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Apple loosens in-app payment system rules

Apple loosens in-app payment system rules
Photo Credit: Reuters
2 Sep, 2021

Technology giant Apple, which is under scrutiny in several countries including India over alleged abuse of its dominant position in the market, has introduced a significant change to its in-app payment system.  

The change, which comes after an investigation by the Japan Fair Trade Commission (JFTC), will apply to developers of “reader” apps worldwide and allows them to direct users to alternative payment methods and potentially skip Apple’s in-app payment system.

Reader apps cover subscription services like Netflix, Spotify, newspaper companies and many more. Apple earns a 30% fee for payments users make to these apps for subscribing to their services when they use the company’s built in payment systems. So far, the company forced developers to use its own payment systems and charged them a fee. Developers who earned less than $1 million per year from the App Store were charged 15% on payments. 

“Trust on the App Store is everything to us. The focus of the App Store is always to create a safe and secure experience for users, while helping them find and use great apps on the devices they love,” said Phil Schiller, Apple Fellow who oversees the App Store. “We have great respect for the Japan Fair Trade Commission and appreciate the work we’ve done together, which will help developers of reader apps make it easier for users to set up and manage their apps and services, while protecting their privacy and maintaining their trust,” he added. 

The company had faced scrutiny from developers recently after it announced a new Small Developer Assistant Fund worth $100 million as part of a settlement agreement for a class-action lawsuit in the US. As part of that agreement, the company said it would allow developers to use data, like email ids, obtained through the App Store to reach out to customers and inform them about alternate payment systems. 

Many developers criticized Apple and said that the change, though big, was barely different from how the company operated so far. The iPhone maker required developers to use its own billing systems and barred them from communicating alternate methods of payments to customers so far. 

 According to the JFTC, the commission was investigation Apple for “restricting business activities, such as selling digital contents, etc., of enterprises that distribute applications based on App Store Review Guildelines”. “During the JFTC’s investigation, Apple proposed to take measures such as revising the Guideline related to the alleged conduct above. As a result of the JFTC’s review on this proposal, the JFTC recognized it would eliminate the abovementioned suspicion and decided to close the investigation on this case after the JFTC confirms the measure has been taken,” the commission said in a press release

The move comes mere days after South Korea passed a landmark law that bars companies like Apple and Google from forcing their payment systems onto developers and consumers. The new law requires these companies to allow developers to use alternate payment systems, though it doesn’t set limits on what commissions they can charge for using their own systems.  

South Korea’s law is a first of its kind legislation in the world, addressing a qualm developers have had with platform companies like Apple and Google for a long time. Even Indian developers had approached the Competition Commission of India (CCI) in October, complaining against similar policies imposed by Google. The CCI had reached out to 17 startups in November, asking them questions about partnerships with the Play Store and the impact of possible abuse of monopoly from the company.