Why Apple Won Its Legal Settlement With Developers

Apple said Thursday that it had reached a legal settlement with app developers who accused it of abusing its control of the mobile-app market.

The settlement of the lawsuit was complex, and various people in the tech industry had widely different reactions to it. Apple and the people who sued it framed the deal as a major concession from Apple and a victory for developers. Some of Apple’s critics, including companies that pay it millions of dollars in app fees, called it a “sham” that did little to change Apple’s control over apps.

Here is an explanation of the settlement and what it means.

First of all, what is the controversy all about?

Courts, regulators, lawmakers and developers have been scrutinizing Apple’s practice of collecting a commission of up to 30 percent on the sales of other companies in its App Store, a business that generates, according to some estimates, nearly $20 billion a year for Apple.

Many companies that reach their customers through apps don’t want to pay Apple a hefty cut, and they are increasingly fighting to change the rules. Apple argues that its commission rewards it for creating the “economic miracle” of the App Store, and it is fighting to keep the status quo.

Billions of dollars are at stake in one of the most consequential fights over the power of Big Tech.

So what did Apple give up in the settlement?

Not much. It agreed to keep its commission rates flat for three years and to continue to base search results in its App Store on “objective characteristics” like downloads and user ratings, also for three years.

At a granular level, it said, it will let developers sell their apps at 500 different price points, up from 100. (For instance, now an app could charge $32.99 instead of $29.99 for a subscription.)

And it agreed to create a $100 million fund for small app developers. (More on this later.)

But what is receiving the most attention is a “clarification” in Apple’s rules: Companies can now send an email to customers telling them about ways to pay other than in their iPhone (or iPad) app.

Is that significant?

Apple says so. But it appears to be a minor change to a set of rules that are at the center of complaints about how Apple controls its App Store.

Apple forces companies to use its payment system inside their iPhone apps, which enables it to collect its commission on their sales. Most companies would prefer to direct customers elsewhere to complete transactions so they can avoid Apple’s fees. But Apple also generally bars companies from telling customers to pay elsewhere.

Apple has long banned such steering. It has also banned companies from even using emails to tell customers about other ways to pay if the companies got the customers’ email addresses from their iPhone app.

Now Apple is saying it is OK for companies to send such emails, if the companies get the customer’s permission to do so.

Some companies appear to have already been partly violating Apple’s rules. To avoid Apple’s commission, the music service Spotify, for instance, doesn’t allow people to sign up for a subscription in its iPhone app. Still, after someone creates a free account in app, Spotify emails a link to its website, where it advertises its paid accounts, though the email doesn’t explicitly tell users to circumvent Apple’s commission.

An Apple spokesman said companies, including Spotify, had complained for years about Apple’s restrictions on emailing certain customers.

David Heinemeier Hansson, an entrepreneur and app developer who is an outspoken critic of Apple’s rules, said in a post on Friday that opening a narrow route for companies to steer customers toward other payment options only gives Apple cover to defend its ban on such communication in the places that matter, like the transaction page in an app.