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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Facebook Inc    FB


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Facebook Strikes Deal to Skirt Apple's App Store Commission -- 2nd Update

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09/25/2020 | 05:31pm EDT

By Sarah E. Needleman

Apple Inc. said it is giving some businesses a reprieve from paying a 30% commission on paid events and experiences through mobile apps, a move that comes as the App Store owner faces scrutiny from software developers and regulators over how its digital marketplace operates.

The announcement Friday follows a Facebook Inc. statement confirming that Apple approved its request to exempt businesses hosting live online events through its app from being required to pay a cut of sales to Apple.

Apple's move, which will last until the end of the year, is significant because the company doesn't normally allow app developers to process payments for in-app purchases themselves or use third-party services, saying those alternative platforms could pose security risks.

The technology company instead makes developers use its own payment system and takes a 30% cut of sales from paid apps and in-app purchases, as well as from digital subscriptions in the first year. Apple has said that amount is in line with what most other app marketplaces charge and helps cover the cost of store services it provides, such as user privacy.

An Apple spokesman said the waiver is a recognition that some app developers, including home-rental company Airbnb Inc., have expressed interest in selling online experiences as the pandemic halted many in-person gatherings and events. He said Apple would closely monitor any customer issues and contact developers to quickly and decisively resolve any that arise.

"To ensure every developer can create and grow a successful business, Apple maintains a clear, consistent set of guidelines that apply equally to everyone," the company said.

Since Apple launched the App Store in 2008, it has sought to create clear guidelines for when it would collect a commission from app developers. Apple doesn't impose its fee on companies that sell physical goods through their apps such as clothing and coffee or offer services like booking rental homes and car rides. Last year, the App Store facilitated $138 billion in commerce in the U.S., with more than $116 billion going to developers, according to Apple.

But app developers have increasingly described the fees that Apple collects as excessive and called its App Store practices monopolistic. Companies including "Fortnite" maker Epic Games Inc., Spotify Technology S.A. and Tinder-owner Match Group Inc. recently formed a coalition dedicated to pushing legal and regulatory changes to how app marketplaces operate.

In a statement, a coalition spokeswoman described Apple's decision as a "distraction from the real issues in the App Store ecosystem." While it is pleased with the move, she said, the group believes no developers should have to "pay this unfair, unreasonable, and discriminatory 30% App Tax, full stop."

Apple declined to respond to the group's comment.

Apple's waiver could fuel critics' arguments that the commission doesn't need to be maintained at the current level, said R.W. Baird analyst Colin Sebastian. He said Apple could be using this case of online events to test the impact of lowering the fee on app developers.

"A consistent commission is easier to defend in court, but generosity generates goodwill," said Florian Mueller, an independent analyst in Munich focused on antitrust issues. "Apple appears to have realized that it didn't look good to be less flexible than Google in this crisis-related context."

Facebook initially sought an exemption from Apple's commission last month when it introduced a way for businesses to host paid events through its live-streaming platform, a move the social-media company said was aimed at helping those struggling through the pandemic. At the time, Apple turned down Facebook's request, which it made through an app update submission.

A Facebook spokesman said Apple's temporary exemption doesn't last long enough and should apply to all businesses hosting paid events through its app, not just those that had been selling physical goods or services before the health crisis began.

Facebook said it wouldn't collect fees from paid online events while businesses remain closed for the pandemic until at least August 2021. Facebook already uses Facebook Pay to handle transactions for paid events sold through its app through the Google Play store.

Similarly, Airbnb added the option for businesses or individuals to offer paid experiences through its app in response to the pandemic and it, too, sought an exemption from Apple's commission on such sales. A spokesman for Airbnb declined to comment on Apple's plan.

Write to Sarah E. Needleman at sarah.needleman@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 0.67% 1596.6526 Delayed Quote.18.41%
APPLE INC. -0.92% 115.77 Delayed Quote.59.20%
FACEBOOK INC -0.56% 277.2199 Delayed Quote.35.80%
SPOTIFY TECHNOLOGY S.A. -0.08% 271.24 Delayed Quote.81.42%
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