Apple Insists on Justification for 27% Commission on Non-App Store Payments — The Court Expresses Doubt

Philip Schiller, Apple’s Senior Vice President of Marketing, has testified in court that Apple’s 27% commission fee on app purchases made outside the app store is a legitimate attempt by the company to ensure compliance with the laws and a court mandate; as reported by Bloomberg.

Schiller, a key player in the development of the App Store, is the highest-ranking Apple executive to testify before District Judge Yvonne Gonzalez Rogers in California. The judge needs to decide if this new fee is consistent with her ruling from 2021, which stated that Apple should allow developers to provide links to cheaper payment options in their apps.

Schiller’s testimony took an hour and a half. He stated that he was one of the three top executives at Apple, alongside CEO Tim Cook and CFO Luca Maestri, who made the decision on the new commission rate. In response to a question from Epic Games representative Gary Bernstein, Schiller stated that he was not opposed to the inclusion of links to alternative payment methods, although he believes it would “deteriorate the user experience.”

Judge Gonzalez-Rogers expressed skepticism over the proposed 27% commission rate for payments made outside of the App Store. Carson Oliver, Apple’s senior business management director, explained that the company hired a consultancy firm, Analysis Group, to establish a new commission rate. The consultancy’s research identified 12.3% as the lowest possible commission rate. The judge questioned Apple’s justification for the extra 15% on top of this amount.

According to Oliver, the additional fee covers the suite of services Apple offers developers, such as app recommendation, distribution, development tools, and platform technology. It also accounts for user privacy, trust, and security, to which no other platform can compare. Oliver further clarified that Apple’s self-assessed lowest limit is 17%. The Analysis Group set the range by comparing Apple’s rates to commission fees on platforms like Microsoft, Google, Etsy, and Shopify. They recommended a commission rate between 12.3% and 92%, depending on the scale of the developer.

“And you take 27%”, interrupted the judge. Apple’s management contends that the effective commission rate is below this, Oliver responded. “But that’s an assumption. Your assumptions are just assumptions. There’s no data on that”, the judge clarified. “That’s not true”, Oliver countered. Schiller’s testimony will continue on May 22nd when the hearings resume.