Apple Fined $12 Million in Russia for Violating Anti-Monopoly Rules With App Store

[mattspace]

Which is why we need to abstract the behaviour that should be regulated and the bounds at which that regulation applies.

- Is the regulation to state that a platform that permits running software developed by third parties is required to permit all applications? (from my read, part of the situation with Russia)
- Is the regulation to state that a hardware platform cannot arbitrarily limit what payment methods software uses? (the Apple Pay restriction)
- Is the regulation to define what a valid fee structure looks like for licensing intellectual property? (the revenue sharing arrangement)

What is the IP licencing you're referring to? Bearing in mind developers effectively pay Apple a fee for IP etc with their dev programme membership, and if IP licences are required to participate in a market, they would likely come under FRAND protection.

I would imagine regulation will eventually be in the scope of "exclusivity without editorial, OR, Editorial without Exclusivity". In other words, they'll be allowed to be:

• the only App Store, but won't be allowed to tie their App Store to their editorial policies for what apps get sold, or to their binary hosting or payment processing service, or;
• An app store where they can exercise editorial, and mandate payment methods and download storage, but banned from preventing competing app stores, or direct sales by developers (which is the current model for macOS).

That is a simple, and workable model, and I suspect the second one is more likely than the first for a host of reasons. iOS / iPadOS will end up being effectively the same as macOS, where Notarisation remains the actual functional security layer (as opposed to the ineffective security theatre of iOS - eg VPN apps that become Casinos in certain countries), and Apple is able to keep a curated app store, at a scale they are capable of managing, with the presence of competition so that they actually have to deliver value for money.

Either way, the tenor from regulators seems to be "the status-quo is not an option".

That said I'm still not aware of this "subsidised hardware business" you keep mentioning. Loss leading is a common tactic to sell one product at a loss to induce a customer to buy another product but there isn't anything unique about this.

The primary thing about the way consoles operate as loss leaders, is that the losses the console makers take on the hardware don't just benefit them, as would be traditional for loss-leading products (eg printers and printer ink, before the court cases that more or less broke that business model). The console makers take a loss on the hardware to increase the sales of third party developers.

This is something Apple absolutely does not do, and it is a fundamental difference in the business model of Apple, vs Games Console makers. Which is why there is no valid comparison between them for arguing whether it's "ok" for MS/Sony to make whatever commission, or mandate whatever sales channel.

To reiterate, what is the behaviour we wish to mandate and what are the behaviours we wish to prohibit? Then what is the cost and impact of such regulation and does this new legislation impose an excessive burden on members of the existing marketplace or potential new entrants? Then how do we balance the cost trade off?

What regulators are indicating they want, is to prevent Apple requiring developers to buy a service from Apple which they don't wish to use (Apple's payment processing, or Apple's App Storefront, or Apple's Binary Download Hosting) in order to participate in a market for which Apple currently acts as the sole gatekeeper (native applications on iOS).

The basic principle of "owning" a market carries responsibilities, not just rights. Apple is not a feudal lord, with a divine right to rule as it sees fit, and, as seems to be the trend in opinions from regulators, "then go make Android apps if you don't like the iOS conditions" is not an acceptable solution to that problem.

As I've said before, Apple is as bound by market regulations, as a person building a house on "their" land is bound by building codes. Apple can't just decide the rules for themselves, in the same way that a person can't just ignore rules about the maximum number of treads in a staircase before a landing is required. Just as a building regulator will demolish a house that fails to comply with building regs, market regulators will dismantle business models that fail to comply with competition policy.

A lot of people seem fundamentally offended by that idea.

 

[mattspace]

This all started by things like: “woah, Apple is charging 30%, that’s too much” to which people started drawing parallels to brick and mortar, the yesteryears steep dev fees (which Apple itself crushed with this same AppStore in 2007), and all the other existing platforms. Now the difference seems to be: “ah, but it’s not subsidized, that’s the whole difference”.

Apple keep comparing their commission to that of boxed software at retail, which ignores that most Mac software before Apple's app store was pay-to-unlock shareware. As many developers have said, it's disingenuous for Apple to paint themselves as having dramatically cut the costs for developers, when most of them were already selling via channels that were cheaper than those Apple offered.

Ultimately I’m not a developer with that $1M+ yearly revenue 30% problem... I actually wish I had that issue.
As a customer I really don’t mind not having tons of ways to install software anyways and would rather the devs and Apple work it out so that me as a customer can continue to enjoy things like reliable auto updates, auto offload/redownload of the app to free space when unused and having to give my credit card and verification credentials to no one except my AppleID profile to name a few.

Apple certainly offers a slew of convenience features for customers, and devs who leave Apple's store to sell direct, or via a 3rd-party store may find they lose sales from people who want to stay in Apple's ecosystem, but that would be competition working as it should.

Personally, I prefer to buy software direct from the developer on the Mac, partially because this is what Apple's App store updates look like in High Sierra:

Al the CSS is broken, has been for weeks, and Apple aren't doing anything about it. Meanwhile, all my developer direct downloads work perfectly, and all my payment goes through paypal - so if I dispute a payment, I don't have the danger of having my AppleID, and all the content tagged to it locked out.

 

[I7guy]

[...]Apple can't just decide the rules for themselves,[...]

Apple wrote the rule book. And now it's revisionist time to make laws that go back in time to prevent what Apple successfully developed and rewrite the Apple rule book. It's akin to legislating from the bench.

 

[mattspace]

Apple wrote the rule book. And now it's revisionist time to make laws that go back in time to prevent what Apple successfully developed and rewrite the Apple rule book. It's akin to legislating from the bench.

Companies don't make rules, government and the organs of civil society do.

Companies follow rules.

As the EU has just demonstrated rather effectively.

 

[I7guy]

Companies don't make rules, government and the organs of civil society do.

Companies follow rules.

As the EU has just demonstrated rather effectively.

Sure. They created a new type of service, which should be covered under existing laws. Now, the same government that has shown ineptitude in other areas, wants to go back and create new stifling regulations, which potentially put a damper on innovation.

Nothing has happened in the EU? What has happened. Has Apple paid a fine, did Apple change the app store? It's not over until it's over.

 

[IG88]

And how many Android devices are there? More right? Those devices can get apps from Google Play. Doesn't Samsung have an app store too for Samsung Android phones?

Apple has no monopoly.

I'm not saying that Google shouldn't have the same scrutiny. But a MAJOR difference with Android is that Android allows sideloading of apps. iOS does not.

 

[mattspace]

Sure. They created a new type of service, which should be covered under existing laws. Now, the same government that has shown ineptitude in other areas, wants to go back and create new stifling regulations, which potentially put a damper on innovation.

Apple created a service, which from day one featured a contract between themselves and developers, that breached existing competition law. It just took this long for the law to catch up with them. There no retrospectivity about it.

"Innovation" is not a catch-all for a greater good - Uber would call making drivers contractors, rather than employees an "innovation".

 

[I7guy]

Apple created a service, which from day one featured a contract between themselves and developers, that breached existing competition law. It just took this long for the law to catch up with them. There no retrospectivity about it.

"Innovation" is not a catch-all for a greater good - Uber would call making drivers contractors, rather than employees an "innovation".

On the tech industry innovation is everything. But that’s a side issue to Monday morning quarterback regulations.

So while this thread is about the fine in Russia, I hope Apple fights long and hard on the US.

 

[pasamio]

I'm not saying that Google shouldn't have the same scrutiny. But a MAJOR difference with Android is that Android allows sideloading of apps. iOS does not.

Apple allows side loading but limits it to ten apps. AltStore is an example of a side loading platform for iOS.

 

[mattspace]

On the tech industry innovation is everything.

So?

Literally, so what?

If technologists can't innovate within the law, then they need to go find a different profession.

But that’s a side issue to Monday morning quarterback regulations.

Yeah that's right, the heads of competition policy and regulation for the worlds largest economies and trading blocks are couch-bound amateurs proffering unqualified opinions. Sure thing.

 

[I7guy]

So?

Literally, so what?

If technologists can't innovate within the law, then they need to go find a different profession.

Nobody has said they haven’t been. This seems to me like revisionism cash grabs.

Yeah that's right, the heads of competition policy and regulation for the worlds largest economies and trading blocks are couch-bound amateurs proffering unqualified opinions. Sure thing.

Yup. Seen it before and we’ll see it again.

 

[mattspace]

Nobody has said they haven’t been. This seems to me like revisionism cash grabs.

Literally every time they're found to have broken the law, be it competition law, or consumer law, that's exactly what the regulators and courts are saying, by definition.

Companies don't get penalised for operating correctly within the law, except in tinfoil-hat sovereign-citizen conspiracy theorist dreams.

Yup. Seen it before and we’ll see it again.

And no doubt Apple-fans will keep putting their fingers in their ears, screwing their eyes up tight, and rocking back and forth repeating their liturgies at how Apple can do no wrong, and how it's all just a big conspiracy by corrupt regulators to cash in on the noble company's "honest" success.

 

[I7guy]

[…]
Companies don't get penalised for operating correctly within the law, except in tinfoil-hat sovereign-citizen conspiracy theorist dreams.

They don’t? And never has it been an innocent man went to jail?

And no doubt Apple-fans will keep putting their fingers in their ears, screwing their eyes up tight, and rocking back and forth repeating their liturgies at how Apple can do no wrong, and how it's all just a big conspiracy by corrupt regulators to cash in on the noble company's "honest" success.

What you have done is divided the world into apple-fans and apple-critics. Where the critics are as biased as the fans and apple is always guilty.

 

[Ethosik]

Apple is the one and only supplier of iOS hardware, the operating system (iOS), and the marketplace for iOS apps.
There is no substitute. If you want iOS in any form, it's only coming from Apple. That's what the Russian are claiming is a monopoly.

I am sorry, isn't that just the most ridiculous thing ever?

Sony is the one and only supplier of the Playstation operating system, and marketplace for Playstation games. There is no substitute. Yes even Physical media needs to be approved via Sony. I have said many times before that I would absolutely love to just create a game for console and release it on my website for download, but that is not possible. No matter what, I need to go through Sony. Same applies to Xbox and Nintendo Switch.

And I absolutely do not buy the argument that "consoles are sold as a loss so its OKAY!" or "consoles are different than smartphones". For the first argument, would people suddenly be okay if the iPhone was sold at a loss but it went from 30% to 50%? For the second argument, there is no requirement in this world to use a smartphone. You can get by with a dumb phone like the jitterbug. So I don't buy in to the argument that a smartphone needs to have unique constraints compared to other forms of software distribution like game consoles and computers.

 

[Ethosik]

Because Nintendo, Sony, Microsoft etc sell their consoles at a loss in order to make the addressable markets for the developers larger, by lowering the entry cost for the customer, and leaving more money in the customer's pockets to buy said games.

That's what's most valuable to the developers - having a critical mass of units sold. 1000 units sold making $10 each is worse than 2000 units making $5 each.

So all this would simply go away if Apple sells their iPhones at a loss. Then they are free to take 50% or more? Sorry, that is Microsoft/Sony/Nintendo's problem that they sell their product at a loss. I don't think that should give them a free pass. Either something is a monopoly or it is not. There should be no "you are not a monopoly if you sell your product at a loss", then what is to prevent Apple from taking 99%?

 

[Ethosik]

I'm not saying that Google shouldn't have the same scrutiny. But a MAJOR difference with Android is that Android allows sideloading of apps. iOS does not.

And to many people, that is THE SOLE reason to use an iPhone. Period. And Apple knows this. If Apple is forced to enable side loading, this is essentially forcing Apple to become worse. I know many people that will drop iPhone tomorrow if it essentially becomes Android. Myself included. Android actually has FAR FAR better hardware for a MUCH cheaper price. If iOS == Android due to this mess, there will be a major decline in iPhone sales and marketshare.

 

[Ethosik]

Companies don't get penalised for operating correctly within the law, except in tinfoil-hat sovereign-citizen conspiracy theorist dreams.

And where is it illegal to have a store and have things locked down to that store while allowing web apps as an alternative? If that is illegal, Microsoft is in trouble because they made Windows 10 S that IS locked down to the Microsoft Store.

 

[mattspace]

They don’t? And never has it been an innocent man went to jail?

Companies are not people. You keep comparing Apple to things that are fundamentally unlike Apple.

This isn't someone being sentenced on the basis that a victim pointed them out from a lineup, after recognising them as their assailant, only to find out later that the feeling of recognition was because they'd seen a mugshot of that one person earlier in the day.

If a company exhausts every appeal avenue and is still found guilty, as Apple did when it was convicted of antitrust violation as a result of its efforts to fix the market for eBooks, it is by definition a guilty party being correctly sentenced.

What you have done is divided the world into apple-fans and apple-critics. Where the critics are as biased as the fans and apple is always guilty.

Apple is only ever guilty, as a result of Apple's actions. It just so happens, that Apple has a flagrant disregard of competition and consumer rights law, as a significant cultural characteristic of the company.

One does not need to be a critic of Apple, to acknowledge that when they are convicted of breaking the law, they are guilty of breaking the law. Conversely, to argue that when Apple is convicted of breaking the law, it must mean the law is flawed, or there is some giant, corrupt, nationalistic and political conspiracy to harm Apple because... why exactly?

Some America-centric xenophobia about Apple being punished by the Europeans because they're American?

People accuse Apple fans of being culty, because it requires a cult-like mindset to construct these labyrinthine persecution complexes, in order to avoid facing an uncomfortable truth about a company with whom they've aligned their sense of self-worth. Apple is a company with a long, and consistent history of achieving success through behaviours that are illegal. Pure and simple.

 

[mattspace]

And where is it illegal to have a store and have things locked down to that store while allowing web apps as an alternative? If that is illegal, Microsoft is in trouble because they made Windows 10 S that IS locked down to the Microsoft Store.

Hint, look at where Apple is in trouble with regulators over their only having a single app store on iOS, and abusing that position to restrain competitors who wish to offer alternatives to Apple's services, that's probably where it's illegal.

Somehow I don't think Microsoft will be in that much trouble over Windows 10 S, given:

How do I switch out of S mode?

To increase security and performance, Windows 10 in S mode runs only apps from the Microsoft Store. If you want to install an app that isn't available in the Microsoft Store, you'll need to permanently switch out of S mode. There's no charge to switch out of S mode, but you won't be able to turn it back on. If you're blocked from switching and your device belongs to an organization, check with your administrator. Your organization can choose to keep all devices in S mode.

 

[mattspace]

I don't think that should give them a free pass. Either something is a monopoly or it is not. There should be no "you are not a monopoly if you sell your product at a loss", then what is to prevent Apple from taking 99%?

Competition law contains subtlety. You may not be accustomed to subtlety in your day to day thoughts, but regulators are, and the laws they subsequently frame contain sufficient nuance so as to allow that a subsidised hardware market is different to an unsubsidised hardware market, and so requires a different hand in regulation.

As has been said about a billion times, having a monopoly is not illegal, using the position of power granted by having a monopoly to extend a monopoly into a new market, or prevent a competitor entering your market, is illegal.

Apple has gotten into trouble over the App store because they have used their position as the incumbent monopolist to defend their payment processing service, against competition from alternate payment systems.

While Apple likes to present the App store as a single monolithic thing, regulators don't adopt such a simplistic view. Their position is that the storefront in which customers browse applications, the hosting service in which the application downloads are stored, and the payment system which takes money from customers and delivers it to developers, are unrelated services, which have no natural, or functional need to be provided by the same vendor.

This is why Apple has lost out to Spotify - not because there was only one app store, not because sideloading is prevented, but because Apple required Spotify to use Apple's Payment Processing Service, as a condition of using their App Store Service (edit: specifically accepting payments in their app), and using their App Store Service is the monopoly condition of the iOS market.

 

[I7guy]

Companies are not people. You keep comparing Apple to things that are fundamentally unlike Apple.

This isn't someone being sentenced on the basis that a victim pointed them out from a lineup, after recognising them as their assailant, only to find out later that the feeling of recognition was because they'd seen a mugshot of that one person earlier in the day.

If a company exhausts every appeal avenue and is still found guilty, as Apple did when it was convicted of antitrust violation as a result of its efforts to fix the market for eBooks, it is by definition a guilty party being correctly sentenced.

Just like a human, in which the same thing happens.

Apple is only ever guilty, as a result of Apple's actions. It just so happens, that Apple has a flagrant disregard of competition and consumer rights law, as a significant cultural characteristic of the company.

One does not need to be a critic of Apple, to acknowledge that when they are convicted of breaking the law, they are guilty of breaking the law. Conversely, to argue that when Apple is convicted of breaking the law, it must mean the law is flawed, or there is some giant, corrupt, nationalistic and political conspiracy to harm Apple because... why exactly?

Some America-centric xenophobia about Apple being punished by the Europeans because they're American?

People accuse Apple fans of being culty, because it requires a cult-like mindset to construct these labyrinthine persecution complexes, in order to avoid facing an uncomfortable truth about a company with whom they've aligned their sense of self-worth. Apple is a company with a long, and consistent history of achieving success through behaviours that are illegal. Pure and simple.

Going to fast-forward past the broad based characterizations (because it's mostly an off-topic rabbit hole that I believe is used to justify a position). Nobody knows how all of this is going to turn out. None of this "so-called" anti-trust regulation may end as some want with Apple being blown to bits.

Apple being a two-trillion dollar company has a big bulls eye on it's back and most of this is a cash grab, imo.

 

[69Mustang]

I am sorry, isn't that just the most ridiculous thing ever?

Sony is the one and only supplier of the Playstation operating system, and marketplace for Playstation games. There is no substitute. Yes even Physical media needs to be approved via Sony. I have said many times before that I would absolutely love to just create a game for console and release it on my website for download, but that is not possible. No matter what, I need to go through Sony. Same applies to Xbox and Nintendo Switch.

{snipped for clarity and focus}

Your entire premise is based on a falsehood. Sony is the only supplier of the PS operating system. Yes. They are not, and never have been, the only marketplace for Playstation games. In fact, Sony itself has probably been one of the smaller marketplaces for it's games. Playstation games are sold primarily by 3rd party vendors. Sony may sell more downloadable games but the physical discs are mainly sold by 3rd party retailers. You're also wrong about your hypothetical game creation scenario. You can, as an independent dev, create a game for any and all of those consoles. If they accept your game you can make them downloadable in their app stores and create discs to be sold by 3rd party retailers - just like every other dev for those systems.

tl;dr Console games can be purchased from multiple 3rd party vendors outside of the console's marketplace. That is not true of Apple's ecosystem. Even if you think the Russian position is ridiculous, your opinion isn't supported by the analogy in your quote. Two totally different marketplaces dynamics are at play with consoles vs iOS.

 

[mattspace]

Just like a human, in which the same thing happens.

Companies are not people (edit: the fundamental difference being a company is both not a living entity, and immortal. A wrongly convicted person loses a non-returnable amount of their one and only lifetime. A company can always have the effects of a punishment or remedy unwound).

Again, you need to compare things that are actually comparable.

Apple being a two-trillion dollar company has a big bulls eye on it's back and most of this is a cash grab, imo.

So it's a cash grab if they keep levelling fines until Apple obeys the law, but what, unfair interference if they directly regulate structural and behavioural changes instead?

Given it's come out in evidence that Apple's margin on the App Store is around 80% (vs ~24% on the business overall), I wonder if you characterise that as a "cash grab"?

 

[I7guy]

Companies are not people.

Again, you need to compare things that are actually comparable.

Correct, but the principal in my opinion is applicable.

So it's a cash grab if they keep levelling fines until Apple obeys the law, but what, unfair interference if they directly regulate structural and behavioural changes instead?

Given it's come out in evidence that Apple's margin on the App Store is around 80% (vs ~24% on the business overall), I wonder if you characterise that as a "cash grab"?

Apple is entitled to its margins, the same way any other business is. This seems like a case of revisionist law making.

 

[avz]

Power dynamics of the world is changing, it’s only normal that the processes that are happening in different areas will reflect this.