Regulators worldwide are debating how to rein in Big Tech’s dominance over app distribution. Tiffany Tsai and Chuyue Tian explore how Apple’s clash with China’s WeChat complicates standard assumptions about platform competition and what it might mean for the next wave of antitrust enforcement.
There has been a global attempt to foster greater competition in the mobile app distribution industry, which is dominated by the Apple App Store and Google Play Store. The United States Supreme Court recently refused to entertain a challenge to the decision demanding certain changes to Apple’s App Store policy. Apple continues to face antitrust scrutiny from the U.S. Department of Justice and the European Commission for exercising control over app creation and distribution, including requiring all developers to use Apple’s in-app payments service and imposing a 30% commission on those transactions. China recently joined the effort, signalling that it may launch its own antitrust probe for similar reasons.
However, exactly how antitrust regulators should intervene in these cases remains unclear. A recent study suggests that when app developers enjoy economies of scope by developing apps for multiple app distribution platforms (“multi-homing”), greater platform interoperability may prompt platforms to raise commissions in order to discourage app entry and development that could benefit their competitors. Imposing a price ceiling on platform commissions may also overlook the dynamic cost for platforms to build and maintain a secure ecosystem for apps to flourish. The optimal antitrust intervention may be case-dependent, requiring regulators to have a nuanced understanding of how platforms compete before stepping in.
This article examines the dispute between Apple and WeChat, a Chinese super-app that serves as an instant-messaging app while also offering a plethora of other services. We highlight three unique lessons that emerge from this dispute: (1) in Apple’s walled garden ecosystem, competition can still emerge without regulatory intervention due to the presence of super-apps; (2) the growing trend of developers staying exclusively on one platform (“single-homing”) and consumers multi-homing challenges the conventional wisdom that developers multi-home and consumers single-home in platform competition; (3) the security risks created by mini programs make the alleged better privacy and security of iOS device more likely to be a pretence.
Apple’s Walled Garden
Apple’s walled garden model is characterized by a closed ecosystem and strict control over app distribution and in-app purchases. All apps for iOS devices are exclusively distributed via Apple’s App Store. Apple claims that this closed platform offers enhanced security and data protection. With some exceptions (e.g., online shopping and ride-hailing services), all in-app transaction payments must first go through Apple before reaching the developer, allowing the company to charge a 30% commission fee. Apps that attempt to inform and steer consumers to third-party payment channels often risk being rejected or removed from the App Store for bypassing Apple’s security policies.
WeChat’s Mini Program
WeChat has nearly universal penetration among Chinese internet users. The app extends beyond instant messaging and payment to serve as a versatile super-app through its mini program feature. Mini programs are sub-apps or plug-ins that are integrated directly into WeChat, eliminating the need to develop separate iOS and Android versions. Mini program developers can also tap into built-in functionalities such as WeChat user accounts and WeChat Pay. This considerably reduces the cost of development compared to creating an independent app for iOS or Android. Thus, mini programs are particularly attractive to small developers offering simple services, such as booking and appointment systems for restaurants and hospitals.
Additionally, users can access mini programs without downloading them and can log in using their WeChat account without separate registration, saving them the hassle of installing and registering for multiple apps that they use only occasionally. As the pioneer super-app, WeChat maintains the highest number of monthly active users across Chinese app platforms that host mini programs and is the only app platform hosting games, the most profitable app category. During the COVID-19 pandemic, the Chinese government rolled out its own mini program for tracking individuals, underscoring the pivotal role of WeChat and mini programs in China.
Past Apple-WeChat dispute
Apple and WeChat have had several disagreements over how WeChat seemingly skirts Apple’s regulations. In late 2017, WeChat introduced a “reward the author” feature, allowing users to transfer money to creators of articles posted on WeChat. Apple claimed that these transfers constituted in-app-transactions and attempted to charge its standard 30% commission. WeChat disputed Apple’s claim and disabled the feature for all iOS users. The issue was eventually resolved in 2018, with Apple exempting these payments from the commission.
But the 2017 dispute was just the beginning. Although WeChat does not formally support in-app-purchases through third-party means on iOS, mini program developers can easily contact their users via in-program or WeChat messages, directing them to make payment through WeChat Pay. As WeChat does not charge a commission fee for its iOS users, it does not have a strong incentive to monitor developer-user communication about mini-program payment. As such practices became prevalent, Apple reportedly demanded WeChat to block mini program game developers from contacting users by disabling in-game messaging entirely. However, WeChat refused Apple’s request, prompting Apple to threaten to ban WeChat from its latest iPhone 16. Although this story is still unfolding, rumors suggest that the two have reached a revenue-sharing settlement for mini program revenue. Meanwhile, WeChat has already imposed an approximately 30% commission on in-mini-program purchases for Android.
Lessons from the Apple-WeChat dispute
The Apple-WeChat dispute offers new insights into the dynamics of platform competition, since it reveals how a super-app, i.e., WeChat, can develop its own walled ecosystem and compete with the incumbent, i.e., Apple.
- Super-apps curtail Apple’s power
First, even in the absence of regulatory intervention, Apple’s walled garden can still face competitive pressure from super-apps such as WeChat. WeChat’s mini-program ecosystem effectively functions as an alternative app distribution platform, directly competing with Apple for user downloads and developer listings. As of 2019, 6 out of the top 10 game mini programs were not offered on AppStore; social welfare services provided by many provincial governments, such as Guangdong and Hunan, are also offered exclusively on WeChat. Most of the WeChat-only software (e.g., poker and utility payment) imposes minimum system requirements, indicating WeChat’s appeal to small developers and governmental agencies. If WeChat allows mini-programs to offer in-mini-program purchases without subjecting these transactions to Apple’s commission, it will substantially erode Apple’s market share in app distribution and in-app transactions.
Although Apple could threaten to stop updating or delist WeChat from the App Store, it risks losing access to the Chinese market due to the country’s heavy reliance on WeChat. WeChat thus possesses the potential to compete in all aspects of app distribution with Apple. As other major apps like WhatsApp have also started hosting app-like services (e.g., chatbots for news and delivery) within those apps, super-apps may increasingly challenge Apple’s dominance in the app distribution market.
- Super-apps intensify platform competition for app developers
In the traditional platform competition analysis (e.g., Apple vs Google for app distribution), we assume that consumers single-home as they use either Android or iOS; most app developers multi-home on both platforms, rendering the two platforms complementary for developers. The Apple-WeChat dispute casts doubt on this paradigmatic conception. First, rather than being complements, Apple and WeChat are more likely to be substitutes for small developers who may find it too costly to develop apps for multiple operating systems. Raising commission in order to reduce app entry and development that could benefit the opponent platform (which can occur in the Apple-Google setting), may merely divert small developers to single-home in the Apple-WeChat competition. Instead, WeChat may charge a lower commission to incentivize small yet popular apps to remain exclusive, pressuring Apple to reduce its commission.
Second, while multi-homing is more difficult in the Apple-Google setting because users traditionally either use Android or iOS, it is much easier to multi-home in the Apple-WeChat setting because Apple users can simultaneously access some apps through WeChat. Consequently, more consumers may multi-home, making it less crucial for platforms (like Apple or WeChat) to attract consumers as they are likely to join anyway. Conversely, attracting app developers will become more important because they will want to divert multi-homing consumers to the platform charging lower commission. This leads to the theoretical prediction that platforms will compete more fiercely for the developers and impose higher fees on consumers. The Apple-WeChat dispute provides an opportunity to empirically examine this theoretical prediction.
- Security and privacy risks
Lastly, the security risks created by mini-programs may render the alleged better privacy and security of iOS a less tenable defense for Apple’s restrictive app distribution policies. Since WeChat independently controls the entry and content of mini-programs without Apple’s direct oversight, Apple cannot fully enforce its rigorous app review and security standards on content delivered through WeChat. In fact, the inability to review games hosted within the app was Apple’s reason for rejecting from its store Google Stadia, a streaming app that allows users to access video games hosted over the cloud. It is uncertain whether the dual-layered system enhances or undermines user security and privacy, given that WeChat’s mini-program development guideline is not as comprehensive as Apple’s. Apple has frequently cited privacy and security as key justifications for maintaining strict control over its walled garden ecosystem. However, given that WeChat’s less stringent security guidelines may allow developers to bypass Apple’s standards, this justification appears increasingly tenuous.
Conclusion
Overall, the Apple-WeChat dispute presents numerous facets of platform competition that are yet to be explored, including competitive constraints imposed by the super-app, the possibility of consumer multi-homing and new security risks posed by mini-programs. We expect this dispute to offer new insights into the digital economy which would be valuable for designing future competition policies.
Author Disclosure: The authors report no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
