Y Combinator Criticizes Apple App Store's Impact on Startups

Y Combinator Supports Epic Games in Apple App Store Dispute

Y Combinator has submitted a supporting legal brief – known as an amicus brief – in the continuing lawsuit between Apple and Epic Games.

The central argument presented by Y Combinator is that the App Store’s policies have actively hindered the growth and innovation of new businesses.

Background of the Legal Battle

This brief arrives amidst a protracted legal conflict. Epic Games initiated an antitrust lawsuit against Apple in 2020.

The lawsuit protested Apple’s practice of imposing a 30% commission on all transactions conducted through the App Store, including purchases within applications.

Epic Games further alleged that Apple improperly prevented developers from informing users about alternative payment methods outside of the App Store.

Court Rulings and Apple’s Response

Initially, a court mandated Apple to cease its anti-steering policies.

However, Apple responded by introducing a link program, permitting developers to direct users to alternative payment options, while still retaining a 27% fee.

Epic Games subsequently filed another complaint, asserting that Apple was violating the court’s injunction regarding anti-steering measures.

In April, the judge sided with Epic, issuing an order requiring Apple to remove restrictions on alternative payment solutions and refrain from collecting fees from them.

Y Combinator’s Position and Appeal

Apple is currently appealing this ruling, prompting Y Combinator to file its amicus brief in support of Epic Games.

Y Combinator is urging the court to reject Apple’s appeal.

“The ‘Apple Tax’ has historically discouraged venture capital investment in app-based businesses due to concerns about profitability,” Y Combinator stated in its filing.

A 30% revenue share can determine whether a company can expand, employ more staff, and reinvest in its product, or remains perpetually financially unstable.

Impact of the Current Ruling

With the current ruling allowing developers to openly offer alternative payment options, Y Combinator expressed optimism.

“For the first time in almost two decades, Y Combinator can genuinely contemplate investing in innovative ventures that were previously unviable due to the ‘Apple Tax’,” the filing explained.

The brief emphasized that the Apple Tax represents a “significant and often insurmountable obstacle to entry, suppressing competition and innovation.”

Y Combinator requests the court to uphold the anti-steering rule and deny Apple’s appeal.

Upcoming Arguments

Further arguments in the case are scheduled to take place on October 21.

Correction

A previous version of this article incorrectly stated that Y Combinator is an investor in Epic Games. TechCrunch has corrected this error and apologizes for the inaccuracy.

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