Apple’s not going to be able to force app store developers to use its payment system for in-app purchases for the time being, thanks to a new court order coming out from Epic’s antitrust lawsuit against the company.
US Northern California District Judge Yvonne Gonzalez Rogers today ruled in the long-running Epic Games v. Apple that Apple has engaged in anti-competitive behavior violating California’s Unfair Competition Law, but stopped short of calling Apple a monopoly. This resulted in an injunction against Apple prohibiting the company from requiring developers to use its own in-app payment system, but also in a fee against Epic for breaching its contract with Apple.
This means that all your favorite mobile games (and even productivity apps) will be able to direct users to outside payment options for microtransactions or subscriptions, avoiding the 30% cut that Apple takes from its own system, which developers have had no choice to use until today. The injunction gives Apple 90 days to set this up, unless it a higher court gets involved.
“Apple has not adequately justified its 30% rate,” Judge Gonzalez Rogers wrote in her opinion on the case. While she acknowledged Apple’s arguments that the use of the app store and the access to Apple’s consumer base does justify a commission, she did not agree that the company adequately argued in favor of its high 30% cut.
While Gonzalez Rogers did not prevent Apple from continuing to charge 30%, she did write that “A remedy to eliminate those provisions [preventing developers from directing users to outside payment methods] is appropriate. This measured remedy will increase competition, increase transparency, increase customer choice and information while preserving Apple’s iOS ecosystem which has precompetitive justifications.”
At the same time, the judge also ordered Epic to pay at least $12 million in damages to Apple for breach of contract, and said “The court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws.”
Both companies are, of course, trying to spin the ruling in their favor. When we reached out to Epic for comment, the company pointed us to a tweet from CEO and founder Tim Sweeney stating that the ruling “isn’t a win for developers or for consumers,” but for “fair competition among in-app payment methods and app stores.”
Today’s ruling isn't a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers. https://t.co/cGTBxThnsPSeptember 10, 2021
Meanwhile, while Apple has yet to reply to us directly, the company today released a statement to press arguing that "success is not illegal" and that “Apple faces rigorous competition in every segment in which we do business."
Apple’s response to Judge’s ruling in Epic Case: pic.twitter.com/LeF4osdTQCSeptember 10, 2021
Apple and Epic have been embroiled in a lawsuit since August 2020, when Apple and Google both removed Fortnite from their respective app stores after Epic gave players a 20% discount for buying in-game currency directly through the Epic site as opposed to either the Apple or Google marketplaces.
This, of course, was to get around the 30% commission that both companies charged, and while it remained possible to install Fortnite to an Android device even after it was delisted from Google Play, this wasn’t the case on iPhones.
We can’t say for certain whether this ruling means that Fortnite will be returning to the App Store or even Google Play anytime soon. But like Sweeney’s tweet implies, the ramifications of this decision will probably affect the entire app store ecosystem. Larger games and apps might soon follow Epic’s lead in encouraging users to make payments through an outside system in the near future.
That could have devastating results for Apple’s profitability, with Bloomberg reporting that analysts attribute $20 billion dollars of Apple’s annual revenue to the App Store.
At the same time, apps may continue to use Apple’s system both to reduce user friction and encourage trust. An outside payment system would require users to navigate outside of the app, and smaller developers might also not be able to adequately convince users to give them their personal information.
This isn’t the end of Epic’s fight against Apple, however, as the company still has ongoing complaints registered with the UK, Australia and the EU. Further, Congress is currently debating a bipartisan bill that would rein in both Apple’s and Google’s “gatekeeper control” over their respective app stores. This bill was prompted by an April congressional hearing in which Spotify, Tile and Match Group all similarly complained about the revenue cuts they face on these platforms.
There’s also the question of appeals. NPR tech reporter Bobby Allyn has tweeted that an Epic Spokeswoman confirmed to him that Epic is appealing the decision despite the win for independent payment methods. He also said that Apple is “considering all legal options.”
Epic spokeswoman confirms it is appealing the decision; Apple is "considering all legal options" in response. Nobody's happy!September 10, 2021