Microsoft president’s criticism of app stores puts pressure on Apple | Technology

Microsoft has thrown its weight behind calls for an antitrust investigation into App Store monopolies, piling yet more pressure on Apple as the iPhone maker prepares for its annual developer conference on Monday.

Brad Smith, Microsoft’s president, criticised the 30% cut that app stores take from developers this month, and argued that the policy is a far higher burden on fair competition than the issues that led to Microsoft’s antitrust case in the early 2000s.

Smith’s comments, which didn’t mention Apple by name, add to a growing backlash over the company’s methods of monetising its position as the sole gatekeeper of what can be installed on iPhones and iPads around the world.

The complaints focus on the limitations Apple places on its app stores. In order to publish an app for iPhone users, the company says developers must offer users the option of paying by means of the company’s own in-app payment systems – from which Apple takes a cut, typically 30%, of the revenue.

There are exceptions for “reader” apps, such as Netflix and Kindle, which may offer access to digital content bought on other platforms. But even there, Apple imposes strict limits: companies may not actively tell users where to go to pay, nor even let them know about the existence of other payment methods.

Apple has long maintained that the rules are required to protect users from fraud and scams. But on Tuesday, the European Commission announced an investigation into whether the company was acting in an anticompetitive fashion. “It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” said Margrethe Vestager, the competition commissioner. “We need to ensure that Apple’s rules do not distort competition.”

The EU’s investigation had been prompted by complaints from Spotify and by an unnamed “e-book/audiobook distributor”, thought to be Japanese conglomerate Rakuten.

Apple has said that the claims are “baseless”.

Just a day later, more complaints emerged on the other side of the Atlantic, prompted by Apple’s refusal to approve a bold competitor to Gmail, called Hey. The service, which comes with a $99 (£79) annual price tag, launched on the App Store without any in-app purchases, and required users to sign up online. But, a week after release, Apple refused to approve an update, and said it was a mistake to have let the app be published at all.

“We’ve been a software developer for 20 years,” said David Heinemeier Hansson, the co-founder of Hey’s developer, Basecamp. “We thought we knew all the written and unwritten rules, but then we, with all this knowledge, have invested two years and millions of dollars into developing a new email service, can face this sort of retaliation – or perhaps just be a victim of their capricious policies. If they kick you out of the App Store it’s like you don’t exist.”

Hansson believes that Apple changed quietly some of those unwritten rules earlier this year, removing an exemption for apps like his. That, he thinks, explains why older apps, such as email service FastMail, which have very similar payment models, are still on the store, while his is banned.

Analyst Ben Thompson, who writes the influential Stratechery newsletter, said that change appears to have hit many developers. Thompson said he has heard from “over 30” who have experienced problems in the past few months.

“Most had similar business models to Hey,” Thompson wrote: “subscribe on the web, with an app that displayed a sign-in screen (and no link — users had to figure it out themselves); many had been in the App Store for years, but now Apple says they have to add in-app purchases.”

The enforcement is also hitting companies selling physical products that require an app to work, as Apple attempts to take a cut of that revenue as well. One developer told the Guardian that the changes the company forced on them have hurt their reputation, hurt their revenue, and made it much easier for pirates to rip off their product. “In the grand scheme of things we’re small,” they said, speaking anonymously for fear of retribution from Apple. “We’re in the sub-£1m revenue bracket. But we’re probably very representative of where anticompetitive stuff hurts the most.”

Hansson argued that antitrust enforcement is needed to solve the problem. “This is not new: Apple has captured a key distribution monopoly. The Rockefellers, the Baby Bells, there’s tremendous wealth in doing that, but it depresses innovation, it crushes competition, it hurts consumers.”

Apple declined to comment, but a spokesperson pointed the Guardian to an interview App Store head Phil Schiller gave industry site TechCrunch.

In a letter to Hansson, shared with the site, Apple wrote: “We understand that Basecamp has developed a number of apps and many subsequent versions for the App Store for many years, and that the App Store has distributed millions of these apps to iOS users. These apps do not offer in-app purchase — and, consequently, have not contributed any revenue to the App Store over the last eight years.”

On Monday, Apple is expected to reveal the changes it will make to its operating systems over the next year. But it seems developers hoping for the freedom to avoid paying the toll will have to wait a bit longer.