UK lawsuit alleges Apple rip-off added 30% to price of smartphone apps

The case claims that Apple has broken competition law by charging eye-watering commission on purchases made on its App Store. Apple strongly disputes the claim. — James Yarema on Unsplash

Millions of Apple customers in the UK have been overcharged by the tech giant and should share in up to £1.5bil (RM8.37bil) of compensation, the High Court will hear this week.

The case claims that Apple has broken competition law by charging eye-watering commission on purchases made on its App Store. Apple strongly disputes the claim.

If the case is successful, the claimants believe nearly 20 million Apple users in the UK could be in line for compensation. Google is being targeted with a similar action, where damages of up to £920mil (RM5.13bil) are being sought on behalf of 19.5 million Android phone users in the UK.

What is it claimed that Apple and Google have done wrong?

When someone buys an app or makes a purchase within an app using an iPhone or iPad, Apple takes a commission of up to 30%. Google takes the same cut from Android users for purchases via its app store. The commission is paid by the app developers, but inevitably this charge will be passed on to customers in higher prices.

The claimants say the profits this generates for the tech giants are “unlawfully excessive”. They also allege that Apple and Google deliberately shut out any competition by requiring users to pay through the tech giants’ own payment systems.

What does this mean for Apple and Google users?

Most customers do not realise they are in effect paying huge commissions. But claimants say Apple and Android users have no alternative so Apple and Google can effectively charge what they like. They say users struggle to shop around for a cheaper price.

Some users may have effectively handed over only a few pence in commission payments, others thousands of pounds. If compensation is paid out, it will be distributed accordingly.

Commission is only paid on digital purchases, as in games or for paid-for content, not goods, such as food purchases or online deliveries.

Who is bringing the case this week?

The case has been filed with the UK Competition Appeal Tribunal and the first hearing is at the High Court this Tuesday (Dec 14). King's College London digital-economy lecturer Dr Rachael Kent is taking the case to the tribunal, but she plans to represent anyone who has bought an app or made an in-app purchase on an iPad or iPhone from the App Store since October 2015. The case is opt out rather than opt in, so customers do not have to do anything to receive compensation if it is paid.

Isn’t this an expensive case for a university lecturer?

Dr Kent is making the claim, but she is being represented by Hausfeld & Co, a law firm with expertise in this area. Commercial litigation funder Vannin Capital is financing the claim.

Dr Kent has spent her career focusing on how consumers interact with digital platforms and apps and how they affect society.

Former Citizens Advice expert Liz Coll is behind the Google claim, with the same backing.

When will we know the outcome?

It could be years — if the cases go ahead, that is. The first hurdle this week is for Dr Kent to be approved by the Competition Appeal Tribunal as a representative for all affected Apple users.

Why are the authorities not taking this on?

The UK’s Competition and Markets Authority is separately investigating Apple’s charging policies.

Elsewhere, the EU Competition Commissioner has imposed heavy fines on Google, while South Korea has passed legislation forcing Apple and Google to open their phones to competition from cheaper app store providers.

In the US, President Biden has appointed Lina Khan to lead the Federal Trade Commission. She is known for her opposition to the power of large tech companies.

What do Apple and Google have to say?

Apple says: “We believe this law suit is meritless and welcome the opportunity to discuss with the court our unwavering commitment to consumers and the many benefits the App Store has delivered to the UK’s innovation economy.”

This year, Apple cut the commission fee for app developers who earn less than US$1mil (RM4.22mil) a year in sales through the store from 30% to 15%.

Apple also said 84% of apps on its App Store were free, so developers paid nothing, and the commission it takes is “very much in the mainstream of those charged by all other digital marketplaces”.

Google said it competed “vigorously and fairly” for developers and consumers, and that its fees were “comparable to our competitors”. – Daily Mail, London/Tribune News Service

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