Apple agrees to let iPhone apps email users about payment options

Apple has conceded ground in the battle over app payments, agreeing to allow app developers to email users about alternative ways to pay other than the in-app payment system where the tech giant takes a cut of every purchase.

The concession announced late on Thursday, which does not allow developers to alert customers within the app itself, is part of a preliminary settlement of a nearly two-year-old lawsuit filed on behalf of iPhone app developers in the US.

It also addresses an issue raised by a US federal court judge who is expected to soon rule on a separate case brought by Epic Games, maker of the popular video game Fortnite.

Apple will also set up a $US100m fund that will pay thousands of app developers covered in the lawsuit sums ranging from $250 to $30,000.

App developers will get more flexibility to set different prices within their apps, expanding the options from about 100 to 500 choices.

Makers of iPhone apps had been forbidden to email users with information on how to pay for services outside the app. Through Apple’s in-app payment system, Apple can take between 15% and a 30% cut of each purchase.

The concession now opens one way for app developers to be more aggressive about encouraging their users to pay in other ways, so long as they get consumer consent.

The compromise also addresses a concern that US district court judge Yvonne Gonzalez Rogers repeatedly raised while presiding over the high-profile Epic-Apple trial.

She openly wondered why Apple couldn’t allow developers to display a range of payment options within their apps, much like brick-and-mortar retailers can show a range of different credit cards they accept in addition to cash.

Apple still isn’t allowing developers to use in-app notifications to prod consumers to explore different payment options. But just being able to email users to explain why they should pay outside the app is a breakthrough for developers who have complained about Apple’s commissions as a form of price gouging for years.

Richard Czeslawski, one of the app developers who filed the lawsuit that Apple is settling, hailed the freedom to email users as a “game changer”. App developers “will take fill advantage of this change in customer communications as a way to further reduce the commissions paid to Apple”, he said.

Earlier this year, Apple lowered its in-app commissions from 30% to 15% for developers with less than $1m in annual revenue – a move covering most of the apps in its store. As part of the settlement announced on Thursday, Apple is guaranteeing the lower commission for small developers will be extended for at least three more years.

But the lower commissions don’t help the largest app makers like Epic and Spotify, which are the leaders in a coalition trying to topple Apple’s so-called walled garden that prevents outsiders from offering other options.

Epic’s Fortnite game was kicked off both the Apple and Google app stores after bypassing their in-app payment systemss. Epic has since launched legal action and lodged complaints in the US, the UK, and Australia over the bans.

Regulators across the world have begun looking at ways to foster competition in the Google and Apple app marketplaces. Australian’s competition watchdog is considering regulation of the app stores, including making it easier for people to choose alternative payment options.

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