Apple's Phil Schiller Initially Opposed 27% App Store Fee on External Purchases

Apple Fellow Phil Schiller testified in court on Monday that he initially opposed the 27% commission Apple now charges on purchases made outside the App Store, citing compliance risks and potential developer backlash (via AP News).

Schiller, who oversees the App Store, said he had concerns that the fee would create an 'antagonistic relationship' between Apple and developers, and worried about Apple becoming 'some kind of collection agency' that might need to audit developers who didn't pay.

'I had great concerns about the collections of funds from developers,' Schiller said during his three-hour testimony in the ongoing legal battle with Epic Games. He specifically worried about 'the change in the role of the App Store to now an organization that needs to collect money from developers.'Despite his reservations, an Apple pricing committee that included CEO Tim Cook, former CFO Luca Maestri, and Apple's legal team ultimately decided to implement the commission structure.

The reduced 27% fee (down from Apple's standard 30%) was established after the 2021 Epic Games lawsuit ruling. Judge Yvonne Gonzalez Rogers rejected claims that Apple operated a monopoly. However, she ruled that Apple's anti-steering conduct was anti-competitive, and ordered the company to allow developers to link to alternative payment methods outside the App Store.

Apple complied by creating a system where developers can apply for a 'StoreKit External Purchase Link Entitlement' to direct users to external payment options. However, Apple still demands a 27% commission on these transactions made within seven days of clicking the link. For developers in Apple's Small Business Program, the rate is 12% instead of the usual 15%.

Epic Games CEO Tim Sweeney previously criticized Apple's approach as 'bad-faith' compliance with the court order, arguing the minimal commission reduction and other restrictions undermined the ruling's intent to foster more competition.

The current hearings are scheduled to continue until Wednesday, and are focused on determining whether Apple has violated the original court order. Judge Gonzalez Rogers has expressed frustration with Apple witnesses' hazy recollections about how they developed rules for the alternative payment system.

According to court documents, Apple extensively analyzed how the 'less seamless experience' of external purchases would affect transaction completion rates, which helped the company work out when developers would likely return to using Apple's in-app purchase system.

The dispute between Apple and Epic dates back to 2020 with Epic seeking to overturn Apple's App Store rules requiring content purchases within iOS apps to go through Apple, which takes a 15% to 30% cut of the revenue.Tags: Apple Antitrust, App Store, Epic Games vs. AppleThis article, "Apple's Phil Schiller Initially Opposed 27% App Store Fee on External Purchases" first appeared on MacRumors.comDiscuss this article in our forums