Apple’s $100M deal with developers gets preliminary OK

A federal judge advanced on Tuesday a $100 million settlement to resolve an antitrust class action by developers against Apple despite some concerns about the enforceability of a term in which Apple agreed to improve the ability of users to find high-quality apps.

One part of the deal is a policy change loosening Apple's control over the App Store and making it easier for developers to avoid the company's toll on all transactions made in its in-app payment system.

Under the settlement, Apple maintains most of the business practices that have been alleged to violate antitrust law. It will instead create a $100 million fund for small developers, whose proceeds from app sales were less than $1 million per year from June 2015 to April 2021.

Issuing preliminary approval, U.S. District Judge Yvonne Gonzalez Rogers in Oakland said the deal "seems, to me, a fair and good settlement."

Apple agreed to lift some restrictions on developers, including one prohibiting them from steering customers to payment methods through which they are not subject to a commission.

Prior to the deal, Apple's policies barred developers from using contact information obtained from users who signed up for their apps to inform them of alternate payment methods, which are sometimes cheaper because they are not subject to a fee.

Apple also committed to structural relief, including improvements in pricing freedom, app review and transparency in addition to preserving for three years the commission rate for small developers, which it cut last year from 30% to 15%

Gonzalez Rogers questioned some of the "generic statements" in the deal in which Apple agreed to "conduct robust experimentation to drive continuous improvement" in app discoverability to "give new and high-quality apps a chance to be found."

"It's not clear to me how you intend to measure this, or what Apple is really offering in terms of discoverability," she said.

Steve Berman, a partner at Hagens Berman Sobol Shapiro LLP and lead counsel representing the developers, responded that the language was intentionally left open-ended because Apple recognizes the issue and wants to fix it.

"It's not really enforceable," Gonzalez Rogers countered. "And if it's not enforceable, it's not really a benefit to the class other than your good faith."

Defense attorney Mark Perry, a partner at Gibson Dunn & Crutcher LLP, said specific terms were not included in the settlement but that counsel for the developers were given significant insight into the proprietary methods and algorithms Apple utilizes for app discoverability. He ensured that they will provide recommendations on improvements, which will be detailed before final approval of the deal is considered.

Gonzalez Rogers also asked about the low expected participation rate in the settlement, which experts predicted to be roughly 35%.

Berman replied that he disagreed with his expert's forecast and anticipates more developers will opt into the deal. He emphasized their robust monetary recovery.

A class of roughly 67,000 developers will be able to claim sums ranging from $250 to $30,000 based on their participation in the App Store, according to court filings.

At the start of the hearing, Gonzalez Rogers noted that the settlement was reached before her order was issued in Epic Games' antitrust challenge against Apple. She said, "Sometimes, settlements are made when the landscape remains uncertain and that's entirely appropriate."

The judge ruled in that case that Apple is not a monopolist, but its rules barring developers from directing users to avenues that allow them to bypass a commission on sales are illegal. The changes forced by her order were identical to the changes Apple agreed to in the settlement to resolve the class action from developers.

Gonzalez Rogers didn't consider a request for $30 million in attorney fees. Cameron v. Apple Inc., CV19-03074 (N.D. Cal., filed June 4, 2019).