Thursday, November 18, 2021

In filing with appeals court, Apple explicitly states its intent to impose its app tax even on purchases made when users click on external links

On Tuesday, Apple filed with the United States Court of Appeals for the Ninth Circuit its expected motion to stay the enforcement of Epic Games's anti-anti-steering injunction, and after showing you the document below, I'll focus on only one important aspect. Here's the motion:

21-11-16 (9th Cir.) Apple M... by Florian Mueller

There's a lot in that motion that I don't agree with, yet I continue to believe--as I explained in my previous post on this topic--that Apple's motion meets reasonable requirements for staying an injunction. But in this post I won't elaborate. I'll focus on what Apple would do if the injunction ever were to be enforced (which I don't consider likely anyway, as this is another See I Told Ya So item. In a recent post on a journalist's misinformation concerning the actual effect of the injunction, I stated the following:

Nilay Patel's tweet [which said that app developers could just offer external links with a "30 percent less" offer] is wrong for another--independent--reason. As I've explained on earlier occasions, Apple could still collect a revenue cut [emphasis added] using its gatekeeper power and claiming intellectual property rights. Developers could try to challenge the reasonableness of those terms, but that would be a whole new case.

In that same post, I also wrote (with respect to Apple's representation to the district court that implementation of the injunction would involve a lot of effort):

The context is that Apple's counsel said his client wouldn't just strike an enjoined passage from its rules but would replace it with a new rule, and that new rule would involve a significant implementation effort. For example, if that new rule involved an obligation to pay Apple a commission, Apple might have to implement some kind of reporting system for payments made outside the app [...].

Apple's appellate motion leaves no doubt that there wouldn't be--even with that injunction hypothetically getting enforced at some point--such a thing as a free lunch:

"[T]he injunction requires a change to the App Store business model that will interfere with Apple’s ability to efficiently collect its commission. As noted above, the district court found that Apple is entitled to charge a commission for use of its iOS platform and that 'IAP is the method' Apple has chosen to collect its commission. [...] But requiring Apple to allow in-app links or advertising would allow developers to circumvent IAP—making it harder, if not impossible, for Apple to collect a commission for those purchases." (emphasis added)

"The injunction would raise Apple's cost of commission collection compared to other platforms, who have similar anti-steering rules they are permitted to enforce." (emphasis in original)

"Apple would have to develop new App Review processes, write and enforce new Guidelines, and implement alternative solutions for collecting its commission—an undertaking the district court acknowledged could be costly." (emphasis added)

Apple's concerns are all about the practical aspects of collecting its commission--there's no reason to believe Apple would not want to get paid even on payments made after users click on external links presented by an iOS app.

Anybody dreaming of a "30 percent less" option in connection with external links is barking up the wrong tree. The app tax will be imposed one way or the other. Collection may be more cumbersome, but Apple's position is that it's entitled to its commission and that's what even the Epic Games v. Apple judgment says.

The consolation prize that is the Epic Games v. Apple injunction is not a promising avenue. Developers need a breakthrough, but it will have to happen on other fronts--such as in the legislative arena. It's truly impressive that Epic Games CEO Tim Sweeney and the executive director of the Coalition for App Fairness (which Epic co-founded) were able to discuss mobile app store issues at a Korean event ("The Global Conference for Mobile Application Ecosystem Fairness") with high-ranking politicians from Korea, Europe (French Secretary of State for Digital Affairs C├ędric O, who happens to be half-Korean), and the United States (Republican Senator Marsha Blackburn sent a video message). Here's an English-language report by a Korean newspaper on that event.

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