Judge Yvonne Gonzalez-Rogers has handed Epic a major legal victory in its case against Apple and its illegal App Store policies: Apple can no longer require app developers to use its in-app payment system, nor can it prevent developers from communicating with their own customers.
In other words, common sense has prevailed.
“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 registration within the app,” the ruling reads.
The ruling is only part of the Epic v. Apple legal case, but it cuts right to the heart of Apple’s abuse of its market power. Effective December 9, 2021, developers will finally be free of the onerous 15 or 30 percent fees that Apple applies to all App Store purchases, and they will finally be able to communicate to their own customers about alternative payment options from outside the App Store ecosystem. Naturally, Apple will appeal this ruling, so the obvious and correct outcome could be delayed quite some time.
The court disagrees with both companies’ definition of the impacted market, defining it as that for “digital mobile gaming transactions” and not for just gaming or for Apple’s operating systems. This market, the court found, is worth $100 billion annually, and most of that comes from games, not mobile apps.
“On a revenue basis, gaming apps account for approximately 70 percent of all App Store revenues,” the ruling explains. “This 70 percent of revenue is generated by less than 10 percent of all App Store consumers. These gaming-app consumers are primarily making in-app purchases which is the focus of Epic Games’ claims. By contrast, over 80 percent of all consumer accounts generate virtually no revenue, as 80 percent of all apps on the App Store are free.”
While Epic won big here, the ruling isn’t entirely in the game maker’s favor. The judge says that Apple, while successful, is not a monopolist based on the evidence introduced during the trial. That doesn’t mean that Apple isn’t a monopolist, the ruling concludes, only that “Epic failed in its burden to demonstrate Apple is an illegal monopolist.” And the judge found many examples of abuse on Apple’s part, including that it is in violation of California’s competition laws.
“The Court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice,” the ruling explains. When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”
And the judge ruled that Epic was guilty of a breach of contract with Apple by implementing an alternative payment system in the Fortnite app for iOS. Because of this, Epic must pay Apple 30 percent of the revenues it collected through its own system, or $3.5 million.
Apple, naturally, declared victory.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,” an Apple representative said, apparently unaware of what the ruling actually states. “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.”
“Today’s ruling isn’t a win for developers or for consumers,” Epic CEO Tim Sweeney tweeted in reply to Apple’s statement. “Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.”