took control of their relationship with readers and potential subscribers.

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