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Apple ordered to comply with court's decision over in-app payments in Epic Games case

·5-min read

A federal judge has ruled that Apple can't push back the deadline to update App Store policies, as previously ordered in the court's decision on California's Epic Games v. Apple lawsuit. Though Apple largely won that lawsuit when the judge declared that Apple was not acting as a monopolist as Epic Games had alleged, the court sided with the Fortnite maker on the matter of Apple's anti-steering policies regarding restrictions on in-app purchases. The court's original ruling stated that Apple would no longer be allowed to prohibit developers from pointing to other means of payment besides Apple's own payment systems, but Apple wanted that decision put on hold until its appeals case was decided -- a delay that would have effectively pushed back the App Store changes by a matter of years.

Specifically, the September 10, 2021 ruling issued by U.S. District Judge Yvonne Gonzalez Rogers on the Epic Games antitrust case had ordered Apple to no longer stop developers from:

… 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.

The court also said Apple couldn't prevent developers from communicating with customers through points of contact obtained voluntarily from customers through their account registration within the app.

Apple in October officially updated its App Store rules to address developers' ability to communicate with their users, as that change was also a part of its settlement with a group of U.S. developers in a class action lawsuit over the same matter. However, upon its appeal of the Epic Games lawsuit, Apple asked for a stay on the injunction Judge Gonzalez Rogers had put into place that would open up the App Store to non-Apple payment systems.

Per the ruling, the required App Store policy changes had an early December deadline, as the judge ordered the injunction to be implemented within 90 days of the September 10 ruling. That meant, if Apple wasn't granted this stay on the injunction, it would have to permit developers to point to alternative means of payment inside their iOS apps.

During a November 9 hearing to hear arguments both for and against the stay, Apple's legal counsel argued that the changes Apple was being forced to implement would "upset the platform."

"They will harm consumers. They will harm developers. That is the fact. It is going to happen," said Gibson, Dunn & Crutcher partner Mark Perry, a lead lawyer for Apple on the Epic Games case. He reiterated Apple's position that allowing links inside apps could introduce security and privacy risks into the iOS ecosystem.

Epic Games' counsel, Gary Bornstein, pointed out that Apple said during the trial that its first-party payments platform competed with web payments. It can't turn around and now say that raising consumer awareness about this competitive alternative would now cause "irreparable harm." He added, too, that Apple shouldn't be left to sort out the changes on its own as, so far, many of the steps Apple has taken to open up the App Store were in response to either class action lawsuits or legislative and regulatory developments. Apple disagreed, pointing to other pro-consumer changes it has made, like the App Store privacy labels.

Ultimately, the judge ruled today that Apple failed to successfully argue its case for a stay and denied the motion.

"In short, Apple’s motion is based on a selective reading of this Court’s findings and ignores all of the findings which supported the injunction, namely incipient antitrust conduct including super competitive commission rates resulting in extraordinarily high operating margins and which have not been correlated to the value of its intellectual property," wrote Judge Gonzalez Rogers. "This incipient antitrust conduct is the result, in part, of the anti-steering policies which Apple has enforced to harm competition."

Reached for comment, Apple said it intends to try again.

"Apple believes no additional business changes should be required to take effect until all appeals in this case are resolved. We intend to ask the Ninth Circuit for a stay based on these circumstances," an Apple spokesperson said.

Epic Games didn't have any immediate comment.

The court's decision, if upheld, could have a significant impact on the App Store's business model, as developers looking to skirt Apple's commissions would be able to point their users to other payment methods when the policy is updated. The fallout from the decision could cost the company billions, depending on how many developers take up the opportunity and how many consumers decide to pay outside the App Store.

Already, some in the market were moving forward to capitalize on that potential change before the policy had been officially revised.

For example, Paddle, a solutions provider for subscription businesses, announced rather prematurely it would introduce a new in-app purchasing system aimed at iOS developers that would allow a drop-in replacement to Apple’s own payments system as soon as the injunction went into effect. (A full replacement for Apple’s in-app purchase system wouldn’t be permitted, however, only external links.) Facebook, meanwhile, just rolled out a system for direct creator payments bypassing the App Store. This system was technically permitted because Facebook isn't taking a cut of creator revenues for the time being. But with a decision that permits other payment mechanisms, that system could change in the future opening up a new revenue stream for the social network.

It's unclear how exactly Apple will rewrite its rules to comply with the court's decision if it's not able to convince the court to grant its motion. When South Korea issued a new law also requiring app stores to allow for other payment mechanisms, Google complied while adjusting fees, but Apple said its current policies were in compliance due to how the law was written.

The court reminded Apple it had 90 days to comply with the injunction per the original ruling and still has approximately 30 days before it goes into effect.

gov.uscourts.cand.364265.830.0_8 by TechCrunch on Scribd

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