‘Egregious’: Apple, Google facing class action suit over fees

Australian app developers and designers are taking on the tech giants in Federal Court.

Australian app developers and designers have joined a consumer class action suit alleging Google and Apple abused their market power by charging 30 per cent commissions for in-app purchases, and forced up prices by not allowing competitors to offer alternate options.

The Federal Court last month ruled a class action against the California tech giants could be expanded to include local app developers and founders who may have suffered loss or damage due to Apple and Google’s conduct.

The class action is being run jointly by Maurice Blackburn Lawyers and Phi Finney McDonald, and alleges that the tech giants’ conduct breached Australian Consumer Law by taking advantage of their dominant market positions in requiring developers to enter non-negotiable contracts that the tech giants could unilaterally amend.

“This case is about an egregious misuse of market power by each of Apple and Google, which should result in significant compensation being paid to app developers and consumers,” Maurice Blackburn’s class action principal Kimi Nishimura said on Monday.

The joint class action alleges Apple makes 55 per cent of smartphones sold in Australia, with the rest running Google’s Android operating system.

The tech giants’ 30 per cent fee has already raised the ire of the Australian competition and consumer watchdog, which is examining the issue and others as part of its five-year digital platforms inquiry.

“Google and Apple are quite rightly facing increased scrutiny from regulators,” Phi Finney McDonald Principal Joel Phibbs said.

“And now this landmark case gives consumers and app developers the opportunity to stand up to these global tech giants and seek compensation.”

Google and Apple were contacted for comment.

The joint class action alleges Apple makes 55 per cent of smartphones sold in Australia, with the rest running Google’s Android operating system. Picture: Rafael Henrique/Getty Images

The class action is one of a flurry of moves locally and internationally against Apple and Google’s app store fees.

In 2020 Fortnite maker Epic Games sued Apple in Australia’s Federal Court, with a court date now set for 2024. And last year in the US, Apple settled a class-action lawsuit in a result that allowed app developers to implement their own payment systems outside of Apple’s App Store. The tech giant also agreed to pay a $US100m settlement as part of the US suit brought by around 67,000 developers.

Apple takes a 30 per cent cut from app developers who make over $US1m through the ‌App Store‌ on an annual basis, but for small developers who make less, Apple has cut its fees to 15 per cent through the Small Business Developer Program. Google takes a 30 per cent cut on one-time purchases and for the first year of subscription payments.

“The duopoly in the market for mobile OS and the significant barriers to entry and expansion provide each of Google and Apple significant market power in the supply of mobile operating systems in Australia,” the ACCC wrote in a recent report as part of its probe.

Tesla chief executive Elon Musk has also been a fierce critic of Apple’s App Store fees, likening it to a “30 per cent tax on the internet” and that the commission is “literally 10 times higher than it should be”.

In a submission to the ACCC previously reported by The Australian, the Australian Investment Council said Australian app developers are essentially limited to using Apple and Google’s platforms for development of their products, to the detriment of both app developers and consumers.

“The Apple/Google duopoly ties developers to the business models of these companies for development, sales and distribution. As in any market where there is dominance by one or two companies, commissions, ownership rights and distribution models are controlled by those companies, leaving little choice for suppliers and consumers,” the submission reads.

“The Council recommends instances where market competition has been obstructed due to monopolisation are rectified and compensation is paid to the impacted app developers.”