Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Apple Goes on App Store Defense

By Evan Niu, CFA - May 29, 2019 at 3:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Meanwhile, a former employee speaks out.

Regulatory scrutiny of Apple's ( AAPL -1.17% ) App Store has been intensifying in recent months, in part due to a formal complaint by rival Spotify to European regulators earlier this year, which alleged that Apple engages in anticompetitive behavior. Dutch regulators have now opened an antitrust probe to investigate the allegations. The fundamental criticisms -- that Apple derives unfair advantages by competing on its own platform, while undercutting competition by taking a 15% to 30% cut of sales -- aren't exactly new.

Rather, the chorus of disgruntled third-party developers that compete with Apple has only grown louder over time. As Apple launches more and more services, the list of developers that become rivals is only going to grow, too. In a major legal blow earlier this month, the U.S. Supreme Court ruled that consumers can sue Apple for antitrust violations. The Mac maker is now going on the defense.

Examples of App Store cards showcasing different apps and content

Image source: Apple.

Just because competition exists doesn't mean it's fair

Apple has now put up a webpage about the "Principles and Practices" of the App Store in an effort to justify how it operates the digital storefront. The Cupertino tech giant notes that distributing apps exclusively through the App Store allows it to maintain high standards for privacy, security, and content. Regarding those aspects of mobile app distribution, Apple is worlds above Android and its Google Play store, where malicious malware apps are regularly discovered, undermining trust in the Alphabet subsidiary's mobile platform.

Apple also points to the massive app economy that it has helped create, having paid out a cumulative $120 billion to developers to date since opening the App Store's digital doors in 2008. There are now 20 million registered Apple developers, and the company says the app industry has created over 1.5 million jobs in the U.S. and around 1.6 million jobs in Europe.

"We believe competition makes everything better and results in the best apps for our customers," Apple says before pointing to numerous categories where third-party developers compete with Apple's own first-party apps. However, that oversimplifies the controversy.

There is no doubt that competition exists. The issue is how Apple competes with third-party developers and whether or not the playing field is level. Apple's apps and services enjoy deeper levels of integration throughout iOS, and third-party offerings typically cannot be made the default app for a particular function. Apple regularly violates various guidelines that third-party developers must abide by and isn't burdened with having to pay out 15% to 30% to a middleman.

Apple's "complete and unprecedented power"

Separately, Philip Shoemaker, the former head of App Store approvals, sat down with Bloomberg's Mark Gurman to discuss the controversy. Shoemaker was in charge of the team that reviewed and approved apps from 2009 to 2016, and he expressed concerns that Apple was indeed undermining competition. "There is now a conflict as Apple goes into these spaces that are ripe with competition," Shoemaker told the outlet. "I'm really worried about the competition."

Shoemaker had previously penned a Medium blog post in March after Spotify filed its complaint, making various policy suggestions on how Apple could address the criticisms. "With the App Store being the only way to install apps onto your iPhone and iPad, Apple has complete and unprecedented power over their customer's devices," Shoemaker wrote. "The decisions they make with regards to third party apps needs to be above reproach, and currently are not."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$161.84 (-1.17%) $-1.92
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,840.03 (-0.68%) $-19.29
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,850.41 (-0.87%) $-25.12
Spotify Stock Quote
Spotify
SPOT
$228.80 (0.11%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.