A Canadian court challenge aims to break Apple’s App Store grip
A public interest group wants the Competition Tribunal to force Apple to open its devices to competing app stores and payment options in Canada
A consumer advocacy group is asking Canada’s competition court to break open Apple’s App Store, arguing that the tech giant’s tight control over what can and can’t be put on iPhones and iPads is causing significant harm to the digital economy.
“Apple’s abuse of dominance results in harm to competition in Canada, including by reducing quality and innovation among developers, and by increasing prices and reducing choices for consumers,” says the Dec. 18 filing by the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic (CIPPIC), a public interest advocacy group based at the University of Ottawa.
“Apple’s policies and practices [have] prevented the entry of competing marketplaces and competitors for the distribution of apps, and competing in-app payment services, which, in turn, would result in lower commissions and competitive options.”
Apple has long maintained that it needs to control which apps are allowed into its app store and therefore onto its devices for security and quality-control reasons.
But, in its filing with the Competition Tribunal, CIPPIC disputes that rationale and says the tight control is instead meant to allow Apple to maintain its dominant market share and charge app developers “supra-competitive” commissions – generally 30 per cent – as well as a cut of all in-app purchases made by users.
Developers are further restricted by Apple’s “anti-steering” provisions that prohibit them from informing users of alternative payment options that allow them to circumvent the in-app cut, such as signing up for a subscription service on a website rather than through an app, for example.
CIPPIC is seeking leave with the Tribunal to argue the case, with the goal of seeking orders that would prevent Apple from requiring developers to distribute apps in Canada exclusively through its app store, and from imposing anti-steering demands.
The group is also seeking monetary damages equal to the benefits Apple has derived from its alleged anti-competitive conduct.
The application is the second to take advantage of new competition laws that came into force in June that allow private parties to bring abuse-of-dominance cases to the Tribunal on behalf of the public interest.
The first, filed right off the bat in June and covered in depth by Do Not Pass Go, was by Alexander Martin, an independent video game developer in Toronto, who is challenging Google’s dominance in search. (Story continues below)
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Back in June, Toronto-based independent game developer Alexander Martin – known as Droqen online – filed a lawsuit against Google, charging that the company was abusing its dominance in search by paying Apple billions of dollars to make its search engine the default on iPhones and iPads.
CIPPIC has previously requested that the Competition Bureau investigate Apple’s app store policies, but the enforcement body has yet to take action.
“This has been an issue that CIPPIC has been concerned with for years,” says CIPPIC general counsel David Fewer. “As soon as the government changed the legislation to allow for public interest claims to come forward on abuse of dominance, as soon as this was something that became available to us, we decided to go forward on it.”
Apple, which has not yet filed a response to the CIPPIC application and did not return a request for comment, is facing a host of legal and regulatory fights around the world over its app store policies.
Aside from a long-running case against Epic Games in the United States, the company lost a similar case in October in the United Kingdom, where the Competition Appeal Tribunal found it guilty of abusing its market power by overcharging app developers.
The Tribunal found this was having significant negative effects on the overall app economy, which regulators have estimated to account for about 1.5 per cent of the U.K.’s gross domestic product.
And last month, the Court of Justice of the European Union ruled that Apple can be sued for antitrust damages after a Dutch tribunal sought guidance on similar charges involving the app store.
Google is also facing similar challenges over its own mobile app store policies. Fewer says CIPPIC is limiting its action to Apple for now, though a successful case against the company could be relatively easy to apply to Google as well.
“Two giants at once at the Competition Tribunal, that seems beyond even mighty, mighty CIPPIC’s capacity,” he jokes. “I think this is a big enough case. One at a time.”
CIPPIC’s filing is supported by an affidavit from Kelli Fairbrother, the co-founder and chief executive of U.K.-based developer xigxag, which distributes audiobooks through its Apple app in a number of markets, including Canada.
Fairbrother outlines a host of problems xigxag deals with, including delayed payments and “damaging” commissions.
“A fair and balanced marketplace would mean that other software suppliers and vendors could compete for business on iOS without being constrained by terms and limitations that have been crafted by Apple,” she says in her affidavit. “xigxag’s position has been that just as the web economy is open to competition, the app economy needs to be open to competition.”
Jean-Marc Leclerc, a lawyer representing CIPPIC in its filing, says the group has encountered challenges in getting Canadian developers to speak out so far for fear of repercussions by Apple, hence the affidavit from a U.K.-based company.
“We spoke to several Canadian app developers, who agreed wholeheartedly with the proposed application, but were understandably reluctant to provide evidence,” he says. “Ms. Fairbrother has been vocal in her criticism of App Store practices in the U.K., which are equally applicable to the Canadian app store (indeed worldwide).”
As with Martin’s filing against Google, the Competition Tribunal must now decide whether it will hear CIPPIC’s case. Both are trailblazers in that they are abuse-of-dominance complaints being brought forward by third parties in the name of the broader public interest, rather than by self-interested businesses that are necessarily being harmed themselves by the alleged misconduct.
Legal experts are watching closely to see what threshold the Tribunal will establish in accepting – or not accepting – such cases in the first place. And, if these cases make it through the veritable door, what damages they may net when they’re all said and done.
Read CIPPIC’s filing here.
The silence from developers here lines up perfectly with the transcripts from the House Industry Committee. Witnesses repeatedly told MPs they could not complain about anti-competitive behavior without losing business. That is why the government updated the Competition Act via Bill C-59. It lets advocacy groups take legal action so the businesses relying on these big players do not have to risk their livelihoods. If the Tribunal allows this case to proceed, it confirms that we need third parties to fight these battles when the actual victims are too afraid to speak up.