Bringing an End to Apple’s Anti-Competitive Practices on the App Store: A Response to Völcker & Baker

Abstract

In April 2020, we published a paper titled “The Antitrust Case Against the Apple App Store.” Prompted by the growing antitrust concerns over various practices of Apple with regard to its App Store and in particular the obligation of certain app developers to use Apple’s proprietary payment system In-App Purchase (“IAP”) to accept user payments, the purpose of this paper was to discuss whether such concerns are (at least prima facie) valid, and if so, how they could be addressed under EU competition law. Based on a detailed analysis of the facts, we suggested several theories of harm and a set of remedies to address the concerns identified. Three months later, Sven Volcker and Daniel Baker published a detailed rebuttal of our initial paper, arguing there is no antitrust case against the Apple App Store and thus no need for remedies. We are grateful to Volcker and Baker for publishing their paper, as it is the first time a detailed defense of Apple’s App Store practices has seen the light of day. The fact that its authors advise Apple makes it particularly interesting as it may shed some light into on the stories told by Apple to regulators on both sides of the Atlantic. Volcker and Baker’s reply also allows us to revisit our paper to see how our arguments hold up against their criticism. In this paper, we show that while at first sight Volcker and Baker’s paper may appear as a convincing defense of Apple’s practices, one does not need to scratch much beneath the surface to find major flaws in their reasoning. In many instances the arguments they put forward are superficial and unsupported by evidence, misleading, self-contradictory, or simply factually inaccurate. For example, the authors’ discussion of market definition is extremely weak, as it is largely predicated on the view that app developers do not multi-home among Google Play and the App Store – a view countered by data and the Commission’s findings in Google Android. Another example is how Volcker and Baker assert most categorically that IAP is the “digital checkout” without which the App Store business model would collapse, while in reality there are technical alternatives to IAP. Volcker and Baker also fail to answer a very simple question we put forward in our first paper: if Apple charges app developers a commission for the value delivered by the App Store, then why is such commission levied only on 16% of apps in the App Store? All in all, Volcker and Baker regurgitate Apple’s one-sided narrative, whereby app developers taking issue with the 30% commission are nothing more but free riders. Needless to say, there is a tension between the authors’ view that app developers’ sole contribution to Apple is in the form of a 30% commission, and their view that third-party apps are so crucial to Apple’s device-based business model that it would never dare to exclude them. A series of recent developments, such as the European Commission’s decision to open formal proceedings against Apple, the antitrust lawsuit filed by Epic Games in the United States, and the announcement by the ACCC of its inquiry into app marketplaces, will hopefully shed more light on the issues discussed in our papers. We hope that our research on Apple’s App Store practices will inform the ongoing debate.