Apple Loosens App Store Payment Rules for Netflix, Others

Apple said on Wednesday it would loosen rules on its App Store that have banned companies such as Netflix from providing customers a link to create a paid account to bypass Apple's in-app purchase commissions.

It is the second concession to regulators and companies in less than a week as the iPhone maker faces legal, regulatory and legislative challenges to the App Store, which forms the core of its $53.8 billion (roughly Rs. 3,92,880 crores) services segment.

But Apple will still ban developers from taking other forms of payment inside apps on the iPhone, the key practice that Fortnite creator Epic Games, Spotify, and Match have said they want to end.

"A limited anti-steering fix does not solve all our issues," Spotify, which is pursuing an antitrust complaint against Apple with European Union competition authorities, said in a statement.

Epic CEO Tim Sweeney tweeted, referring to Apple's operating system: "Apple should open up iOS on the basis of hardware, stores, payments, and services each competing individually on their merits. Instead, they're running a literally day-by-day recalculation of divide-and-conquer in hopes of getting away with most of their tying practices."

Apple collects commissions between 15 percent and 30 percent from in-app purchases and erects barriers to keep developers from steering users toward payment alternatives. One such rule had barred "reader apps" - where users consume content that they purchased elsewhere - from providing a link to sign up for a paid account.

Apple said on Wednesday it would drop that rule starting early next year as part of the conclusion of an investigation by the Japan Fair Trade Commission (JFTC).

Apple said it agreed with the JFTC to let developers of those apps share a single link to their websites to help users set up and manage their accounts. Although the change is part of an agreement with the JFTC, Apple said it would be applied globally.

The JFTC said at a media briefing it had closed a five-year investigation into Apple and the company's App Store guideline revision eliminated suspicion of antimonopoly practices. Apple will be able to reject apps it doesn't judge to be "reader" apps.

The scope of the investigation did not cover games, it added.

Previously, Apple had allowed a link for account creation but only if creating the account did not involve entering payment information. That meant companies like Netflix, which has no free tier of service and requires payment at sign-up, could not provide a link.

But the changes will not apply to gaming companies, which are the largest category of moneymakers for Apple on its App Store.

Apple said in a statement that reader apps can safely offer other ways to pay because the shows or songs they offer access to are not "in-app digital goods and services." Apple has the ultimate say over whether an app qualifies as a "reader app" or a game.

Sweeney of Epic Games, which is pursuing an antitrust claim against Apple in US courts, criticised Apple's logic, saying on Twitter that "it's hard to discern the rationale that this is safe while Fortnite accepting direct payments remains unsafe."

Last week, Apple reached a deal with a group of developers in the United States in a class-action lawsuit as it awaits a ruling by the same US judge in a separate App Store dispute brought by Epic Games. In that agreement, Apple ended a ban on developers' telling users in email messages outside an app about payment alternatives.

© Thomson Reuters 2021