Apple settlement lets app makers advertise outside payments

The new advertising policy will make it easier for developers to promote alternative pricing plans. PHOTO: REUTERS

LOS ANGELES (BLOOMBERG) - Apple settled a wide-ranging class action lawsuit with US app makers on Thursday (Aug 26), announcing changes to the App Store such as giving developers more flexibility to advertise outside payment methods.

The settlement will include US$100 million ($135.4 million) worth of payments to app makers ranging from US$250 to US$30,000 per developer, according to law firm Hagens Berman, which represented plaintiffs who claimed Apple overcharged them fees required for distributing their programs through the iOS App Store.

The new advertising policy, meanwhile, will make it easier for developers to promote alternative pricing plans and ways to pay - without Apple taking a cut.

Apple has long allowed developers to advertise external payment methods - such as Netflix pointing users via e-mail to sign up on its website instead of the app - but has frowned upon the practice.

The new policy ensures Apple cannot ban developers for these communications. It does not, however, let developers advertise outside pricing or payment methods within apps themselves.

The company is "clarifying that developers can use communications, such as e-mail, to share information about payment methods outside of their iOS app", Apple said in a statement.

Critically for Apple, the settlement excludes more significant App Store changes that were sought by some outside developers and legislators. The company is still requiring developers to sell their apps - as well as in-app items and subscriptions - using Apple's payment system, which takes between 15 and 30 per cent in commissions.

Apple reduced the cut to 15 per cent for all developers that generate US$1 million or less annually last year. On Thursday, it committed to continuing that policy for the next three years.

The settlement also does not require Apple to allow third-party app stores or the so-called sideloading of software. And the company does not have to further reduce its revenue share.

The accord will require approval from Judge Yvonne Gonzalez Rogers, who is overseeing this lawsuit. She is also the judge in Apple's lawsuit with Epic Games, which has contested the App Store policies as well. It is unclear if this settlement will affect her opinion in that higher-stakes suit.

Apple's App Store practices have come under increasing scrutiny in recent months, with critics saying the tech giant wields too much power in the industry. US Senators have griped about the "gatekeeper control" that Apple and Google have with their mobile operating systems, forcing the companies to testify before Congress.

South Korea is poised to become the first country to impose curbs on the companies' app marketplaces.

With Thursday's agreement, Apple said it would retain recent changes to the App Store search engine for the next three years. "At the request of developers, Apple has agreed that its search results will continue to be based on objective characteristics like downloads, star ratings, text relevance and user behavior signals," Apple said.

The Cupertino, California-based company is also expanding the number of price points developers can offer from fewer than 100 to more than 500, and it will publish an annual App Store transparency report.

That report "will share meaningful statistics about the app review process, including the number of apps rejected for different reasons, the number of customer and developer accounts deactivated, objective data regarding search queries and results, and the number of apps removed from the App Store", according to Apple.

The company plans to detail more information about its app review process on its website.

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