Rate Expectations: Apple and the New Price Regulators
Competition policy is supposed to protect the competitive process, not do double-duty as price regulation. Yet the line between the two appears to be blurring in both a U.S. antitrust case and the European Union’s enforcement of the Digital Markets Act (DMA).
On Aug. 14, after years of litigation with Epic Games, Apple submitted a proposed commission structure to the U.S. District Court for the Northern District of California. Under the proposal, Apple would collect a 15% commission on purchases made through links from iOS apps and 10% on subscription renewals. Small businesses participating in Apple’s video, news, and mini-app programs would pay 5%.
Four days later, Apple announced new terms for developers in the European Union, following what the European Commission called a “close dialogue.” Apple would charge 26% on App Store sales made through its in-app purchase system, 20% when developers use an alternative payment processor within an app, and 15% on purchases made through external links. It would also impose a new 5% “Core Technology Commission” on apps distributed through rival marketplaces or the open web. Reduced rates of 15% and 10% would apply to small businesses, partner programs, and subscriptions after the first year.
The parallels are hard to miss. Both the U.S. and EU regimes ostensibly seek to protect competition, yet both pursue that goal by dictating the rates Apple may charge developers that rely on its platform and technology. That looks less like conventional competition enforcement and more like price regulation.
This raises several important policy questions. Are mobile ecosystems so uncompetitive as to warrant rate-setting, which is widely regarded as a policy of last resort? If so, do U.S. antitrust law and the DMA give courts and competition agencies the proper tools for the job?
The stakes extend beyond the distributional question of how Apple and Epic divide a fixed pie. Poorly designed price controls can weaken competition and innovation over time, ultimately harming the very consumers that enforcers ostensibly mean to protect.