- Apple is in a standoff with buzzy new subscription email service Hey on Tuesday over integrating in-app purchases into its iOS app and taking up to 30% commission on payments.
- The confrontation with Hey, which was created by Basecamp, erupted the same day the EU announced it would launch an antitrust investigation into this same levy that Apple imposes on app purchases.
- Spotify complained to the EU last year that it was anti-competitive of Apple to impose this tax while operating competing apps like Apple Music.
- Match Group, the dating app conglomerate which owns Tinder, also weighed in on Tuesday to criticize the tax.
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Apple faces a sudden public backlash from developers large and small against the tax it imposes on some in-app purchases.
Although apps can be hosted on the App Store for free, Apple charges a 15-30% commission on certain purchases made in-app. If, for example, you buy a premium Spotify subscription through its iOS app, Apple takes a 30% cut. The same fee applies to other digital content purchases, such as virtual items or ebooks.
On Tuesday, a buzzy new subscription email service called Hey said Apple was trying to strong-arm it into integrating in-app purchases so it could get this commission, as first reported by Protocol.
Hey, which comes from Basecamp and costs $99 per year, launched on Monday. According to Protocol, the service doesn’t let you subscribe or pay inside the iOS app.
Soon after launch, Hey tried to roll out an update fixing some bugs in its iOS app.
It then received an email from Apple rejecting the update. The email suggested Hey had broken the rules by not implementing Apple’s in-app purchase system, which automatically takes the 15-30% cut. An Apple reviewer later said that the app may be removed completely if it didn’t comply.
Apple’s developer guidelines state that while apps can offer users access to services or content they’ve previously purchased, apps cannot “directly or indirectly target iOS users to use a purchasing method other than in-app purchase.” They also state that apps can’t offer access to new, paid features within the app, they must offer in-app purchase.
Hey’s executives had thought the rule didn’t apply to them as the app is intended to allow people to sign in to something they are already subscribed to, as is the case with platforms like Netflix and Slack.
“There is no chance in bloody hell that we’re going to pay Apple’s ransom. I will burn this house down myself, before I let gangsters like that spin it for spoils. This is profoundly, perversely abusive and unfair,” tweeted Basecamp CTO David Heinemeier Hansson.
According to Protocol, Apple enforced the rule because it’s a consumer app rather than an enterprise app.
Heinemeier Hansson said the enforcement of the policy is inconsistent: “The Basecamp app has been in the App Store for YEARS offering access to a subscription bought elsewhere. The store is FULL of apps doing just that. Even other email apps!”
But this is preposterously false and inconsistent. The Basecamp app has been in the App Store for YEARS offering access to a subscription bought elsewhere. The store is FULL of apps doing just that. Even other email apps! A few examples we compiled: pic.twitter.com/MYC1KF1Xfr
— DHH (@dhh) June 16, 2020
Stratechery analyst Ben Thompson said on Twitter following the news he has received multiple emails from developers saying they’ve had a similar experiences and suggested this was a recent re-interpretation of Apple’s policy.
Bad timing for Apple
The standoff between Apple and Hey happened the same day the EU launched two antitrust investigations into Apple, one focusing on the 30% App Store levy.
The EU probe was set in motion in 2019 when Spotify filed a complaint saying that levying the tax while also running a competing music streaming business (Apple Music) meant the Apple was giving its own service a leg-up by artificially inflating Spotify’s prices. Spotify argued that in order to make up for the 15-30% fee it passed on to Apple, it had to put up the price of its own subscriptions.
An ebook company made the same complaint to the EU in March of this year. Although the European Commission did not name the company, the details match a report from the Financial Times that the complainant was Rakuten-owned Kobo. Kobo declined to comment when contacted by Business Insider.
Apple hit back, saying the EU is “advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else.”
Another app developer heavyweight came out swinging against Apple on Tuesday.
Match Group, which owns a host of popular dating apps including Tinder, OKCupid, and Hinge, issued a statement criticizing the in-app purchase tax.
“Apple is a partner, but also a dominant platform whose actions force the vast majority of consumers to pay more for third-party apps that Apple arbitrarily defines as ‘digital services.’ Apple squeezes industries like ebooks, music and video streaming, cloud storage, gaming and online dating for 30% of their revenue, which is all the more alarming when Apple then enters that space, as we’ve repeatedly seen,” Match Group said in its statement.
“We’re acutely aware of their power over us. They claim we’re asking for a ‘free ride’ when the reality is, ‘digital services’ are the only category of apps that have to pay the App Store fees. The overwhelming majority of apps, including Internet behemoths that connect people (rideshare/gig apps), or monetize by selling advertising (social networks), have never been subject to Apple’s payments systems and fees, and this is not right. We welcome the opportunity to discuss this with Apple and create an equitable distribution of fees across the entire App Store, as well as with interested parties in the EU and in the US,” it added.
Apple was not immediately available to comment on Match Group’s statement when contacted by Business Insider.
SEE ALSO: Apple just got hit with 2 EU antitrust probes into the App Store and Apple Pay
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