Well, That Settles That ⭐

With Big Tech under dramatically more stringent antitrust oversight in recent years, I frequently return to the same advice: Learn the lessons of Microsoft Past and negotiate with regulators from a position of strength instead of gambling that you will somehow come out ahead in cases where you are clearly breaking the law.

To date, the biggest and worst offenders, Apple and Google, have ignored history and fought tooth and nail to preserve their outrageous and unfair app store fees and retain control of their respective app ecosystems. Indeed, it appears that Google’s strategy has been simply to copy what Apple does. And Apple’s strategy has been to never give ground, even when it ran afoul of the law and its own self-righteous marketing. Not to mention common-sense and basic decency.

But this is starting to change. Finally.

Today, Epic Games and Google agreed to settle their five-year-old antitrust lawsuit. This is incredible on several levels. First, Epic Games didn’t just defeat Google in Epic v. Google, it manhandled the online giant like it was child’s play, with Google losing every possible appeal along the way. But the settlement wrung even more concessions out of Google than the original ruling, key among them the first-ever reversal of the company’s egregious app store fee structure. And that will now become a precedent that current and future plaintiffs can point to as they try to dismantle its unfair app store fees and policies.

This was avoidable. Indeed, Apple and Google both could have emerged from this era of heightened scrutiny with their unfair fees and policies in place had they simply worked with antitrust regulators. Years ago, I pointed out that had Apple and Google simply lowered their fees to 10 or 12 percent, levels that are still unfair and unwarranted, they would never have been in this mess to begin with. But Apple, of course, dug its hole even deeper by going in the exact opposite direction and engaging in a policy of belligerent non-compliance after having been found, in multiple cases, to not be meeting its legal requirements.

Everyone has opinions on this topic. But I’m tired of pretending that most of those opinions aren’t uneducated and ridiculously pro-Big Tech and anti-consumer. Here’s what’s objectively true:

Apple’s 30 percent fee structure was arbitrary from the get-go and not based in any way on the cost of the services it provides developers.

Apple’s redefinition of how computing platforms work, by charging developers for the “right” to publish apps on a computing platform while restricting their capabilities and preventing them from communicating with their own customers, was unprecedented. In the past, platform makers would pull out all the stops to attract developers to their platforms because that’s where the value equation started. More developers make more apps and attract more users; more users attract more developers who will make more apps.

Apple’s app store czar, Phil Schiller, knew that the fee structure was unsustainable and argued internally that the company should lower them, to no avail.

Apple’s app store is outrageously profitable and the profits it earns from this service are incommensurate with the cost of providing those services.

Google originally positioned its Google Play Store as an open alternative to the Apple App Store, one that would not need to be profitable. But in time, the revenues were too difficult to ignore, so it simply started copying Apple’s fee structures and policies.

No one outside of Apple knows exactly what the line is between fair and unfair, meaning the line between making a profit on a service rendered vs. charging outrageous fees. But we do know that the fees that Mastercard and Visa charge range from 1 to 3.5 percent per transaction and that those companies have also come under regulatory scrutiny for—wait for it—charging egregiously high fees.

Given all this, I feel that a fair fee structure in an app store might be about double the credit card processing fee, or 2 to 7 percent, because Apple and Google do more than just process transactions. But not much more, honestly: Even my back of the napkin math is overly favorable to these companies.

As noted above, had Apple and Google simply behaved in a manner that mirrors how both, but Apple in particular, market themselves, they could have taken the higher ground and dropped their fees significantly, benefitting developers and customers. This would have likewise benefitted apple and Google because they would have retained a significant portion of app store revenues while retaining control (full or nearly so) of their insane walled garden ecosystems.

But instead, Apple and Google have decided to dig in and defend the indefensible.

Until today. With this settlement, Google has agreed to lower its app store fee structure to 20 percent and 9 percent, depending on the type of transaction, and it will allow frictionless third-party app stores and third-party in-app payment systems for which it will not collect fees. This is happening worldwide, not just in the United States. And while it’s still unfair to some degree, it meets the basic premise of my years-long arguments about working with regulators and easing up on the most unfair of its policies.

The ball’s in your court, Apple. (Pardon the pun.) But this is an excellent opportunity to show that this company actually lives up to its endlessly promoted ideals. I recommend that you take it.