Apple to Let iPhone Users Access Better Deals Outside App Store

App makers can pitch cheaper products and services directly by email instead of through App Store

Apple app store logo Apple

iPhone users may soon be able to buy apps, subscriptions, and other digital products directly from developers instead of Apple’s App Store, likely resulting in lower prices for consumers.

The change is part of Apple’s proposed $100 million settlement, announced Thursday, of a 2019 class-action suit brought by a group of small app developers.

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Under the agreement, developers will be able to email iPhone users directly to inform them about ways to purchase their products outside the App Store. This will allow developers to sidestep the steep fees imposed by Apple and offer lower prices to consumers.

However, the app makers would still be prohibited from contacting consumers directly through apps sold through the App Store.

Advocates say this proposed settlement, which still needs court approval, is just part of a much-larger fight over whether Apple’s App Store stifles competition in violation of antitrust laws.

“It’s great that app developers can now tell consumers they can get a better deal if they buy a service outside the App store,” says Sumit Sharma, senior researcher for tech competition at Consumer Reports. “However, even after the settlement, most of the business practices Apple has used to reduce competition in the app space, such as self-preferencing and monopolizing payment solutions within the App Store, can still continue.”

Other groups also highlight the settlement’s shortcomings. “This offer does nothing to address the structural, foundational problems facing all developers, large and small, undermining innovation and competition in the app ecosystem,” says Meghan DiMuzio, executive director of the Coalition for App Fairness, a nonprofit group of app developers, in a statement that cited the ways that Apple continues to prevent developers from using the App Store to communicate with its customers. 

Under the terms of the deal, developers will be able to offer expanded pricing options for apps, subscriptions, and in-app purchases.

“We appreciate all the new pricing tiers that are on the way, which will give us greater flexibility in how we market and sell our workout subscriptions,” said Richard Czeslawski, president of Pure Sweat Basketball, one of the plaintiffs named in the suit, in an online statement.

Apple also pledged not to raise commissions for smaller developers for three years. Earlier this year, the company had reduced commissions for those developers who earn less than $1 million annually to 5 percent from levels of up to 30 percent.

The $100 million earmarked in the agreement will establish a fund to assist smaller U.S. app developers. The company also agreed to publish transparency reports detailing the App Store’s review process, including the rates at which Apple rejects app submissions from developers, a process that many developers have found confusing.

Except for the access to the fund, the remaining terms will apply to all developers, both domestic and abroad.

The agreement still needs to be approved by Judge Yvonne Gonzalez Rogers of the U.S. District Court. Apple is also waiting for Rogers to hand down the hotly anticipated verdict in a lawsuit brought by the game developer Epic, creator of the popular Fortnite franchise. That case was heard this spring, and a decision is expected soon.

This week, the U.S. Supreme Court agreed to allow a large class-action suit filed against Apple on behalf of consumers to move forward. That suit contends that Apple had used its competitive position to hike prices of iPhone apps.

Apple's App Store Antitrust Problem

Over the past year, Apple has come under fire for its pricing practices in the App Store, with developers such as Epic and Spotify arguing that the company’s commissions are excessive and that the fees and other restrictions cost consumers money, while providing disincentives for developers to innovate.

These practices were highlighted in a series of antitrust hearings held in the Senate in 2020 and this past spring.

Earlier this month, Sens. Richard Blumenthal, D-Conn., Marsha Blackburn, R-Tenn., and Amy Klobuchar, D-Minn., introduced legislation that could expand competition and strengthen consumer protection in the apps market while restricting the ability of Apple and Google to act as “gatekeepers.”

The Open App Markets Act is supported by a number of advocacy groups, including Consumer Reports. The proposed law would pave the way for the creation of third-party app stores and allow sideloading of apps in a way that circumvents the Apple and Google app stores completely.

“We need the Open App Markets Act to help create an app ecosystem that is fairer, more competitive, and that enables unfettered innovation by all companies—big and small—to the benefit of all consumers,” says CR’s Sharma.

The bipartisan federal bill comes on the heels of state-level proposals in Arizona, Georgia, Hawaii, Illinois, Massachusetts, Minnesota, New York, and North Dakota that would offer similar provisions to increase competition in the app space.

Allen St. John

I believe that technology has the power to change our lives—for better or for worse. That's why I’ve spent my life reporting and writing about it for outlets of all sorts, from newspapers (such as the Wall Street Journal and the New York Times) to magazines (Popular Mechanics and Rolling Stone) and even my own books ("Newton’s Football" and "Clapton’s Guitar"). For me, there's no better way to spend a day than talking to a bunch of experts about an important subject and then writing a story that'll help others be smarter and better informed. 

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