Apple is facing a billion-pound legal claim after being accused of breaking UK competition law by “overcharging” millions of people for software on its App Store. Apple Inc is facing a London lawsuit over claims it overcharged nearly 20 million UK customers for App Store purchases, yet another legal headache for the tech giant fighting lawsuits across the world.
The claim, brought by Dr Rachael Kent, a digital economist and a lecturer at King’s College London, calls for Apple to repay UK customers who it says have been overcharged because of the company’s practices, and damages of up to £1.5 billion being sought. Apple calls the lawsuit “meritless”.
Apple’s 30% standard fee is “excessive” and “unlawful” the claimants said in a press release Tuesday. The claim, filed at London’s Competition Appeal Tribunal on Monday, calls for the U.S. firm to compensate UK iPhone and iPad users for years of alleged overcharging.
According to the lawsuit’s details, Apple is being called out to compensate 20 million iPhone and iPad users in the U.K. for years of overcharging. If the lawsuit concludes with Apple found guilty, the iPhone maker will have to pay damages of up to $2 billion, and that is no pocket change. The case was brought forward by Dr. Rachel Kent, who is an expert in the digital economy and a lecturer at King’s College London.
“The App Store was a brilliant gateway for a range of interesting and innovative services that millions of us find useful, myself included. But 13 years after its launch, it has become the only gateway for millions of consumers. Apple guards access to the world of apps jealously, and charges entry and usage fees that are completely unjustified. This is the behavior of a monopolist and is unacceptable.”
“Apple is abusing its dominance in the app store market, which in turn impacts UK consumers,” Rachael Kent, the lead claimant in the case and a professor at King’s College London. She teaches the ways in which consumers interact and depend upon digital platforms.
The suit, described by Apple as “meritless,” was filed a week into a U.S. trial over Epic Games Inc.’s claims that Apple is running its marketplace like a monopoly, cheating developers and consumers. The separate UK claim is focused on the alleged harm caused to customers rather than developers.
“We believe this lawsuit is meritless and welcome the opportunity to discuss with the court our unwavering commitment to consumers and the many benefits the App Store has delivered to the UK’s innovation economy. The commission charged by the App Store is very much in the mainstream of those charged by all other digital marketplaces. In fact, 84% of apps on the App Store are free and developers pay Apple nothing. And for the vast majority of developers who do pay Apple a commission because they are selling a digital good or service, they are eligible for a commission rate of 15%.”
As stated in the above quote, Apple lowered its App Store fee to 15% from 30% for developers who produce as much as $1 million in annual revenue from their apps and those who are new to the store.
The legal challenges come as Apple faces a backlash — with billions of dollars in revenue on the line — from global regulators and some developers who say its fees and other policies are unjust and self-serving. Last month, the European Commission sent a statement of objections to the firm, laying out how it thinks Apple abused its power as the “gatekeeper” for music-streaming apps on its store.
“We believe this lawsuit is meritless and welcome the opportunity to discuss with the court our unwavering commitment to consumers and the many benefits the App Store has delivered to the UK’s innovation economy,” Apple said in an emailed statement.
“The commission charged by the App Store is very much in the mainstream of those charged by all other digital marketplaces,” Apple said. “In fact, 84% of apps on the App Store are free and developers pay Apple nothing. And for the vast majority of developers who do pay Apple a commission because they are selling a digital good or service, they are eligible for a commission rate of 15%.”
The suit alleges that Apple deliberately shuts out potential competition and forces ordinary users to use its own payment processing system, generating unlawfully excessive levels of profit for the company.
The claimants say any UK user of an iPhone or iPad who purchased paid apps, subscriptions or made other in-app purchases since October 2015 is entitled to compensation. They estimate that Apple could face paying out in excess of 1.5 million pounds.