Domestic developers report: Apple App Store suspected of infringement and monopoly

On August 7, a team of domestic developers and legal experts held a collective antitrust action briefing on the Apple App Store, believing that the App Store operated by Apple has been suspected of violating laws, infringing rights and engaging in monopolistic behavior in its long-term operations. On August 8, they will formally send a complaint letter to the two antitrust law enforcement agencies, the State Administration for Industry and Commerce and the National Development and Reform Commission.

Forced removal

An online karaoke app was suddenly removed from Apple's shelves due to a general complaint from one of the three major US record companies, and was forced to pay a licensing fee before it could be put back on the shelves; a download tool software encountered pressure from the US industry association and was removed from the shelves without violating Chinese law; a smart electric car was removed from the shelves because it only had a built-in SIM card purchase channel for navigation...

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App Store is an application store operated by Apple Inc.

Since Apple only notifies apps of their removal via internal emails, sudden removals can cause huge economic losses to apps with large user bases. According to data from ASO100, a domestic App Store ranking optimization service platform, the problem of apps being removed from the shelves in China is very serious. From August to October 2016, more than 30,000 apps were removed from the shelves in China, including many well-known apps uploaded by Chinese developers. In just 20 days in June 2017, Apple removed 89,205 apps, accounting for about 4% of the total number of apps. According to incomplete statistics, nearly 30 developers, including nearly 60 popular apps such as Autohome, Toutiao, and Yizhibo, have been removed from the shelves since 2013.

According to Lin Wei, partner of Xiaoda Law Firm, Apple mainly uses Clause 3.2(f) of the Developer Agreement as the basis for removing apps, but the application of this clause is relatively abstract, resulting in an opaque removal procedure. Finally, there is the problem that developers' complaints cannot be properly resolved. Many users who were removed from the shelves in March 2017 and immediately complained, and even users who were removed from the shelves in 2016, have still not received a clear response from Apple.

On June 10, 2017, Apple wrote a so-called Chinese localization innovation into its latest "Developer Terms" - a commission on rewards. The content is: "Rewards" from mobile phone users to original creators in App software are considered "in-app purchases"; further, according to the provisions of this clause, Apple will charge iOS original creators (i.e. App software developers) a commission of 30% of the reward value. If you do not accept Apple's 30% commission arrangement, or there are other hidden payment methods in the app, Apple's way of dealing with it is to remove the app from the shelves.

Infringement judgment

“In fact, the Apple App Store has no physical presence in China. The trading company registered by Apple in China is mainly engaged in the sale of hardware, while the main body of the App Store is directly operated by the US headquarters.

"Therefore, the right to manage the Apple App Store and determine whether a product is infringing or should be removed from the shelves lies in Apple's hands. Apple has greater power than the judiciary," said Lin Wei.

Industry insiders said that the reason why Apple is unwilling to delegate the rights of the App Store is because of the huge interests behind it. The fourth quarter financial report of 2016 shows that Apple, with an 18% market share, has obtained 92% of the profits of the entire industry. Apple's profits are mainly brought by the following aspects: iPhones, Apple computers, App Stores, and other hardware devices. In recent years, Apple's hardware profit growth has been weak, and the goal of profit growth has been shifted from hardware devices to application service provision based on stock devices, that is, to find new growth points in the App Store. In terms of financial data, the profits brought by the Apple App Store have repeatedly set new highs and are growing at an extremely fast rate.

Formal Report

The law firm that made the report believes that Apple may have abused its dominant market position and violated state laws and regulations on Internet information services and online publishing services in the operation of the App Store, and may have damaged the legitimate rights and interests of mobile application developers, operators, and consumers.

The suspected abuses of the Apple Store operated by Apple Inc. in the relevant market are mainly manifested in the following ways: 1. Refusal to trade, which is manifested in the unilateral removal of Chinese developer software without giving specific and reasonable explanations; 2. Differential treatment, with different efficiency in handling the demands of Chinese and foreign developers, and some regulations not being available in Chinese; 3. Conditional transactions, i.e. bundling, which is manifested in the fact that only Apple Pay can be used for in-app purchases; and 4. Excessive pricing, which is mainly concentrated in the fact that Apple charges a commission of 30% or more on the electronic service industry.

Beijing Business Daily reporter learned that there are currently many antitrust investigations against Apple mobile phones in the world, but there has not been a successful antitrust lawsuit against the Apple Store. This time, a total of 28 domestic application manufacturers provided relevant evidence of Apple's suspected monopoly.

Yang Ming, a professor at the Law School of Peking University, said that for foreign Internet service providers like Apple Store that have no corporate entity in China, Chinese law has the right to regulate them because their business scope covers China. Previously, Qualcomm was fined $975 million by the National Development and Reform Commission of China for patent licensing issues.

Beijing Business Daily also contacted Apple (Greater China) Government Affairs Director Fan Yong on this issue, but he refused to be interviewed. "When we launched the user collection in April, we also contacted some Apple China executives. But they have no decision-making power, and the entire Apple App Store is run by Apple's US headquarters," Lin Wei said.

Lin Wei said that Apple should set up a Chinese entity for the App Store's services in China to meet the regulatory requirements of Chinese law and the needs of operators and consumers. In addition, Apple should explain the reasonable reasons for its 30% commission. If there is no reasonable basis, the antitrust enforcement agency and the People's Court can adjust and reduce it in the corresponding relief procedures.