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Australian app developers are joining a class action lawsuit against Google and Apple, alleging the tech giants abused their market power by charging a 30 per cent commission for in-app purchases while blocking competitors from offering better value payment systems.
Legal proceedings initially began in mid-2022 through a consumer class action led by Melbourne-based law firm Phi Finney McDonald and funded by Vannin Capital, alleging the companies abused their market dominance to inflate prices by forcing developers to use their platforms, in turn inflating the cost of in-app purchases.
Last month saw the Federal Court of Australia allow the class action to include local app designers and founders who may have suffered loss or damage due to the conduct of Apple and Google.
The class action is being run jointly by Maurice Blackburn Lawyers and Phi Finney McDonald.
“Google and Apple are quite rightly facing increased scrutiny from regulators. And now this landmark case gives consumers and app developers the opportunity to stand up to these global tech giants and seek compensation,” Phi Finney McDonald principal Joel Phibbs said.
“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 class action principal Kimi Nishimura added.
The App Store, which Apple launched in 2008, offers roughly 1.8 million apps and is visited by half a billion people each week, while Google’s Play Store has around 2.6 million Android apps and has 2.5 billion-plus active users.
Both companies charge a 30 per cent commission for paid apps and in-app purchases on their respective app stores.
The fee has already caught the attention of the Australian Competition and Consumer Commission (ACCC), which is investigating its potential impact as part of its Digital Platform Services Inquiry interim report.
In the legal complaint, Phi Finney McDonald alleges both companies are able to charge commission rates “over and above what it would otherwise have been able to charge in a competitive market.”
The class action also alleges that Apple makes 55 per cent of smart phones sold in Australia, with the rest running on Google’s Android system.
In early 2021, Apple launched a Small Business Program, reducing the commission to 15 per cent for companies earning up to USD$1 million (AUD $1.5 million) per annum.
“Apps have taken on new importance as businesses adapt to a virtual world during the pandemic, and many small businesses have launched or dramatically grown their digital presence in order to continue to reach their customers and communities,” Apple said at the time of the announcement.
“The program’s reduced commission means small developers and aspiring entrepreneurs will have more resources to invest in and grow their businesses in the App Store ecosystem.”
In August 2021, Apple settled a class action in the US and allowed app developers to use alternative payment systems.
An estimated 67,000 developers were involved in the lawsuit, which was resolved after the tech giant agreed to pay USD$100 million (AUD$150 million) as part of a settlement.
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