Microsoft believes it’s time for antitrust regulators to fully investigate Apple’s App Store. Speaking during a Politico interview this week, Microsoft’s chief legal officer Brad Smith outlined Apple’s walled garden approach to its App Store, and how it’s affecting competition.
“If you look at the industry today, I think what you’ll find is increasingly you’re seeing app stores that have created higher walls and far more formidable gates to access other applications than anything that existed in the industry 20 years ago,” says Smith. “They impose requirements that increasingly say there’s only one way to get onto our platform, and that is to go through the gate that we ourselves have created. In some cases they create a very high price for a toll, in some cases 30 percent of all your revenue has to go to the toll keeper if you will.”
While Smith doesn’t name Apple, Bloomberg confirmed with Microsoft that he’s referring to the App Store specifically.
Apple’s App Store
This week may go down in history as a turning point for Apple’s App Store. The iPhone maker has been caught up in an ongoing debate over its controversial decision to reject the new Hey email app. Apple initially approved the app, but later decided it broke App Store rules. Apple has been accused of acting like a monopolist and a bully by the chairman of the House antitrust subcommittee.
Apple’s decision has put a spotlight on Apple’s confusing App Store policies, just as the European Commission announced a formal antitrust investigation into the App Store and Apple Pay. It also comes just days before Apple’s annual WWDC developer conference, putting the company in an awkward position to host an event to entice developers to create apps for its platforms.
“I do believe the time has come, whether we are talking about Washington DC or Brussels, for a much more focused conversation about the nature of app stores, the rules that are being put in place, the prices and tools that are being extracted, and whether there is really a justification in antitrust law for everything that has been created,” says Smith.
Microsoft obviously has some experience and history with antitrust cases, after it was found guilty of monopoly abuses related to its bundling of Internet Explorer in Windows nearly 20 years ago. Microsoft was ultimately forced to open up Windows more to third-party developers, and it faced closer scrutiny on its practices for years. The European Commission went even further, ordering Microsoft to create a separate version of Windows without its bundled Windows Media Player and create a browser ballot for consumers to pick their web browser of choice.
Bill Gates speaks at an antitrust press conference in 1998 Photo by Porter Gifford/Liaison
The EU’s investigation into Apple’s App Store is still at an early stage, so it’s not clear what type of measures will be taken, but Microsoft is certainly sitting on the sidelines and encouraging action. Microsoft has faced its own issues with Apple’s App Store. The software maker attempted to launch its SkyDrive (now named OneDrive) app for iPhones back in 2012, but got locked in a battle over a 30 percent cut of revenue from purchases of cloud storage within the app. It was a minor scuffle that was a testing point for Microsoft’s launch of Office on iOS.
More recently, Microsoft has been battling to launch its xCloud game streaming service on iOS. The company has launched a preview version, but “to comply with App Store policies,” the app only includes a single game and is limited compared to the Android version. Microsoft hasn’t revealed exactly why xCloud is limited by App Store policies. Apple previously revised its App Store policies during WWDC 2018 to allow mobile apps like Valve’s Steam Link game streaming service, but both xCloud and Google’s Stadia have been unable to launch fully in the App Store.
Microsoft is finding it difficult to launch xCloud on iOS. Photo by Nick Statt / The Verge
While Microsoft has clashed with Apple over its App Store policies, it’s also benefited through various promotions for its apps in the App Store. Microsoft also appeared on stage at WWDC last year to promote Minecraft Earth, and the company has previously shown up at Apple events to tout Office improvements for iPhones and iPads.
Microsoft would benefit from a more open Apple App Store, both in terms of revenue and in how the company can design and launch apps. Microsoft has increasingly been embracing Android as the mobile equivalent of Windows, because of the many restrictions with iOS and Apple’s App Store policies. This Android investment has led Microsoft to partner more closely with Google and Samsung, and launch apps like Your Phone for Windows 10 that is barely functional when paired with an iPhone.
Apple is now doubling down on defending its App Store policies, but there’s a growing number of companies that are calling for change. Spotify led the pack with an antitrust complaint last year, and now Epic Games, Rakuten, Match Group, Microsoft, and others are making their feelings known. These calls will likely grow louder as the EU continues its investigations, but if there’s anything we know about Apple’s battles with European regulators it’s that it’s not afraid to fight back.