Developer Files Antitrust Suit vs. Apple Over 'Arbitrary' App Store 'Gatekeeping'

Apple’s “gatekeeping” of its App Store and “arbitrary decisions” hurt “honest developers,” alleged a Monday antitrust complaint (docket 5:24-cv-02698) against the iPhone maker in U.S. District Court for Northern California in San Jose.

Sarafan Mobile alleges Apple wrongfully terminated its developer account, causing recurring revenue losses of over $33,000 per month, plus “reputational harm to Sarafan and its stakeholders.”

When Apple terminates a developer’s account, “the developer has little recourse, and its business prospects are destroyed,” alleged the complaint. Apple developers face limited options with only two dominant platforms available -- the other being Google Play -- for developers to publish their apps. That makes access to the App Store a “critical component of any app developer’s market strategy,” said the complaint.

Sarafan’s Apple Developer Program (ADP) account was created in May 2022, allowing the company to distribute and market its apps to end users via the App Store, said the complaint. Sarafan “actively tackled spam issues on the App Store,” the complaint said, noting that the “high quality” of its apps makes them “frequently subject to imitation.”

When Sarafan’s Rolly app was copied in icon, name and screenshots, Sarafan worked with Apple to address the issue; the offending developer made necessary changes to its app, as a result, it said. Sarafan’s subsequent apps also “demonstrated strong user retention, reflecting both the quality of the applications and Sarafan’s commitment to excellence,” it said.

On Aug. 21, Apple’s App Store Review Team notified Sarafan that it was in the initial stage of a review “for dishonest or fraudulent activity” and that the plaintiff’s ADP account was “flagged for removal,” the complaint said. The complaint alleged Sarafan’s account was associated with “terminated developer accounts, or accounts pending termination,” in violation of the developer program license agreement (DPLA). The notice didn’t identity any developer accounts that had engaged in fraudulent activity, nor did Apple provide steps for how Sarafan could resolve the issue, it said.

Apple gave Sarafan 30 days to appeal the decision, without detailing evidence of misconduct that violated the DPLA, said the complaint. The plaintiff could submit a written statement explaining the identified issues, outlining steps to resolve them and offering additional information, but because Apple hadn’t identified specific issues, the Hong Kong-based company was unable to “respond effectively,” said the complaint; Apple initiated the appeal process nonetheless.

Sarafan CEO Viktor Seraleev received a denial Aug. 29 from Apple's app review board, again asserting that Sarafan had been involved in “dishonest or fraudulent activity,” said the complaint. The developer account remained suspended and all payments from the account were paused, it said.

Seraleev initiated another case with the review board on Sept. 7 and “meticulously outlined all the steps he had taken and planned to take to mitigate any potential violations of the DPLA, despite the absence of specifics from Apple," the complaint said. Steps included that Sarafan had previously “terminated a contract with a problematic marketing contractor, removed all rating requests from the apps, introduced subscription management directly within the app, and enhanced the transparency of in-app payments,” said the complaint.

On Sept. 21, Apple informed Seraleev that all of Sarafan’s apps would be removed from the App Store in a termination notice. The apps had 1,209 active trials and $33,680 in monthly revenue, said the complaint. On Nov. 1, Apple notified Seraleev of its final decision to deny the request to reinstate the ADP membership.

A Dec. 15 letter from Apple explained the basis for termination: that Sarafan’s developer account was associated with another of Seraleev’s developer accounts that had previously been terminated for allegedly publishing a spam app, the complaint said. Though Sarafan had evidence to refute the spam claim, “clarified that it adhered to Apple’s guidelines regarding auto-renewable subscriptions,” and “conscientiously avoided including any misleading content regarding payments and benefits,” Apple again denied Sarafan’s attempt to reinstate its account, the complaint said.

In late April, Seraleev learned that previous associates of his had registered a second company in Russia under the name Softeam-2, an account closed by Apple in October 2021. When Seraleev published his game under the Softeam-1 account, “Apple incorrectly flagged the activity as originating from a similar, but completely different entity -- Softeam-2,” the complaint said. Sarafan has no relationship to the Softeam-2 account, so it shouldn’t have been banned from the App Store, said the plaintiff.

Apple’s "unwarranted termination" of Sarafan’s ADP membership had -- and continues to have -- a devastating impact on Sarafan, alleged the complaint. Before the termination, Sarafan had secured $900,000 from angel investors but, afterward, “its valuation plummeted, and the company was not able to raise new capital,” it said. Apple “still refuses to admit that its decision, which was based on incorrect information and caused great financial harm to Sarafan, might have been in error,” it said.

Sarafan seeks declaratory relief that it didn’t violate any Apple agreements and “reinstatement of its developer account so that its business can survive,” said the complaint. The plaintiff asserts claims of breach of implied covenant of good faith and fair dealing, intentional interference with contractual relations and prospective economic advantage, negligent interference with prospective economic advantage, and violations of the Sherman Act and California’s Business & Professional Code.

Sarafan demands awards of compensatory and consequential damages of not less than $811,000 plus accrued and accruing interest, treble damages for Apple’s alleged federal antitrust law violations, pre- and post-judgment interest, attorneys’ fees and expenses, and an order barring Apple from conspiring to monopolize the App Store. Apple didn't comment Tuesday.