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Concerns Grow Over App Store's Unfair Treatment Of Developers


If you have an iPhone and you want to download an app, there is only one place you can go - Apple's app store. The tech giant controls what apps you can find and how much developers get paid for each purchase. Does Apple wield all that power to gain an unfair advantage? Regulators in the U.S. and Europe want to know as NPR's Bobby Allyn reports.

BOBBY ALLYN, BYLINE: More than 30 billion apps were downloaded just last year through Apple. David Heinemeier Hansson hoped his new app could join them. He's the co-founder of software company Basecamp. It recently launched a slick email service with no ads called Hey. It costs $99, and Basecamp planned to pocket every cent.

DAVID HEINEMEIER HANSSON: Here comes Apple, shows up with a demand to take 30% of our revenue. And it wasn't just that they were going to hold back our updates, they threatened to kick us out of the app store.

ALLYN: And he says getting kicked out of Apple's app store could mean make or break for a new app.

HANSSON: This trillion-dollar company bearing down on our small, 50-person software company, it didn't feel like a fair fight. In fact, it wasn't even really a fight. It was just us getting squashed.

ALLYN: The pushback against Apple's 30% cut isn't just about the fee itself, which some critics call the Apple tax, but Hanson says that the fee appears to be applied unevenly. Streaming services Netflix and Hulu, for instance, have found ways around paying Apple's fees.

HANSSON: The guidelines they have are full of sweetheart deals to particularly large companies.

ALLYN: That's issue one. The second issue, critics who say Apple is trying to undercut its rivals. Apple doesn't charge its own app Apple Music any fee, but it does charge its competition, Spotify. A Spotify representative told European regulators recently, quote, "Apple acts as stadium owner, referee and player and tilts the playing field to favor its own services."

DAVID YOFFIE: Developers have a reasonable case...

ALLYN: That's David Yoffie. He's a Harvard Business School professor.

YOFFIE: ...Particularly where Apple tends to be relatively indiscriminate in the way in which it often throws people off the platform and has the ability to literally put people out of business.

ALLYN: We wanted to hear from Apple, but the company wouldn't talk to us for this story. In multiple statements, it defended its app store rules and says it applies them equally across the board. Apple says its 30% fee is for privacy and security reviews. The company also stood by its exceptions. For instance, Lyft, Uber and Airbnb aren't charged a commission because users are paying for something tangible, like a ride downtown or a place to stay. Apple says its fees only apply when people pay for digital stuff. Here's Yoffie.

YOFFIE: The percentage of people who actually buy apps on Apple are significantly higher than on an Android. And as a consequence, that gives Apple enormous power.

ALLYN: Heinemeier Hansson expects almost all of the people willing to pay for his new email service to be iPhone users. He says Apple should give both large and small developers more leeway around app store rules.

HANSSON: This is what we're asking for. Give us choice. Choice leads to competition. Competition leads to lower prices, which benefits consumers. It benefits the marketplace. It benefits everyone, perhaps, except Apple's bottom line.

ALLYN: Congressman David Cicilline, a Democrat who leads the House's antitrust investigations, agrees. He's compared Apple's app store fees to highway robbery. He says Apple's control of apps is a kind of monopoly power that discourages competition. The Justice Department is looking into this. So are regulators in Europe. The European Commission has opened a probe to examine Apple's gatekeeper role, and it hopes to zoom in on whether Apple's app store rules distort competition. Bobby Allyn, NPR News, San Francisco. Transcript provided by NPR, Copyright NPR.

Bobby Allyn is a business reporter at NPR based in San Francisco. He covers technology and how Silicon Valley's largest companies are transforming how we live and reshaping society.