Apple faces £1.5 billion legal battle after being accused of 'overcharging' UK customers

11 May 2021, 10:27

Apple is facing a billion-pound legal claim after being accused of breaking UK competition law by "overcharging" millions of people for apps on its App Store.

The tech giant has been accused of deliberately shutting out the competition in the store and forcing people to use its own payment processing system, generating "excessive" profits for itself in the process.

The claim, which is being brought on behalf of potentially millions of UK Apple users, has been filed in the Competition Appeal Tribunal and calls for Apple to repay UK customers it says have been overcharged because of the company's practices, with damages of up to £1.5 billion being sought.

It says as many as 19.6 million UK users could be eligible for compensation.

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The claim argues that Apple's policy of forcing developers to use Apple's payment systems for in-app purchases and taking up to 30% commission on those transactions is unfair.

Apple is currently the subject of a court case in the US brought by Fortnite maker Epic Games, which has accused the iPhone maker of using the App Store and the 15% to 30% commission it takes on in-app purchases in that store as a way of stifling competition.

The UK collective action has been brought by Dr Rachael Kent, an expert in the digital economy and a lecturer at King's College, London, who claims that because the App Store is the only way to get apps on to an iPhone or iPad, it is acting like a monopoly.

"The App Store was a brilliant gateway for a range of interesting and innovative services that millions of us find useful, myself included," she said.

"But 13 years after its launch, it has become the only gateway for millions of consumers.

"Apple guards access to the world of apps jealously, and charges entry and usage fees that are completely unjustified.

"This is the behaviour of a monopolist and is unacceptable. Ordinary people's use of apps is growing all the time and the last year, in particular, has increased our dependence on this technology.

"Apple has no right to charge us a 30% rent for so much of what we pay for on our phones - particularly when Apple itself is blocking our access to platforms and developers that are able to offer us much better deals.

"Last year's US congress inquiry estimated that Apple's annual global revenue from the App Store is at least 15 billion dollars a year (£10.6 billion), but the company's costs for running the platform are just 100 million dollars (£71 million).

"Apple achieves this by slapping unjustified charges on its users. It would not be able to impose these exorbitant charges if competitor platforms and payment systems were allowed to compete on its devices.

"It is a clear abuse by Apple of the law and its own customers."

The claim says any UK user of an iPhone or iPad who purchased paid apps, paid subscriptions or made any other in-app purchases within the UK version of the App Store since October 1 2015 could be entitled to compensation over the firm's "anti-competitive practices".

There have been growing concerns raised about the App Store's policies in recent months.

In April, the European Commission charged Apple with abusing its dominant position in the music streaming market with App Store rules on in-app payments, following a complaint by Spotify.

Apple had previously begun taking steps to try to ease tension over the issue.

At the beginning of this year it halved the commission fee for smaller app developers on its App Stores, cutting the rate from 30% to 15% for those who earn less than one million dollars per year in sales generated through the store.

The technology giant has previously defended the App Store as an "engine of economic growth", creating jobs and other opportunities for developers.

In response to the legal claim, Apple said: "We believe this lawsuit is meritless and welcome the opportunity to discuss with the court our unwavering commitment to consumers and the many benefits the App Store has delivered to the UK's innovation economy.

"The commission charged by the App Store is very much in the mainstream of those charged by all other digital marketplaces.

"In fact, 84% of apps on the App Store are free and developers pay Apple nothing. And for the vast majority of developers who do pay Apple a commission because they are selling a digital good or service, they are eligible for a commission rate of 15%."