Apple In-App Payments: Court Ruling in Epic Games Case

Apple’s App Store Policy Update Deadline Confirmed by Federal Judge

A ruling by a federal judge has denied Apple’s request to postpone the implementation of changes to its App Store policies, as mandated by the court’s decision in the Epic Games v. Apple lawsuit. Despite achieving a favorable outcome in the core of the case – where the judge determined Apple did not operate as a monopoly – the court supported Epic Games regarding Apple’s restrictions on in-app purchases and anti-steering policies.

Details of the Court’s Ruling

The court initially ruled that Apple could no longer prohibit developers from informing users about alternative payment options outside of Apple’s own system. Apple sought a stay on this decision, aiming to delay the changes until its appeals process concluded, potentially delaying implementation for several years.

The September 10, 2021 ruling, issued by U.S. District Judge Yvonne Gonzalez Rogers, specifically prevented Apple from:

• Restricting developers from communicating the existence of payment methods outside the App Store.
• Preventing developers from sharing contact information obtained directly from customers through in-app account registration.

Apple’s Response and Arguments

Apple had previously updated its App Store rules to allow developers to communicate with users, partially in response to a separate class-action lawsuit. However, the company appealed the Epic Games ruling and requested a stay on the injunction concerning non-Apple payment systems.

During a November 9 hearing, Apple’s legal team argued that implementing these changes would negatively impact the platform. They asserted potential harm to both consumers and developers, citing concerns about security and privacy risks within the iOS ecosystem.

Mark Perry, a partner at Gibson, Dunn & Crutcher and lead counsel for Apple, stated the changes would “upset the platform” and lead to negative consequences.

Epic Games’ Counterarguments

Epic Games’ counsel, Gary Bornstein, countered that Apple had previously acknowledged competition with web-based payment systems during the trial. He argued that raising awareness of these alternatives shouldn’t be considered harmful. He also emphasized that Apple’s App Store adjustments had largely been reactive to legal challenges and regulatory changes.

The Judge’s Decision

The judge ultimately denied Apple’s motion for a stay, concluding that the company’s arguments were based on a selective interpretation of the court’s findings. Judge Gonzalez Rogers highlighted the presence of “incipient antitrust conduct,” including high commission rates and substantial operating margins not directly linked to intellectual property value.

“This incipient antitrust conduct is the result, in part, of the anti-steering policies which Apple has enforced to harm competition,” the judge wrote.

Apple’s Future Plans and Epic’s Response

Apple stated its intention to appeal the decision further, seeking a stay from the Ninth Circuit Court. An Apple spokesperson indicated the company believes no additional changes should be required until all appeals are resolved.

Epic Games has not yet issued a public statement regarding the ruling.

Potential Impact on the App Store

If the decision is upheld, it could significantly alter the App Store’s business model. Developers could direct users to alternative payment methods, potentially bypassing Apple’s commission fees. This shift could result in substantial financial losses for Apple, depending on developer and consumer adoption rates.

Market Reactions and Emerging Solutions

Several companies are already preparing for the potential changes. Paddle, a subscription solutions provider, announced a new in-app purchasing system for iOS developers, designed as a replacement for Apple’s payment system. Facebook has also launched a system for direct creator payments, currently bypassing App Store fees.

Compliance and Future Outlook

The court has reaffirmed the original 90-day deadline for Apple to comply with the injunction, leaving approximately 30 days remaining. The method by which Apple will revise its rules remains unclear. The situation mirrors a recent law in South Korea, where Google complied with similar requirements while adjusting fees, while Apple maintained its existing policies were already compliant.