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Judge poised to approve Apple’s $100 million settlement with app developers

Among other things, the proposed settlement promises to help small developers make their apps more discoverable.

OAKLAND, Calif. (CN) — A proposed $100 million settlement —Apple’s peace offering to iOS app developers that also promises to loosen restrictions on how they can communicate with their customers — is headed for approval by U.S. District Judge Yvonne Gonzalez Rogers.

"As it stands, it seems to me like a fair and good settlement,” Gonzalez Rogers said Tuesday, telling attorneys over videoconference that she anticipates giving it preliminary approval.

The agreement arises from an antitrust class action brought by a group of iOS developers in June 2019 over App Store fees and practices that they say puts them at a disadvantage while protecting Apple's monopoly for iOS app and in-app-product distribution services.

It establishes a $100 million “Small Developer Assistance Fund” that will dispense sums from $250 to $30,000 for a class of about 67,000 developers who earned $1 million or less through the App Store between June 4, 2015, and April 26, 2021. It also locks in for three years a lower commission rate of 15% for in-app purchases that Apple announced earlier this year.

The settlement also “clarifies,” in Apple parlance, that developers can contact consenting customers through email or other information gleaned from their apps to tell them about ways to make purchases outside the App Store. Developers will still be prohibited from alerting customers to alternate payment methods inside the app, and the downloading and installation of apps from outside the App Store will remain forbidden.

Still, Richard Czeslawski, one of the lead plaintiffs and president of workout app maker Pure Sweat Basketball, called this provision “a big deal” in a statement, and also expressed appreciation for another aspect of the settlement that expands the number of price points developers can offer customers for subscriptions and in-app purchases. He said the added freedom “will give us greater flexibility in how we market and sell our workout subscriptions.” Apple’s current pricing tiers only allow developers to price their apps and products at tiers ending in $0.99.

At Tuesday’s hearing, Gonzalez Rogers asked how Apple intends to make good on another settlement pledge to improve app promotion and discoverability for small developers.

“It's not clear to me how you intend to measure this,” she said.

Attorney Steve Berman, partner with Hagens Berman Sobol Shapiro who represents the plaintiffs, said Apple recognized app visibility as an important issue in settlement discussions. “They believe it's in their interest to listen to the developers’ complaints and pledge their good faith in trying to make it more discoverable," he said. "We sincerely believe that they recognize the issue and want to fix it.”

Gonzalez Rogers said she was concerned that this promise to try harder would not be enforceable. “If it's not enforceable it's not really a benefit to the class,” she said.

Representing Apple, Gibson Dunn partner Mark Perry said that after sharing some of its algorithms and methods with plaintiffs' counsel during the settlement talks, Apple agreed to issue an annual transparency report that should give developers some data on search queries and results, as well as Apple’s process for reviewing apps.

“We didn't spell everything out in the agreement largely because frankly, it’s the secret sauce, but we did give the plaintiffs some visibility into that,” Perry said. The transparency report, he added, “will be year-over-year insight for the developer community into the operations, including search results. The goal here was really to provide more visibility. One of the things we heard from developers was the opacity of the process.”

This seemed enough to satisfy the judge, at least at this stage. “Before final approval, let's see what the transparency report is going to look like so we can evaluate the extent to which it provides meaningful information,” she said.

The developer settlement was announced just weeks before Gonzalez Rogers, who rendered judgment in a high-profile legal battle between Apple and Epic Games, issued an order enjoining Apple from restricting developers’ ability to add buttons and external links to their apps for payment options other than those offered by Apple.

That order accompanied her 180-page ruling in the case where Epic, the maker of the popular Fortnite video game, challenged Apple’s App Store policies and 30% commission rate as anticompetitive.

Gonzalez Rogers rejected the market definitions offered by both sides, Epic’s as one exclusively for distribution of iPhone apps and Apple’s as all-digital video games, in favor of her own definition — the market for digital mobile gaming transactions. But she also found that Apple's anti-steering rules prevented informed consumer choice, and thus “threaten an incipient violation of an antitrust law.”

Apple seeks a stay of this order, set to take effect Dec. 9, as the appeals wind their way through the Ninth Circuit.

Follow @MariaDinzeo
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