Australian app developers are joining a class action lawsuit against Google and Apple for alleged abuse of market power. The suit takes aim at the 30% commission that the tech giants take from the majority of purchases in their respective app stores.
The original proceedings began in mid-2022 as a consumer class action by Melbourne-based law firm Phi Finney McDonald. It alleges that the commission rate has led to developers having to raise the prices of in-app purchases.
Last month the Federal Court allowed these proceedings to be expanded to include app developers, designers and founders who may have suffered loss or damages as a result of the current commission structure.
On Monday morning Maurice Blackburn announced it would be representing these stakeholders who are also alleging misuse of market power due to the 30% in-app commissions and inability to offer other payment options. The class action alleges that this breaches Australian consumer law.
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“This case is about an egregious misuse of market power by each of Apple and Google which should result in significant compensation being paid to App Developers and consumers,” said Maurice Blackburn Class Action Principal, Kimi Nishimura, in a statement.
The class action is being run jointly by Maurice Blackburn Lawyers and Phi Finney McDonald.
In August 2021, Apple settled a class action in the United States and allowed app developers to use alternative payment systems. Roughly 67,000 developers were involved in the suit and the settlement was for US$100 million.
“Google and Apple are quite rightly facing increased scrutiny from regulators. And now this landmark case allows consumers and app developers to stand up to these global tech giants and seek compensation,” said Phi Finney McDonald Principal Joel Phibbs.
SmartCompany has reached out to Google and Apple for comment.
What are the 30% Apple and Google commissions?
Often referred to the ‘Apple Tax’ or ‘Google Tax’, these are the 30% commission rates that both companies charge for paid apps and in-app purchases on the App Store and the Play Store.
Every purchase needs to run through these respective stores.
This has caused a contention among regulators in the US and EU for years. In Australia, the ACCC has been investigating Google and Apple’s app stores in relation to the potential impact on competition and consumers as part of its Digital Platform Services Inquiry interim report.
App developers and consumers have also been concerned for a long time.
This is because developers can’t simply offer another way for users to pay them either for the apps themselves or in-app purchases. This violates the guidelines of both stores and can result in the app being removed.
Considering that both companies have almost a complete monopoly over app stores and operating systems on mobile devices, this is a disastrous outcome for a developer. You need to be on these platforms to survive, especially if you’re a smaller developer.
The 30% commission rate debate has been around for years, but it exploded in the public eye back in 2020 when popular video game Fortnite was removed by Apple and Google.
This happened because the developer, Epic Games, purposely allowed players to purchase in-game currency, V-Bucks, directly in the app. This meant Apple and Google weren’t getting their respect cuts.
Epic even offered players who bought directly a 20% discount.
The move resulted in Fortnite being removed from both platforms due to store guideline violations. And Epic knew this was going to happen. The developer sued immediately in several countries for anti-competitive behaviour — including Australia.
In fact, the ACCC got involved and the case still hasn’t been settled. It was granted a stay while the US proceedings played out. It’s currently pencilled in to be continued in 2024.
In the US the judge ultimately ruled in favour of the tech giants, stating that the behaviour wasn’t anti-competitive.
Elon Musk also threatened to remove Twitter from Apple’s App Store in late 2022 after learning about what he called the “secret” 30% commission rate.
It’s not 30% for everyone
It’s worth noting that not every company or app developer is impacted by the 30% commission rate.
Several months after the very public Epic Games stunt, Apple introduced a new Small Business Program‘.
This cut the rate to 15% for businesses that earned less than US$1 million the previous year.
However, there’s at least one global mammoth that also benefits from this half-price commission.
An anti-trust hearing from 2020 revealed that first-year Amazon Prime Video subscriptions only had a 15% commission applied. This was a practice that dated back to 2017 specifically for users who were subscribing to Amazon Prime Video through Apple TV.
The deal also allowed the online retail giant to offer users payment systems outside of the App Store ecosystem — the very thing that this current class action lawsuit, and so many other legal proceedings, have been based on for years now.
If you’re an Australian app developer or stakeholder who is involved in the class action lawsuit against Apple and Google — we’d love to talk to you. Anonymity guaranteed.
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