Apple will face a full trial in the UK over allegations it breached competition law by overcharging people for apps on its App Store.
London’s Competition Appeal Tribunal has this week refused Apple’s attempt to limit a consumer claim led by Dr Rachael Kent, a lecturer in digital economy.
Dr Kent’s claim alleges that Apple breached the law by excluding competition and charging an unlawful level of commission on digital purchases in the App Store.
It argues that forcing app developers to use Apple’s payment system for in-app purchases and taking up to 30 per cent commission on those transactions is unfair and has bumped up prices for consumers.
If the trial rules against Apple, 19.6 million consumers who purchased paid apps in the App Store since October 2015 would be entitled to a share of £1.5 billion in compensation.
The full trial will take place in London, likely in 2023 at the earliest.
In a significant development for millions who use Apple’s UK App Store, the Competition Appeal Tribunal has refused Apple’s attempt to limit the consumer claim led by Dr Rachael Kent, which alleges abuses of competition law that result in systematic overcharging for apps and in-app purchases by Apple (file photo)
Who is eligible for compensation?
Any UK iPhone or iPad user who purchased paid apps, paid subscriptions or made other in-app purchases within the UK storefront of the App Store at any point since October 1, 2015 is eligible.
The claim applies to most popular apps on iPhones and iPads, including Fortnite, YouTube, Tinder and many others, that require payment at point of download, subscription payments, or allow for in-app purchases.
It does not apply to apps providing ‘physical goods or services that will be consumed outside of the app’. These include Deliveroo and Uber, which are not required to use Apple’s payments system or pay Apple the disputed 30 per cent commission.
The purchases must have been made on iPhone or iPad devices. All such purchasers are automatically included within the claimant class. Device users can check their eligibility for compensation by logging into their App Store account and checking ‘Purchase History’
Individuals or businesses who are included in the class and would like to be excluded can do so before September 9, 2022.
More information: www.appstoreclaims.co.uk/Apple/Faq
The legal claim applies to the most popular apps on iPhones and iPads, including Fortnite, YouTube, Tinder and others, which require payment at point of download, subscription payments or allow for in-app purchases.
The case is also ‘opt-out’, meaning people eligible for a refund will be automatically included in the claim, unless they choose to opt-out of the proceedings.
‘This is excellent news for App Store users in the UK,’ said Dr Kent, who lectures at King’s College London and is being represented by law firm Hausfeld & Co.
‘I applaud the Competition Appeal Tribunal for this clear and well-thought-out decision.
‘A claim of this magnitude is always going to be heavily defended. The anti-competitive practices that we are alleging against Apple go to the heart of Apple’s business strategy, and with its almost unlimited resources, it will always make this a challenging fight.
‘We look forward now to progressing the case on behalf of consumers and businesses.
‘We believe we have a convincing and well-founded argument that Apple’s practices are detrimental to those in the class, and the evidence will support it.’
Dr Kent’s legal claim, which was filed last year, accuses Apple of deliberately shutting out the competition in the App Store and forcing people to use its own payment processing system, generating ‘excessive’ profits for itself in the process.
Typically, 30 per cent of the amount app users spend in the App Store goes straight to Apple.
Apple has allegedly forced app purchases to be routed through its own App Store Payment Processing System, where this high commission charge is imposed.
Apple has consequently blocked developers’ ability to enable users to pay for many app services through an alternate payment system.
The collective action has been brought by Dr Rachael Kent, an expert in digital economy and a lecturer at King’s College, London
This in turn forces app developers to raise the price of their apps to cover the 30 per cent fee, ultimately meaning App Store users pay more than they otherwise would.
Who is involved in the legal claim – and what does it apply to?
The legal claim applies to the most popular apps on iPhones and iPads, such as Fortnite, YouTube and Tinder, which require payment at point of download, subscription payments, or allow for in-app purchases.
It does not apply to apps providing ‘physical goods or services that will be consumed outside of the app’.
These include Deliveroo and Uber, which are not required to use Apple’s payments system or pay Apple the disputed 30 per cent commission.
Affected app purchasers, on whose behalf the class action is brought, will not pay costs or fees to participate in the action, funded by Vannin Capital.
The action has been brought by Dr Rachael Kent, an expert in digital economy and a lecturer at King’s College, London who specialises in consumer welfare issues relating to smart mobile technology.
At King’s College, her research focuses on how consumers use apps and digital platforms, and the impact apps have on choice, spending and other aspects of consumers’ everyday lives.
Dr Kent is represented by Hausfeld & Co LLP, and Mark Hoskins QC, Jennifer MacLeod and Aaron Khan of Brick Court and Ronit Kreisberger QC of Monckton Chambers.
Dr Kent has also been advised on the claim by a consultative group with expertise and experience in group claims management, digital markets and consumer rights matters.
This group consists of Dame Elizabeth Gloster, formerly a judge in the Court of Appeal; James Walker, an adviser to the Scottish government on consumer protection and founder of Resolver, which helps customers resolve complaints with companies; and Kevin Jenkins, former CEO of Visa UK.
At a court hearing in May 2022, Apple attempted to argue that the aspect of Dr Kent’s claim which alleges that Apple’s 30 per cent commission is unfair and excessive should not be allowed to proceed, on the basis that Dr Kent had applied the wrong legal test and her claim was therefore defective.
But in its judgement handed down this week, the Tribunal dismissed all of Apple’s arguments, and in doing so, rejected Apple’s attempt to limit Dr Kent’s claim.
Tribunal chairman Ben Tidswell held that Dr Kent had applied the correct legal test and therefore her claim against Apple could proceed to a full trial.
‘We do not accept Apple’s argument that the pleadings disclose a legal error or defective approach, either in relation to the correct legal test for the abuse or for the consideration of economic value in that exercise,’ Tidswell said.
An Apple spokesperson told MailOnline today that it would not be commenting on the judgement of the Competition Appeal Tribunal.
Last year, when Dr Kent’s class action was initiated, the tech giant said: ‘We believe this lawsuit 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.
‘The commission charged by the App Store are very much in the mainstream of those charged by all other digital marketplaces.
‘In fact, 84 per cent of apps on the App Store are free and developers pay Apple nothing.
‘And for the vast majority of developers who do pay Apple a commission because they are selling a digital good or service, they are eligible for a commission rate of 15 per cent.’
Increasing scrutiny has been placed on Apple’s controversial App Store policies in recent months.
The UK’s Competition and Markets Authority and the European Commission are separately investigating allegations of anti-competitive behaviour in Apple’s App Store.
The tech giant is also facing regulatory action in the Netherlands, Australia, South Korea and India.
Last year, Apple went against video games developer Epic Games, known for the popular game Fortnite, in court over its App Store.
Tech giant Apple is alleged to have deliberately shut out competition and forced people to use its own payments system for in-app purchases
Epic said Apple had transformed App Store into an illegal monopoly that squeezes mobile apps for a significant slice of their earnings, which Apple denied.
Epic also took issue over Apple taking a commission of up to 30 per cent on purchases made within apps, including everything from digital items in games to subscriptions.
In September, Judge Yvonne Gonzalez Rogers decided in favour of Apple on nine of 10 counts, but found against Apple on its ‘anti-steering policies’ under California law.
Rogers prohibited Apple from stopping developers from informing users of other payment systems within apps.
Apple started building its dominant App Store 13 years ago as part of a strategy masterminded by co-founder Steve Jobs.
THE TRILLION DOLLAR RISE OF APPLE
The company’s journey to the summit of the technology industry has been a rocky one, having seen Jobs (pictured right in 1976) leave the firm in the mid-1980s after his pet project, the first Macintosh computer, struggled and he attempted to oust then chief executive John Sculley. Wozniak is pictured left
1976: Founders Steve Jobs, Steve Wozniak and Ronald Wayne created the company on April 1 1976 as they set about selling computer kits to hobbyists, each of which was built by Wozniak.
The first product was the Apple I.
1977: Apple released the Apple II in June, which was the first PC made for the mass market.
1981: Jobs became chairman.
1984: The Macintosh was introduced during an ad break for the Super Bowl and later officially unveiled during a launch event. It was discontinued a year later and Jobs left the firm.
1987: Apple released the Macintosh II, the first colour Mac.
1997: Apple announces it will acquire NeXT software in a $400 million deal that involves Jobs returning to Apple as interim CEO. He officially took the role in 2000.
2001: Apple introduced iTunes, OS X and the first-generation iPod.
The first iPod MP3 music player was released on October 23, 2001, at an event in Cupertino and was able to hold up to 1,000 songs.
Steve Jobs unveils Apple Computer Corporation’s new Macintosh February 6, 1984 in California.
The then Chief Executive Officer of Apple, Steve Jobs, with the iPhone
2007: Apple unveils the iPhone.
2010: The first iPad was unveiled.
2011: Jobs resigned in 2011 due to illness, handing the CEO title to Tim Cook. Job died in October from pancreatic cancer.
2014: Apple unveiled the Apple Watch. It also unveiled its first larger iPhones – the 6 and 6 Plus.
2015: After purchasing Beats from Dr Dre, Apple launched Apple Music to compete with Spotify and other music streaming services.
Apple CEO Steve Jobs speaks at an Apple event at Apple headquarters in Cupertino, Calif.
2016: Apple returned to its roots and announced the 4-inch iPhone SE. Meanwhile, the firm is embroiled in a legal battle with the FBI, involving the agency demanding access to the locked phone used by Syed Farook, who died in a shootout after carrying out a deadly December attack in San Bernardino, California with his wife. The court order was dropped on March 28 after the FBI said a third party was able to unlock the device.
2017: Apple introduces the iPhone X, which removes the home button to make way for a futuristic edge-to-edge screen design and a new FaceID system that uses advanced sensors and lasers to unlock phones with just the owner’s face.
2018: In a first for the company, Apple introduces new features in its latest operating system, iOS 12, that encourage users to manage and spend less time on their devices. The move was spawned by a strongly worded letter from shareholders that urged the firm to address the growing problem of smartphone addiction among kids and teenagers.
2019: In January, Apple reports its first decline in revenues and profits in a decade. CEO Tim Cook partly blamed steep declines in revenue from China.
2020: In March, Apple closes all its bricks and mortar retail stores outside of China in response to coronavirus.