Lost the first trial! Why is the “Apple tax” so controversial?
On May 29, China's first consumer lawsuit against Apple for monopoly was pronounced in the first instance. The court found that Apple clearly had a dominant market position in the Chinese software market, but did not abuse its market dominance, and rejected the plaintiff's complaint.
Dissatisfied with the 30% commission charged by Apple for “in-app purchases”, Apple mobile phone consumer Jin sued Apple and Apple Computer Trading Co., Ltd. to court on January 11, 2021.
According to the complaint, the plaintiff, as an Apple mobile phone consumer, discovered when purchasing iQiyi App, Ximalaya App, NetEase Cloud Music App and Douqiudi App membership services that the prices of these digital products on the Apple channel were higher than those on the Android channel. You need to pay a commission of 30% of the transaction amount to Apple, and you can only choose ApplePay for payment during the transaction, and it is not compatible with other payment methods such as Alipay or WeChat.
The plaintiff claimed that after users paid fees within the app, the fees first went to Apple International Distribution Co., Ltd., a third-party company controlled by Apple, which then divided the fees according to the share ratio with developers. Apple ensures that it deducts a 30% commission before distributing the remainder to developers. Developers then pass on the corresponding costs to consumers, causing harm to consumers' interests.
The plaintiff believed that Apple forced users to pay their money directly to a third-party distribution company controlled by Apple against their will, and implemented forced tying, restricted transactions and refusal of transactions. Apple was abusing its market dominance and injuring the company. In order to seek huge profits in the interests of consumers, the lawsuit was brought to court.
On the afternoon of May 29, the Hainan Intellectual Property Court issued a first-instance verdict on the case.
It is understood from the judgment that Apple argued in this case that after Apple International Distribution Company collects commissions, it will not directly transfer the commissions to Apple, but will only flow to Apple through dividend income. The collection and distribution of application transaction commissions in the China Apple App Store are independently completed by Apple International Distribution Company and have no direct relationship with Apple.
In addition, Apple said that the commission charged by the Apple App Store includes three levels. According to statistics from 2019 to 2021, the four apps involved are all free to download. For digital goods purchased within the apps involved, the Apple App Store also applies commissions at different levels. The commission charged by the Apple App Store is Reasonable compensation for the economic value that developers receive from the Apple Store is not an unfairly high price.
At the same time, Apple argued that Apple users can choose to complete application transactions with developers through various methods such as developer websites, mini-apps, e-commerce platforms, Alipay, WeChat, and bank cards.
Apple believes that it has not engaged in monopolistic behavior of unfairly high prices, forced tying, restricted transactions, or refusal to trade. The plaintiff’s petition has no factual and legal basis and should not be supported.
After the first-instance verdict, the plaintiff pointed out that it respected the verdict, but insisted that Apple's practice of levying the world's highest "Apple tax" in China and not opening third-party payment and third-party download channels was an abuse of market dominance. It infringes upon the right of choice and fair trade of Chinese consumers, increases the operating costs of Chinese enterprises, and damages the global competitiveness of China's Internet industry.
In addition, the plaintiff’s attorney stated that the case will be appealed to the Supreme People’s Court next.
It is understood that China is currently the country with the highest commission rate for Apple’s in-app transactions in the world, with a commission rate of 30%. In recent years, Apple has been prosecuted or investigated by governments in the European Union, the United States, Japan, South Korea and other places. The "Apple tax" in the European Union has dropped significantly since March this year.
According to statistics from Sensortower, a third-party data statistics agency, the "Apple tax" will generate approximately US$22.34 billion in global revenue in 2023, equivalent to RMB 160.8 billion, and China is Apple's second largest revenue source and third largest revenue source in the world. region, this figure is more than 40 billion yuan.
Many people in the industry believe that China has a huge number of Apple users and the competition in the digital market is relatively fierce. Its "Apple tax" standard should be equal to that of major overseas markets, or even lower than some overseas markets. Chinese consumers' relevant rights and interests expectations be better addressed and resolved.
It is understood that the “Apple tax” has become an important contributor to Apple’s total revenue. According to Apple’s financial report, Apple’s total revenue for fiscal year 2023 is US$383.3 billion, of which service business revenue is US$85.2 billion, accounting for 22% of total revenue. The gross profit margin of iPhone, iPad and other products is 36.5%, while the gross profit margin of service revenue reaches 70.8%, nearly twice that of hardware products.
