An Apple developer lawsuit filed back in 2019 has been settled after the Cupertino company agreed to pay $100M in compensation, and the court approved the deal – but the judge in the case has asked the lawyers to justify their $27M cut.

The antitrust case was brought by a number of small iOS developers, on the same basis as the separate case brought by Epic Games: that Apple has a monopoly on the sale of iOS apps, leaving them forced to give the iPhone maker a 30% cut …

Background

The single biggest antitrust complaint levied against Apple in multiple countries has been over the company’s complete control of the iOS app market.

Apple developer lawsuit

While the Epic Games lawsuit got all the attention, a smaller class action lawsuit on behalf of a number of smaller developers was also making its way through the courts.

Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store.

Companies like Epic Games argue that they should be allowed to sell in-app purchases without Apple taking a cut of their revenue. The argument here is that Apple harms developers by taking part of their income, and consumers by forcing developers to charge more to make up for Apple’s cut. Apple, in response, says that it is perfectly normal for a company to take a cut of the sales it facilitates.

Two things have happened since the Apple developer lawsuit was filed:

The lawsuit filed in the U.S. District Court for the Northern District of California in San Jose regards Apple’s allegedly anticompetitive practices in mandating only one app store for iOS devices, which sets the stage for Apple to abuse its market power […]

Today’s lawsuit seeks to force Apple to end its abusive monopoly and allow competition in the distribution of iOS apps and related products, to get rid of its pricing mandates, and to reimburse developers for overcharges made through abuse of its monopoly power.

  • The higher-profile Epic Games lawsuit ended with a compromise ruling.
  • Apple reduced its cut for 98% of developers from 30% to 15%.

This made the separate small developer lawsuit easier to settle.

Apple’s $100M settlement

Apple responded by proposing to establish a Small Developer Assistance Fund. This proposal was accepted, subject to court approval.

Developers were given until May 20 this year to submit their request for inclusion in the payout.

The Small Developer Assistance Fund created as part of the settlement will benefit over 99% of U.S. iOS developers, whose proceeds from app and in-app digital product sales through all associated accounts were less than $1 million per calendar year during the period from June 4, 2015 to Apr. 26, 2021. These developers can claim sums from the fund ranging between minimums of $250 to $30,000, based on their historic participation in the App Store ecosystem.

Law360 reports that the court has approved the settlement, but questioned the $27M lawyer’s cut. In particular, she wants to see the impact on the developer payouts.

It’s not unusual in class action lawsuits to see payouts in the tens of millions of dollars – but there are so many claimants that the actual amount received by most amounts to just a few dollars.

A California federal judge said Tuesday she’ll approve Apple’s $100 million deal resolving class antitrust claims by app developers, but told class counsel she wants more information about the “math” behind their $27 million attorney fee request and how much their fee bid will reduce claims by small app developers.

During a hearing in Oakland, California, U.S. District Judge Yvonne Gonzalez Rogers told class counsel Steve W. Berman of Hagens Berman Sobol Shapiro LLP, to submit a mathematical breakdown of how much each class member would receive if she awarded class counsel $25 million in fees instead of the $27 million they requested from the nonreversionary settlement.

The judge noted that for some developers, who she pointed out “really are the people who are taking the brunt of this,” the difference between $1,000 and $2,000 may be significant.

“That’s why I want to see the numbers,” she said.

The Small Developer Assistance Fund gave claimants a better deal than most, as it saw them receive payouts ranging from $250 to $30,000, depending on how active they were in the App Store.

However, the other factor to impact payouts is the fee charged by lawyers. Typically this is 25%, meaning that lawyers make tens of millions. This already seems crazily excessive for most cases, but in this one, they have demanded 27% – or $27M. It’s good to see a judge requiring justification for this sum.

Photo: Hunters Race/Unsplash