[Comprehensive] '30% App Commission' Hit or Not... Tim Cook Testifies in Court "Without In-App Payment, It's a Mess"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Seulgina Jo] "Without the in-app payment system, it would be a mess." Tim Cook, Apple CEO, who appeared in court amid the so-called 'app toll' controversy, stated that the current App Store operating system, which forces developers to use Apple's payment system and charges a hefty 30% commission, is a policy for the users, not about 'money.'

On the other hand, Epic Games, the developer of the popular game 'FORTNITE,' which was expelled from the App Store after opposing Apple's commission policy, criticized Apple for earning over $100 million from the 30% commission on that game alone and accused Apple of unfairly exercising its monopoly power.

◆ Tim Cook on the Stand: "We Don't Think About Money at All"

According to local media including The Wall Street Journal (WSJ), CEO Cook appeared as a witness at the federal court in Oakland, California, and stated, "We do not think about money at all. We think about the users."

This was a rebuttal to Epic Games' claim that Apple, along with Google, dominates the app ecosystem by forcing in-app payments and charging high commissions. On that day, Cook focused for over four hours on explaining that the App Store's commission policy is not excessive. Currently, Apple applies a 30% commission in the in-app payment method for apps distributed through its own app market, the App Store. For example, if a consumer pays 10,000 won for a game item, Apple takes 3,000 won.

Cook claimed that Apple reviews about 100,000 apps weekly and removes 40,000 of them, continuously monitoring all apps to protect users' security. He explained that without such procedures, the App Store would become chaotic. He emphasized, "It would be terrible for users and also terrible for developers," adding, "Developers also rely on the App Store being a safe place for transactions."

Furthermore, Cook raised his voice about Apple's investments in the app ecosystem bringing significant value to developers. He added, "Allowing independent payments would essentially mean Apple giving up all the revenue it earns from intellectual property."

This is consistent with Apple's official message regarding the app toll controversy. At the annual shareholders' meeting held online last February, Cook stated, "For over 10 years, the App Store has provided a software revolution for users and an economic miracle for hundreds of entrepreneurs, creators, and developers," and officially expressed discomfort over antitrust and app toll controversies by saying, "Apple does not hold a dominant position in any market."

WSJ reported, "Although Cook has appeared before congressional hearings, this is his first time testifying in court," and added, "Apple decided on this appearance with confidence that he would deliver a compelling message to the judge." This is also interpreted as being aware that plaintiffs usually face disadvantages in antitrust lawsuits.

◆ Epic Games Expelled for Opposing Commission Policy → Legal Battle Ensues

This lawsuit began in earnest last August when Apple expelled Epic Games for violating the App Store's payment guidelines. This was a response to Epic Games building its own in-app payment feature within Fortnite to oppose Apple's app commission policy.

Epic Games immediately sued Apple after being expelled. The main points are that Apple monopolizes the App Store by blocking the emergence of competing app markets and that the 30% commission is excessive. Tim Sweeney, CEO of Epic Games, criticized, "Apple and Google make huge profits from device sales, and the 30% commission policy is not justified in any way," adding, "The business model with developers needs to change." Epic Games also pointed out that Apple not allowing other app markets besides the App Store is problematic.

The controversy over app market commissions is not new. The commission policies of app market giants like Apple and Google have been criticized as "robbery" in the U.S. House of Representatives and are under investigation by regulatory agencies due to antitrust issues. However, the Epic Games case, which escalated from expulsion to lawsuit, is evaluated as showing how serious the conflict between the dominant app market giants and developers has become.

In response to the lawsuit, the 'Coalition for App Fairness (CAF)' was formed to counter platform companies. The coalition includes Spotify, the world's largest music streaming service, and Match Group, operator of the dating app Tinder.

◆ A Landmark Trial That Could Shake the App Business Landscape

This lawsuit is attracting attention as a landmark trial that could shake the $100 billion annual app business. It could be an opportunity to reset the conventional relationship between app developers and app market operators. The core issue is the monopolistic behavior of major app market operators like Apple App Store and Google Play.

No matter the outcome, significant changes to the app business landscape are inevitable. If Apple loses, the app market dominated by the App Store and Google Play could collapse, and the revenue structure based on existing app commissions would be severely impacted. Additionally, antitrust regulatory actions by competition authorities worldwide are expected to gain momentum. The LA Times described it before the trial as "the most serious challenge Apple has faced in its iron-fisted rule over the App Store."

During the trial, major foreign media reported that Apple has earned over $100 million in commission revenue from Fortnite alone under its 30% commission policy. This figure is based on revenue estimates disclosed during the trial, which began this month. It was confirmed that Apple spent $1 million on Fortnite marketing in the App Store over the past 11 months. Epic Games' lawyer pointed out, "A $100 million revenue with a $1 million expense is a great deal."

Currently, Apple is cornered over antitrust issues in the U.S., Europe, and other countries. A report released last year by the U.S. House Judiciary Committee's antitrust subcommittee included content stating that Apple and Google's app market monopolies bring enormous profits to these companies. In March, the Arizona House passed a bill banning app market monopolies, and various state legislatures are discussing regulatory bills on app market commission policies. The European Union's executive body, the European Commission, has preliminarily concluded that Apple's App Store rules related to music streaming violate antitrust laws.