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Apple Inc. was dealt a blow Friday when a federal judge in the Epic Games Inc. case ordered an injunction that would allow developers to provide in-app purchases on the App Store, effectively bypassing commission fees of 15% to 30%. However, it was not ruled an antitrust monopolist.
Apple
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is “permanently restrained and enjoined from prohibiting 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 and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app,” federal judge Yvonne Gonzalez Rogers, who presided over the closely-watched trial in May, said in an 185-page ruling.
It wasn’t all bad for Apple on one crucial point. Gonzalez Rogers said, “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.” Epic was also ordered to pay damages to Apple.
Apple immediately spotlighted the latter opinion. “Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,” Apple said in a statement emailed to MarketWatch. “As the Court recognized ‘success is not illegal,’ Apple faces rigorous competition in every segment in which we do business, and we believe customers and developers choose us because our products and services are the best in the world. We remain committed to ensuring the App Store is a safe and trusted marketplace that supports a thriving developer community and more than 2.1 million U.S. jobs, and where the rules apply equally to everyone.”
Epic was not immediately available for comment.
Apple shares are down 2.5% in early afternoon trading Friday.
Market Pulse: Apple’s stock takes a dive to pace the Dow’s losers after report of unfavorable court decision
In the days leading to Gonzalez Rogers’ decision, Apple made a small concession — several developers and coalitions insist it was a “sham” — to smaller developers with a legal settlement on Aug. 19. Under the deal, agreed to allow app makers to direct their consumers to payment options outside the App Store, which could allow them to avoid paying fees of up to 30% that Apple charges developers for online purchases in iOS apps.
Indeed, in Friday’s ruling, the federal judge pointedly said, “Nothing other than legal action seems to motivate Apple to reconsider pricing and reduce rates.”
Read more: Apple will change its App Store practices in legal settlement
Epic sued Apple and Alphabet Inc.’s Google
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in separate lawsuits in 2020, claiming their influential app stores gouged developers with onerous commission fees of up to 30% and unfairly competed directly with similar apps of their own. The digital platforms, in other words, were in violation of antitrust law in the ability of smaller companies to compete with Apple and Google.
A long line of economic and technology experts testified on behalf of Apple and Epic during a contentious trial to set the future course for distributing and selling software on the internet, prompting a bipartisan bill in the U.S. Senate that takes direct aim at both computing giants.
While Epic awaits a trial vs. Google in federal court in 2022, the South Korean government passed a law that severely restricts the ability of Google and Apple to extract commission fees from developers.
At the same time, Apple made concessions to smaller developers in the days leading to Gonzalez Rogers’ decision. On Sept. 1, Apple said it would let app developers such as Netflix Inc.
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and Spotify Technology
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provide customers a link to create a paid account that sidesteps Apple’s in-app-purchase commissions of up to 30%.
The App Store update, part of a settlement with the Japan Fair Trade Commission, goes into effect globally early next year and applies to “reader” apps where users consume content that they have purchased elsewhere.
A few days earlier, as part of a proposed settlement of a 2019 class-action lawsuit from developers, Apple agreed to allow app makers to direct their consumers to payment options outside the App Store, which could allow them to avoid paying fees of up to 30% that Apple charges developers for online purchases in iOS apps.
