Apple Forced to Open App Store to Other Payment Methods

The judge in the Epic v. Apple lawsuit has issued a ruling in favor of Epic, forcing Apple to allow third-party developers to add app payment options that don’t cut Apple in for a percentage of the take. This is one of Epic’s major goals, and it means the company is now free to put in-app payment links in Fortnite.

The judge’s order states:

Apple Inc. and its officers, agents, servants, employees, and any person in active concert or participation with them (“Apple”), are hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registrations within the app.

Translation: Apple cannot force developers to cut Apple a share of their own profits via in-app purchasing mechanisms.

Apple is already attempting to spin this as a win, claiming that the Court “affirmed what we’ve known all along: the App Store is not in violation of antitrust law.”

While technically true, this reading avoids some nuance in the court ruling.

The judge opens her ruling by declaring that both Apple and Epic are wrong when it comes to defining the relevant market for Apple products. Epic, the judge notes, attempts to argue that Apple is a monopolist presiding over its own product ecosystem. Apple tries to argue that the iPhone and its own products compete with the entire digital market for video games. Both of these arguments are nonsensical — if Apple is a monopolist strictly for presiding over its own app ecosystem, so is every other high-tech company. Claiming that the iPhone competes with the likes of the Xbox, PC, and PS5 is similarly absurd.

After hearing testimony from both parties, Judge Yvonne Rogers ruled that both companies were wrong. The ruling declares that Apple competes in the digital mobile gaming transactions market, not gaming more generally. She finds that approximately 70 percent of all App Store revenue is generated by mobile gaming, which explains why Epic is so interested in bringing suit in the first place.

While the ruling does say that the Court “cannot ultimately conclude that Apple is a monopolist under federal or state antitrust laws,” it goes on to note that the trial did not consider other important questions of monopoly abuse such as barriers to entry or decreasing innovation. This is less a case of Apple being exonerated and more a situation where Epic did not prove its argument beyond a reasonable doubt.

The ruling states that Apple has absolutely engaged in anticompetitive behavior through its use of antisteering provisions and the associated illegal stifling of customer choice. “When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”

So does Epic get everything it wanted, and a quick trip back to the App Store in triumph? No. While Epic succeeded in its efforts to force Apple to open the App Store to alternative payment systems, Epic itself is still in breach of its valid contract with Apple and must pay damages. Specifically, Apple is entitled to 30 percent of the $12.1 million Epic collected from Fortnite players via Epic Direct Payment between August and October 2020, as well as 30 percent of revenue from such players between November 1 and the date of this judgment.

Apple also retains sole discretion over the content appearing on the App Store, which means it is under no obligation to allow Fortnite to return to the platform. Apple cannot prevent app developers from informing its customers that they now have the option to buy from directly within an app and it has 90 days to put the ruling into effect.

The ruling concludes:

Thus, and in summary, the Court does not find that Apple is an antitrust monopolist in the submarket for mobile gaming transactions. However, it does find that Apple’s conduct in enforcing anti-steering restrictions is anticompetitive. A remedy to eliminate those provisions is appropriate.

It seems unlikely that this ruling will be the final word on the topic. The judge leaves open the possibility that a fuller examination of the App Store’s impact on the market could demonstrate it acts as a monopoly, which is potential ground for further suits to examine. Epic also doesn’t get renewed access to the iPhone market. Court battles between huge companies can play out for a decade or more, so we may not have seen the last of this particular case or the issues it raises.

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