Apple’s Decision To Charge 27% Commission On External Payments Draws Criticism

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Updated Jan 17, 2024, 06:17am EST

Topline

Apple’s decision to charge a 27% fee on all in-app purchases made through external payment platforms faced pushback from developers, including Epic Games’ Tim Sweeney, on Tuesday, hours after the iPhone maker was effectively forced to update its App Store policies after the Supreme Court refused to consider an appeal from the company.

allow external payment methods.

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Key Facts

Apple updated its App Store policy on Tuesday to allow the use of external payment methods, to comply with a 2021 federal court order after the Supreme Court’s decision.

The updated policy allows developers to link to additional payment methods aside from Apple’s own, but the tech giant will still collect a 27% cut of all transactions (12% for small developers) instead of the customary 30%, or 15% for small developers.

Developers will need to apply for an “entitlement” to enable this feature and they will still be required to offer Apple’s in-built payment service as an option.

Sweeney, the CEO of Epic—a video game developer who had brought the case against Apple—termed the changes as a “bad faith ‘compliance’” of the court order.

Sweeney called the 27% fee an “anticompetitive” new tax and said Epic would contest the matter in court.

News Peg

According to Sweeney, Apple still exerts significant control over how external payment links appear on the apps, which “must be separated out into a different section of the app, away from places where users actually buy stuff.” Sweeney also criticized Apple’s disclaimer for users choosing an external payment option, calling it a “scare screen.” Users who choose an external payment method are greeted with a message saying: “You’re about to leave the app and go to an external website. Apple is not responsible for the privacy or security of purchases made on the web.”

Crucial Quote

The Coalition for App Fairness, a group of app developers including Epic Games, Spotify, Masimo and several others, derided Apple’s move. The group’s Executive Director Rick VanMeter said: “These changes do nothing to enhance consumer choice, lower prices for in-app purchases or inject competition into Apple’s walled garden. It is precisely this type of abusive, monopolistic behavior that makes it imperative for Congress to pass the Open App Markets Act.”

Contra

John Gruber, the author of prominent Apple blog Daring Fireball, argued that Apple views the 30% cut not as a processing fee, but rather a commission it charges developers for using its intellectual property—in this case the iOS ecosystem. He argued that the new external payment option simply offloads the 3% that developers need to pay for handling “actual payment processing” while keeping them on the hook for the remaining 27% as a type of platform commission.