Does App Store tax make Apple a monopoly? U.S. and Europe plan on investigating

The 30% cut that Apple takes for in-app payments and subscriptions paid for through Apple's App Store payment platform (which drops to 15% for subscriptions after year one) is a real point of contention with developers and consumers. Because you can't sideload apps from a third-party app store like you can with Android, Apple is being probed by anti-trust investigators here and abroad and is the subject of a class-action suit filed by Apple customers who feel that the so-called Apple Tax combined with the inability to sideload an app raises the prices they pay to purchase a paid app from the App Store.

Rep. David Cicilline (D-RI) accused Apple of committing "highway robbery" on The Verge's podcast. The congressman said, "Because of the market power that Apple has, it is charging exorbitant rents — highway robbery, basically — bullying people to pay 30 percent or denying access to their market. It’s crushing small developers who simply can’t survive with those kinds of payments. If there were real competition in this marketplace, this wouldn’t happen." Alongside Cicilline on the podcast was Basecamp CTO David Heinemeier Hansson. The latter had just had his company's $99 premium email app, "Hey" rejected from the App Store because it didn't offer users a way to pay for it inside the app. That would have prevented Apple from taking its 30% cut from subscribers.

Big and small developers say that they are afraid of crossing Apple which could come back to bite them in the butt when it comes time to have a new app approved. Rep. Cicilline added that "Many people have come forward to share their experiences, who are terrified of economic retaliation, who are afraid they can’t survive the economic retaliation that these large platforms can impose because of the power that they have, and we intend to pursue those allegations very seriously. This is a real problem in the marketplace. This is a direct consequence of enormous market power, the fact that Apple is the gatekeeper for these developers, and we have heard many, many examples."

Basecamp's Heinemeier Hansson explained why developers-like his company-feel compelled to say "How high?" when Apple says "Jump." The CTO says, "No one has a choice. Everyone is petrified... and then I understood. If you’re a publicly-traded company, you cannot afford this. You cannot afford to file your earnings and say, 'Oh, we just lost 50 percent of revenue last quarter because we had a spat with Apple.' And if you’re a small developer, you can’t afford this literally because you will go broke — you will lose your house if they kick you out of the App Store."

The House Antitrust Committee, which is led by Cicilline, has asked the CEOs of Google, Facebook, Amazon, and Apple to testify as the Committee probes the App Store and Google's demand that phone manufacturers install the Chrome Browser and Google Search if they want to license Google Play Services. While three of the CEOs indicated that they would testify, Apple's Tim Cook hasn't committed yet.

Besides facing an antitrust investigation in the U.S., a couple of days ago the EU announced that it was starting two investigations into Apple's business practices. The first probe will look at Apple's requirement that developers use Apple's own in-app purchases platform and what options developers have if they don't want to use it. The problem here is that when third-party apps compete in the App Store with Apple's own apps, the latter has an advantage. For example, Spotify and Apple Music have the exact same pricing online with one-month plans priced at $9.99 per month and $14.99 per month for a family plan with up to six members. But in the App Store, Spotify raises its prices by 30% to cover the Apple Tax. That $9.99 monthly subscription becomes $12.99 giving Apple Music an advantage in Apple's own iOS App Storefront.

The second investigation deals with how Apple restricts developers in a similar situation as Spotify is in from informing iPhone and iPad users that they can purchase the same app cheaper if they subscribe outside the App Store.

Big Tech has a big bullseye painted on its back and both the U.S. and the EU are looking to hit these companies where it hurts them the most-in the wallet.