The Federal Court’s ruling that Facebook and Google’s app stores have engaged in anti-competitive practices should be a huge benefit for developers, media companies and brands that transact within their app stores.

Furthermore, it sends another marker that the Australian government is no longer willing to tolerate monopolistic behaviour by Big Tech at the expense of clients and consumers.

Federal court judge Jonathan Beach found that Google and Apple breached section 46 of the Competition and Consumer Act and had misused their market power to reduce competition. This included a “material” overcharge in the 15-30 per cent fees that Google and Apple charge to use their payment platforms.

He ruled that Apple had a “substantial degree of market power” because of the restrictions placed on in-app payment systems and the distribution of iOS-compatible apps. Google was also judged to have a “significant degree” of market power as the supplier of Android apps.

Yango’s GM of product and operations Robert Nagy told B&T that app developers have long complained about the “exorbitant” prices Apple and Google charge for using the app payment platform.

“It’s been a long time coming. It’s not the first kind of situation where this has come up and companies have complained about it, but they’ve been kind of forced to play ball because Apple and Google essentially have a monopoly over the app market,” he said.

“In short, [Apple and Google’s fees] takes a cut out of the pocket of emerging developers and especially those that create emerging solutions. So that leaves them with lower revenues, less budgets for things like marketing and advertising.

“This ruling should hopefully allow more developers and more emerging solutions to access the market, but also allow them to scale, grow and potentially engage broader marketing and advertising services on a higher basis.”

Nagy said ruling impacts apps that have in-app purchases or are paid for, either through a cover price or via a subscription fee.

In Judge Beacher’s ruling, he described the 15-30 per cent fees as “materially” higher than they would be if Apple and Google didn’t have monopolies over the Apple and Android app stores.

Google and Apple “strongly disagree” with the court’s ruling, arguing that they operate walled garden app stores to protect consumer privacy and data.
One industry set to benefit from the ruling is the media. Publications that are behind walled gardens often charge a subscription fee to access their content via an app.

Retrospective compensation

Future Media founder Ricky Sutton reckons media companies stand to claw back millions in revenue that they pay to Apple and Google though 30 per cent commissions.

As publisher advertising revenues continue to decline, app subscriptions have become an important revenue source for media companies, and Sutton believes this ruling could be a “game changer”.

“A lot of publisher subscriptions have come through app stores but all of these subscriptions have had this 30 per cent charge applied to them,” he said in a podcast with Maurice Blackburn lawyer Kimi Nishimura, who represented applicants in the court case.

“This creates a really interesting opportunity if publishers are able to sell direct and there is not a 30 per cent charge. It means that they could make their subscriptions cheaper or they keep them at the same price but make more money from those subscriptions. They could channel those subscriptions through their brown payment portals and manage the direct one to one relationship with readers.

Nishimura said that subscription fees were a key part of the court ruling that Apple and Google’s materially overcharged.

“The future state for the media and publishers should be brighter,” she said. “It should mean, subject to the court’s further findings on the overcharge, there should be some retrospective compensation for those that are eligible because of sales in Australia.”

Nishimura believes the ruling could “radically change the market” in terms of how publishers interact with their audiences, the control they have over app data, and the ability to shop around for in app payment solution providers that have been prohibited in the past.

On the developer front, Sutton reckons the ruling open the door to 100,000s of developers who have not had the ability to absorb the 30 per cent charge.

TrinityP3 founder and global CEO Darren Woolley believes the ruling will have a moderate impact for the advertising industry, mostly benefiting brands and publishers using apps as part of their customer experience. Nonetheless, it sends a strong message to Silicon Valley.

“The willingness of the court to enforce the anti-competitive laws on these enormous tech companies is a sign that competition is still highly valued and that monopolies and cartel behaviour will not be tolerated,” he said.

“There is a continuing trend for advertising and media to become dominated by key players globally, which will require the same commitment to competition by the courts and government to keep in check for marketers, media owners and agencies.”