Apple reverses decision to charge businesses fees for events, but Facebook still isn't happy

Facebook Chairman and CEO Mark Zuckerberg testifies at a House Financial Services Committee hearing in Washington, October 23, 2019.

Erin Scott | Reuters

Facebook on Friday said Apple temporarily reversed its decision to take a 30% cut of transactions generated by small businesses hosting paid virtual events through the Facebook app. But although it's a temporary win for Facebook, the company still used the opportunity to frame Apple's App Store rules as harmful to small businesses during the Covid-19 pandemic and global recession.

Apple's reversal comes weeks after it blocked an update to the Facebook app that displayed a warning to users that a cut of transactions for paid events would go to Apple. At the time, Facebook said Apple would not make an exception to its rules to give the full amount of the transactions to the businesses hosting the events. Facebook already waived its cut through its Facebook Pay system, and Google agreed not to take its standard 30% cut of the transactions through the Android version of the app.

An Apple spokesperson told CNBC it reversed its decision on the Facebook event fees due to the pressures businesses are facing from the pandemic, and that Apple wants to give those businesses more time to adapt to digital business models. The spokesperson also said its App Store rule that requires the 30% cut to Apple does not apply to ticketing real-world events, only digital events, and Facebook has until the end of the year to implement in-app payments for real-world events. Airbnb and ClassPass also have until the end of the year to add the in-app payments for events, Apple said.

"The App Store provides a great business opportunity for all developers, who use it to reach half a billion visitors each week across 175 countries," Apple said in a statement. "To ensure every developer can create and grow a successful business, Apple maintains a clear, consistent set of guidelines that apply equally to everyone."

Facebook's announcement on Friday also takes a shot at Apple's App Store policies, claiming they're harmful to small businesses struggling amid a pandemic-fueled recession. The company said Apple only agreed to waive the fees until Dec. 31, and that paid events hosted by gaming companies will still be subject to the fees. The Apple spokesperson said the decision does not affect gaming companies because gaming businesses have not been hurt by the pandemic and have always been digital-only. Facebook said it will waive its transaction fees until at least August 2021.

"This is a difficult time for small businesses and creators, which is why we are not collecting any fees from paid online events while communities remain closed for the pandemic," Facebook spokesperson Joe Osborne said in a statement. "Apple has agreed to provide a brief, three-month respite after which struggling businesses will have to, yet again, pay Apple the full 30% App Store tax."

Facebook vs. Apple

Facebook executives have become increasingly critical over Apple's App Store rules, saying the company has an effective monopoly over how apps work across more than 1 billion devices in use around the world.

In an interview on CNBC's "Squawk Box" earlier this month, the head of Facebook-owned Instagram Adam Mosseri said Apple has "an immense amount of power" over its App Store and has control over how app-based businesses operate. Apple recently delayed a feature in its new iOS 14 software that would have made it easier for users to block companies from tracking their iPhone usage to gather data for targeted digital ads. Facebook warned that the feature would slow growth in its ad business and harm businesses that rely on Facebook ads.

"They can just decide we can't launch new apps at any given moment," Mosseri said of Apple. "We've seen a series of articles and even some lawsuits and their influence and power over developers over the last couple months." 

Facebook CEO Mark Zuckerberg made similar comments to employees during an all-hands meeting this summer, according to leaked audio of the meeting obtained by BuzzFeed. Zuckerberg said in the August meeting that Apple has "this unique stranglehold as a gatekeeper on what gets on phones" and that the company charges "monopoly rents" to app makers, according to the report.

Facebook also argued on Friday that Apple should allow users more control over default apps used on the iPhone for basic services like sending text messages. Apple's latest iPhone software update, iOS 14, has a new feature that allows you to select default third-party apps for web browsing and e-mail, but not other basic functions.

In an interview with The Information, Facebook's VP in charge of its Messenger app said the company has repeatedly asked Apple over the years to give iPhone users the option to select Messenger as their default messaging app, something Google already allows on Android devices. The call echoes antitrust complaints Microsoft faced in the late 1990s and early 2000s over the way it packaged its own default apps for web browsing and other key functions PCs in the Windows operating system.

But the irony in Facebook's recent criticism over Apple should not be lost: Facebook is also facing formal antitrust investigations from the Federal Trade Commission and nearly every state attorney general in the U.S., not to mention a slew of regulatory threats around the globe.

Everyone else vs. Apple

It's not just Facebook taking aim at Apple. Several other companies that build iPhone apps are also taking aim at the App Store fee policies.

The most high-profile case comes from Fortnite maker Epic Games, which sued Apple after Epic purposefully violated Apple's App Store policies by offering its own own payments system within the iPhone version of Fortnite. Apple removed the Fortnite app from the App Store, and the two are now locked in a legal battle over the decision.

On Thursday, a group of tech companies including Spotify, Match Group (which makes dating apps like Tinder), Epic Games and Basecamp announced the formation of a nonprofit group called the Coalition for App Fairness. The group's aim is to lobby for legal changes that regulate app marketplaces so they can't charge developers "unfair, unreasonable or discriminatory fees or revenue shares."

Two other tech giants, Microsoft and Google, have their own beef with Apple's App Store rules. Apple has blocked the two companies from launching their new streaming video game services on the App Store, arguing that each game included in the service should be submitted individually. But that goes against the very nature of the gaming services, which allows you to stream a library of console games in one app to your mobile device.

"This remains a bad experience for customers. Gamers want to jump directly into a game from their curated catalog within one app just like they do with movies or songs, and not be forced to download over 100 apps to play individual games from the cloud," a Microsoft spokesperson told CNBC earlier this month.

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