Apple agreed to pay $100 million and change one of its App Store rules to settle a lawsuit with app developers on Thursday, giving the company another legal headache over its control of mobile apps.
As part of the settlement, Apple said it would create a $100 million fund for payouts to small app developers and allow developers to instruct customers in emails on how to pay for services outside of Apple’s payment systems; that way, the developers can avoid Apple’s commission on app sales. Apple also agreed not to raise the small developer commission, which it last year reduced to 15 percent from 30 percent, for at least three years.
The settlement appears to be a small cost to the world’s richest company to avoid another protracted legal battle that could have put major risks to its business by targeting the iPhone App Store.
Apple is awaiting a federal judge’s decision in a separate lawsuit from Epic Games, the maker of the popular game Fortnite, seeking to force Apple to allow app developers to avoid App Store commissions altogether. Consumers have also sued Apple over app commissions, in a case that the US Supreme Court has allowed to proceed in federal court and that is seeking class-action status.
In a briefing with reporters, an Apple executive said Thursday’s settlement showed that small app developers were usually good at enforcing current App Store policies, including the reduced commission. However, larger developers, who pay the higher rate, continue to complain.
She also said Apple’s willingness to allow developers to inform customers about alternative payment methods via email and other channels was a major concession. App developers are still not allowed to inform customers about other ways to pay in their iPhone apps.
Apple banned reporters from naming or quoting the Apple executive directly.
Steve Berman, a lawyer for the plaintiffs in the lawsuit, who sought class action status, said: “We are really proud that a case brought by two developers, who are in the shoes of tens of thousands of American iOS developers, can help bring about so much important change.”
In the settlement, Apple also agreed to publish an annual report on the number of apps it rejects or removes from the App Store, as well as data on search results. The New York Times reported in 2019 that Apple preferred its own apps to rivals in search results. Apple agreed in the settlement to ensure that search results “remain based on objective characteristics” for at least another three years.
The settlement must be approved by Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California, the same judge who presides over the Epic Games and consumer cases against Apple.
Developers who earned less than $1 million a year on the App Store from June 2015 to April 2021 are eligible for payouts between $250 and $30,000 each from Apple’s proposed $100 million fund, according to plaintiffs’ attorneys.
Separately on Thursday, Apple said it would also allow news organizations to pay the reduced 15 percent commission on subscriptions sold through their iPhone apps, but only if they participated in Apple’s news service, Apple News. The Times and some other news organizations have: pulled from Apple News in recent years because, they said, it took over their relationship with readers and potential subscribers.