Monday, February 21, 2022

Dutch antitrust authority fines Apple for fifth time (aggregate: €25M) over alleged non-compliance with dating-app payment system ruling

Dutch tech reporter Nando Kasteleijn of NOS just reported on Twitter that the Authority for Consumers & Markets--the Dutch antitrust authority--has imposed another contempt sanction on Apple of €5 million ($5.7 million) for this calendar week, on top of €20 million ($22.7 million) imposed over the course of the past four weeks. The competition regulator of the Netherlands claims that Apple's so-called "solutions" still fall short of what the agency believes is needed to enable dating-app makers to make use of alternative payment systems to Apple's own IAP:

As I discussed with Tweaker's Arnoud Wokke on Twitter, these fines are levied in advance. They are meant to have a coercive effect: Apple can still avoid them for a new week by bringing its conduct into compliance.

Those weekly sanctions can reach--but not exceed--a total of €50 million ($56.7 million).

The complaint that led to the underlying decision on the merits (which Apple is still appealing) was brought by Match Group, a U.S. company best known for Tinder. Someone claimed on Twitter that Match Group has zero employees in the Netherlands. There may not be a single Dutch app maker that has a substantial benefit from this case. That doesn't deprive the ACM of jurisdiction as its job is to protect the "C" in its name: Dutch consumers. However, it's easy to see that this case only makes sense as a "pilot project" with the objective of expanding the same reasoning to other app categories and to other jurisdictions, particularly other EU member states, as the ACM says it's decision is based not only in Dutch but also EU competition law.

While I'm a vocal critic of Apple's App Store terms, the Dutch situation is not a simple one of Apple committing violations and acting as if it were above the law. The situation is rather more nuanced, and on the specific question of whether Apple can reasonably require app makers to submit a new app for the Dutch market, I can see technical reasons--apart from obvious commercial motives--for which Apple has made that choice. Apple is simply trying to capitalize on the fact that the Dutch market is small. If Apple required app makers to submit a new app for the entire EU Single Market, some would also complain that it's a hassle, but if it resulted in major savings for developers, it would be worth the effort.

The much bigger issue here is whether Apple can collect a 27% commission on revenues that bypass its IAP system. Considering that certain alternative payment systems have a base transaction fee such as $0.50, 27% is a prohibitive commission compared to the 30% Apple normally demands (and in any event it's higher than the 15% of Apple's small business program, making it a total non-option for dating-app startups). I don't think Apple would realistically be able to impose a 27% commission as a fair, reasonable and non-discriminatory (FRAND) IP license fee. But the question is whether the ACM can do anything about it in the short term. I have my doubts, let's put it that way.

New York University (NYU) professor Scott Galloway calls Apple's cut a "mob-like 30% toll" in a very thought-provoking article on how Apple might hit $1 trillion in revenue by 2030 (from $366 billion last year) leveraging its power and resources. The headline is "Apple: Thief" and I'd like to highlight this tweet by the author on Apple just "stealing markets from incumbents":

There are serious issues. I agree with mobile app business guru Eric Seufert that the impact of Apple's ATT (anti-ad-tracking) policy on Shopify's stock price raises concerns about how small and medium-sized businesses (many of which rely on Shopify) suffer under the Apple tyranny. Also, ATT is a total squeeze that makes user acquisition ("UA") more expensive while diminishing the ad-based revenue generation opportunity.

I still think the Dutch dating-app case has potential-if the same reasoning is applied to other app categories and spills over to other (especially European) markets. But it's all taking time, and in some jurisdictions (including the EU) new legislation may make an impact ahead of definitive and tangible results from any enforcement of the existing laws.

It's a complex situation. I will continue to criticize Apple, but I strive to be a rational (not rabid) critic. For now, I think Apple's conduct following the ACM decision is above board. Sort of hardball, but not out of line--and not entirely without merit.

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