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Apple Must Allow Developers to Use Alternative Forms of In-App Purchases, US Judge Rules in Epic Case

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By Reuters | Updated: 11 September 2021

A US federal judge struck down some of Apple’s App Store rules on Friday, forcing the company to allow developers to send their users to other payment systems in a partial win for “Fortnite” creator Epic Games and other app makers.

But the judge did not require Apple to let app makers use their own in-app payment systems, one of Epic’s top requests, and allowed Apple to continue to charge commissions of 15 percent to 30 percent for its own in-app payment system.

Epic said it would appeal the ruling, with CEO Tim Sweeney tweeting that the ruling “isn’t a win for developers or for consumers.”

The outcome left Apple’s critics and rivals saying they are more likely to turn to legislators, rather than courts, to pursue the changes they seek.

US District Judge Yvonne Gonzalez Rogers described her ruling as requiring a “measured” change to Apple’s rules. Analysts said the impact may depend heavily on how the iPhone maker chooses to implement the decision.

Apple shares were down 3.2 percent late on Friday afternoon, but many Wall Street analysts maintained their long-term favorable outlooks on the iPhone maker.

“We suspect the eventual impact from this will be manageable,” Evercore ISI analyst Amit Daryanani wrote in a note to investors.

The ruling vastly expands a concession made to streaming video companies last week allowing them to direct users to outside payment methods. The decision expands that exemption to all developers, including the game developers who are the biggest cash generators for Apple’s App Store, which itself is the foundation of its $53.8 billion services segment.

The judge ruled that Apple can no longer bar developers from providing buttons or links in their apps that direct customers to other ways to pay outside of Apple’s own in-app purchase system. The ruling also said Apple cannot ban developers from communicating with customers via contact information obtained by the developers when customers signed up within the app.

The ruling comes after a three-week trial in May before Gonzalez Rogers of the US District Court for the Northern District of California.

Gonzalez Rogers stopped short of granting Epic some of its other wishes, such as forcing Apple to open the iPhone up to third-party app stores.

Apple said in a statement: “As the Court recognized ‘success is not illegal. Apple faces rigorous competition in every segment in which we do business, and we believe customers and developers choose us because our products and services are the best in the world.”

In a media briefing, Apple’s legal team said it does not believe the ruling forces it to allow developers to implement their own in-app purchase systems. Apple officials said the company is still debating how it will implement the requirements of the ruling and whether it will appeal.

The judge sided with Apple on key questions such as defining the relevant antitrust market as gaming transactions, rejecting Epic’s argument that the iPhone is its own app market over which Apple is a monopolist.

“Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers,” Epic’s CEO, Sweeney, said on Twitter. “We will fight on.”

The Epic lawsuit began after the game maker inserted its own in-app payments system in “Fortnite.

More Chalenges Likely

Challenges to Apple’s App Store rules are far from over. The ruling on Friday suggests they are more likely to play out in statehouses and capitals than in courtrooms.

Lawmakers in the United States and Europe are considering bills that would force Apple to allow third-party in-app payment systems, and South Korea’s parliament has already passed such a law.

“What today’s ruling also makes clear is that antiquated antitrust laws cannot solely be fixed by the courts,” Match Group, which has challenged Apple’s practices in Europe and owns the popular dating app Tinder, said in a statement. “Apple and Google’s monopolistic practices will only end when we bring our laws into the digital age, as South Korea did last week.”

Lawmakers in the US Congress said the ruling showed that courts alone will not address their concerns.

While Gonzalez Rogers did not find that Apple is a monopolist, she found that the trial showed Apple was violating California state competition and showed some “incipient antitrust violations” that required a nationwide remedy.

John Newman, a law professor at the University of Miami, said the ruling leaves open avenues for U.S. regulators to challenge Apple in court. Reuters has previously reported that the U.S. Department of Justice is probing the iPhone maker.

The orders follow Apple’s agreement last week with the Japan Fair Trade Commission, under which it eases rules for “reader” apps like Netflix Inc to provide a link to customers to sign up for a paid account outside of the app. Games are a larger portion of Apple’s sales.

But whether the ruling eats into that revenue depends on how Apple implements the changes.

“To some degree, Apple could make it so that its in-app payments are still the easiest to use,” said Ben Bajarin, head of consumer technologies at Creative Strategies.

Shares of Alphabet Inc, whose Google unit operates an app store for Android smartphones and which Epic is also suing on antitrust charges, were down 1.7 percent late on Friday.

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Apple vs Epic: Fortnite Maker Opposes Apple’s Effort to Pause Antitrust Trial Orders

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By Reuters | Updated: 23 October 2021

Fortnite creator Epic Games on Friday opposed Apple’s efforts to put on hold orders handed down in an antitrust trial as a potentially lengthy appeals process plays out.

US district Judge Yvonne Gonzalez Rogers in September struck down some of the iPhone maker’s App Store rules, including a prohibition on developers directing their users to other payment options beside Apple’s in-app payment system, in a partial win for Epic and other app makers.

Apple has until December 9 to comply with the injunction, but earlier this month the company said it will appeal the ruling and asked Gonzalez Rogers to put her order on hold as the appeals process, which could take more than a year, unfolds.

Epic on Friday argued in a court filing that Apple has not met the legal standard for that pause, which requires Apple show that it will be irreparably harmed by even temporarily complying with the order if the injunction is later reversed on appeal.

Epic said that Apple’s positive comments about the ruling shortly after it landed, and its delay in asking for a pause, showed that it would not be harmed by enacting the orders.

“The public interest favours denying (Apple’s request); an injunction is the only path to effective relief,” Epic wrote. “History shows … that in the absence of an injunction, Apple will not make any changes.”

Apple did not immediately respond to a request for comment.

A hearing on Apple’s request is set for November 9.

© Thomson Reuters 2021

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Apple Updates App Store Payment Rules to Allow Developers Contact Customers Directly

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By Agence France-Presse | Updated: 23 October 2021

Apple has updated its App Store rules to allow developers to contact users directly about payments, a concession in a legal settlement with companies challenging its tightly controlled marketplace.

According to the App Store rules updated Friday, developers can now contact consumers directly about alternative payment methods, bypassing Apple’s commission of 15 or 30 percent.

They will be able to ask users for basic information, such as names and e-mail addresses, “as long as this request remains optional”, said the iPhone maker.

Apple proposed the changes in August in a legal settlement with small app developers.

But the concession is unlikely to satisfy firms like Fortnite developer Epic Games, with which the tech giant has been grappling in a drawn-out dispute over its payments policy.

Epic launched a case aiming to break Apple’s grip on the App Store, accusing the iPhone maker of operating a monopoly in its shop for digital goods or services.

In September, a judge ordered Apple to loosen control of its App Store payment options, but said Epic had failed to prove that antitrust violations had taken place.

For Epic and others, the ability to redirect users to an out-of-app payment method is not enough: it wants players to be able to pay directly without leaving the game.

Both sides have appealed.

Apple is also facing investigations from US and European authorities that accuse it of abusing its dominant position.

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Tencent Says ‘Loophole’ Allowed WeChat Searches on Google, Bing

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By Reuters | Updated: 22 October 2021

Tencent’s WeChat has fixed a glitch that allowed some of its content to be searchable by external search engines, the owner of China’s most popular messaging app said on Friday, raising questions over regulators’ latest attempt to crackdown on the internet sector.

Some of WeChat’s content, including articles on its public accounts page, was briefly searchable in the last few days on Alphabet-owned Google and Microsoft’s Bing, but not on China’s dominant search engine Baidu, Reuters checks showed.

The change had prompted speculation that Tencent was heeding a call by Chinese authorities for its tech giants to tear down “walled gardens” in the country’s cyberspace which has come amid a wide ranging crackdown on the sector.

“Due to recent technological upgrades, the official accounts’ robots protocol had loopholes, which caused the external crawlers to scrape part of the official accounts’ content,” Tencent said in a statement in Chinese.

“The loopholes have since been fixed.”

Google, Microsoft, and Baidu did not immediately respond to a request for comment. Google is not available in China.

The ability to find WeChat content on Google and Bing was initially raised by users on developer forums. China’s internet sector has been long dominated by a handful of technology giants who have historically blocked rivals’ links as well as their search crawlers, a practice is often referred to as ‘walled gardens’.

In recent months, this practice has been targeted by Chinese authorities as part of a sweeping regulatory crackdown.

Last month, China’s Ministry of Industry and Information Technology (MIIT) ordered companies to stop blocking links, which they said has affected users’ experience and damaged consumer rights.

The MIIT has also been studying plans and conducting research to make WeChat content available on external search engines, according to a person with direct knowledge.

MIIT did not immediately respond to requests for comment.

Some users on China’s Twitter-like Weibo platform expressed dismay over Tencent’s comments.

“This should be an important attempt of creating an open internet space, how can you call it a bug,” said one user.

© Thomson Reuters 2021

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Snap Shares Plunge 25 percent as Apple Privacy Changes Hit Advertising Business

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By Reuters | Updated: 22 October 2021

Shares of Snap plummeted 25 percent on Thursday after the owner of photo messaging app Snapchat said privacy changes implemented by Apple Inc on iOS devices hurt the company’s ability to target and measure its digital advertising.

The Santa Monica, California-based company, which earns the vast majority of its revenue from selling digital advertising on the app, said the issue was compounded by global supply chain disruptions and labor shortages and caused brands to pull back on their advertising spending.

The results for Snap, which is the first of the major social media companies to report earnings, cast a shadow over Facebook and Twitter, which release third quarter results next week..

Snap’s results also knocked Facebook shares down 6 percent, Twitter down 7 percent and Alphabet fell 3 percent on Thursday.

The Apple privacy updates were rolled out broadly in June and prevent digital advertisers from tracking iPhone users without their consent.

A new ad measurement tool provided by Apple hampered the ability for companies to measure the performance of their ads, upending many of the ways advertisers have been accustomed to doing business for decades, said Snap Chief Executive Evan Spiegel during a conference call with analysts.

“This has definitely been a frustrating setback for us,” he said.

Snap added it expects the Apple privacy changes and global supply chain disruptions to linger through the fourth quarter, which is typically the highest-earning period for social media companies when brands ramp up marketing for the holiday season.

Many of the advertisers who place ads on Snapchat are in the beauty, fashion and consumer goods industries.

Snap said the supply chain disruptions affected a wide variety of advertisers across industries and regions.

Revenue for the third quarter ended September 30 was $1.07 billion, missing consensus estimates of $1.1 billion (roughly Rs. 8,000 crore), according to IBES data from Refinitiv.

Daily active users, a metric watched closely by advertisers and investors, rose 23 percent year-over-year to 306 million, beating analyst estimates of 301.9 million.

Snapchat has worked to attract and retain users by building new features like the ability to discover restaurants and stores through a map feature, or play virtual games with friends.

The net loss during the quarter was $72 million (roughly Rs. 540 crore), or 5 cents (roughly Rs. 4) per share, narrowing from $199.9 million (roughly Rs. 1,495 crore), or 14 cents (roughly Rs. 10) per share, in the year-ago quarter.

Snap forecast fourth quarter revenue between $1.16 billion (roughly Rs. 8,670 crore) to $1.2 billion (roughly Rs. 8,970 crore), and daily active users between 316 million to 318 million.

© Thomson Reuters 2021

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PayPal Said to Be in $45-Billion Bid for Pinterest

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By Reuters | Updated: 22 October 2021

PayPal has offered to buy Pinterest for $45 billion (roughly Rs. 3,36,770 crore), people familiar with the matter said, a combination that could herald more financial technology and social media tie-ups in e-ecommerce.

It would be the biggest acquisition of a social media company, surpassing Microsoft’s $26.2 billion (roughly Rs. 1,95,990 crore) purchase of LinkedIn in 2016.

The deal talks come as internet shoppers increasingly buy items they see on social media, often following “influencers” on platforms such as Instagram and TikTok. Acquiring Pinterest would allow PayPal to capture more of that e-commerce growth and diversify its income though advertising revenue.

PayPal has offered $70 (roughly Rs. 5,200) per share, mostly in stock, for Pinterest, one of the sources said. The online payments provider hopes to successfully negotiate and announce a deal by the time it reports quarterly earnings on November 8, the source added.

The sources cautioned that no deal was certain and terms could change. They asked not to be identified because the matter is confidential.

PayPal and Pinterest did not respond to requests for comment. Bloomberg News first reported on the companies’ talks on Wednesday.

PayPal shares fell 4.9 percent to close at $258.36 (roughly Rs. 19,330), while Pinterest shares jumped 12.8 percent to $62.68 (roughly Rs. 4,690).

“(The) combination would be a significant positive for PayPal’s ongoing monetisation initiatives on both sides of its merchant and consumer platforms, especially if Pinterest’s social commerce platform gets integrated with Honey’s AI into PayPal’s destination app,” Wedbush analysts wrote in a note.

The payments behemoth was among the big winners of the COVID-19 pandemic, as more people used its services to shop online and pay bills to avoid stepping out. Its shares have risen about 36 percent in the last 12 months, giving it a market capitalisation of nearly $320 billion (roughly Rs. 23,94,100 crore).

Pinterest was valued at about $13 billion (roughly Rs. 97,275 crore) when it went public in 2019. It also saw a huge spike in users looking for crafts and DIY project ideas, as lockdown curbs kept people at home.

As lockdowns eased, Pinterest has warned about slowing user growth, especially in the United States, its largest market. It has said it expects revenue growth mainly through deeper engagement with existing users rather than signing up new ones.

The market has valued Pinterest shares more cheaply than those of some younger social media platforms such as Snap but higher than more mature companies such as Twitter, according to Refinitiv Eikon valuation metrics.

PayPal’s offer represents a 26 percent premium to Pinterest’s closing price of $55.58 (roughly Rs. 4,160) on Tuesday and it is equivalent to 62 times the social media company’s earnings before interest, taxes, depreciation and amortisation over the last 12 months, according to Eikon.

By that metric, Microsoft paid 79 times LinkedIn’s earnings when it acquired it in all-cash deal. Pinterest, however, would be giving its shareholders some of PayPal’s stock, in a bet that this currency would appreciate over time over time as the combined company reaps revenue and cost synergies.

Pinterest is at a crossroads after co-founder Evan Sharp announced last week he would step down as chief creative officer to join LoveFrom, a firm led by Jony Ive, the designer of many Apple products.

Sharp founded the online scrapbook and photo-sharing platform in 2010 with Ben Silbermann, who is the San Francisco, California-based company’s chief executive officer, and Paul Sciarra, who left in 2012.

PayPal had been looking to boost its e-commerce offerings in recent years through acquisitions. It bought online coupon finder Honey Science in 2019 for $4 billion (roughly Rs. 29,920 crore) and Japanese buy-now-pay-later (BNPL) firm Paidy for $2.7 billion (20,195 crore) earlier this year. It acquired return-service provider Happy Returns in May.

Social media-driven commerce

Social media platforms that have not pursued mergers with fintech firms have been working on ways to allow consumers to buy directly from their platforms.

TikTok, for example, is testing a way for users to buy products directly on its short video app. It has partnered with ecommerce giant Shopify and in August began allowing retail brands to link their product catalogs to the app.

Analysts said the PayPal-Pinterest deal talks highlight the potential for other social media and fintech companies to join forces to capture swaths of the e-commerce market.

“Social/interactive commerce is growing in the United States and no one has won it yet. So rather than going against Amazon, PayPal is making a bet on a different kind of shopping model,” said Marketplace Pulse e-commerce analyst Joe Kaziukėnas.

© Thomson Reuters 2021

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WeChat Makes Content Searchable on Google and Bing

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By Reuters | Updated: 22 October 2021

Tencent’s WeChat has made its content searchable on some foreign search engines such as Alphabet-owned Google and Microsoft’s Bing, Reuters checks showed, in the latest tearing down of “walled gardens” in China’s internet sector.

Content from China’s most popular messaging app WeChat, including articles and videos on its popular public accounts page, a function similar to a news portal, has opened to external search engines, other than Tencent’s own Sogou search engine, in recent days.

Tencent, Google, and Microsoft did not immediately respond to a request for comment. Google is not available in China.

China’s Internet sector has been long dominated by a handful of technology giants who have historically blocked each others rivals’ links as well as their search crawlers. The practice is often referred to as ‘walled gardens’.

In recent months, this practice has been targeted by Chinese authorities as part of a sweeping regulatory crackdown.

Last month, China’s Ministry of Industry and Information Technology (MIIT) ordered companies to stop blocking links, which they said has affected users’ experience and damaged consumer rights.

The MIIT has been studying plans and conducting research to make WeChat content available on external search engines, according to a person with direct knowledge.

MIIT and Tencent did not immediately respond to requests for comment.

WeChat content however, is not yet searchable on Baidu, China’s dominant search engine, according to Reuters checks. Baidu didn’t immediately respond to a request for comment.

Citi analysts said in a Tuesday note that the potential “opening up of the social ecosystem to search engine” was a positive development for Baidu, as its “leading search gateway position has been weakened and diluted by the growth and dominance of super apps.”

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