A federal judge ruled that Apple cannot delay the update of App Store policies as required by California's Epic Games lawsuit. Although Apple won the lawsuit, as the judge declared Apple wasn't acting as a Monopolist like Epic Games had claimed, the court sided in favor of Fortnite creators on the issue of Apple’s anti-steering policies regarding in-app purchases. Although the court had originally ruled that Apple could not prohibit developers from using other payment methods than Apple's, it decided that Apple should be allowed to delay its appeals decision. This would have effectively delayed the App Store's changes by years.
Specifically, U.S. District Judge Yvonne Gonzalez Rogers' September 10, 2021 ruling in Epic Games antitrust case had directed Apple to stop developers from:
"...including their metadata buttons, external hyperlinks, and other calls to actions that direct customers to purchasing channels, as well as In-App Purchasing.
Apple was also found to be able to communicate with customers via points of contact that customers have voluntarily provided through their accounts within the app.
Apple updated its App Store rules in October to address the ability of developers to communicate with users. This change was also part of a settlement with several U.S. developers over the same matter. Apple appealed the Epic Games lawsuit and requested a stay of Judge Gonzalez Rogers' injunction that would allow the App Store to accept non-Apple payments.
The ruling stated that the App Store policy changes required by the ruling had to be made by December 1, as the judge required the injunction be implemented within 90 day of the September 10 ruling. This meant that if Apple didn't grant the stay to the injunction, developers would be able to point to other methods of payment within their iOS apps.
Apple's legal counsel claimed that the changes Apple was forced to make to the platform would "upset" the platform during a hearing held on November 9.
They will cause harm to consumers. They will also harm developers. This is the truth. It will happen," stated Gibson, Dunn & Crutcher partner Mark Perry who was Apple's lead lawyer in the Epic Games case. He reiterated Apple’s position that linking within apps could pose security and privacy threats to the iOS ecosystem.
Gary Bornstein, Epic Games' counsel, noted that Apple claimed during the trial that its first party payments platform was competitive with web payments. It cannot turn around and say that increasing consumer awareness about the competitive alternative would cause "irreparable damage." Bornstein also said that Apple should not be left to make the changes. Many of the steps Apple took to open the App Store were either in response to class action lawsuits or legislative/ regulatory developments. Apple refuted this assertion, pointing out other pro-consumer measures it took, such as privacy labels for the App Store.
The judge denied Apple's motion for a stay today.
"In short, Apple’s motion is based upon a selective interpretation of this Court’s findings and ignores all the findings which support the injunction. This includes incipient antitrust behavior including supercompetitive Commission Rates resulting in extraordinarily large operating margins and that have not been correlated with the value of its intellectual properties," said Judge Gonzalez Rogers. "This incipient antitrust behavior is partly the result of anti-steering strategies that Apple has enforced in order to harm competition."
Apple responded to a request for comment and said that it would try again.
Apple believes that no further business changes should be made until the appeals in this matter are resolved. An Apple spokesperson stated that they plan to request a stay from the Ninth Circuit based on these facts.
Epic Games did not immediately respond to our request for comment.
If the court's decision is upheld, it could have a major impact on the App store's business model. Developers who want to avoid Apple's commissions will be able point their users towards other payment options when the policy changes. The company could lose billions depending on how many developers accept the opportunity and how many customers choose to pay outside of the App Store.
Some market participants were already preparing to capitalize on the potential change even before the policy was officially changed.
Paddle, a solution provider for subscription businesses announced prematurely that it would create an in-app purchasing system targeted at iOS developers. This would allow for a drop-in replacement of Apple's payments system once the injunction was in effect. However, it wouldn't allow for a complete replacement of Apple's in app purchase system. Only external links would be allowed. Facebook has now introduced a direct payment system to creators that bypasses the App Store. The system is technically permissible because Facebook doesn't take a cut from creator revenues at the moment. However, if Facebook decides to allow other payment methods, this system could be changed in the future and open up new revenue streams for the social network.
If Apple is unable to convince the court to grant the motion, it's not clear how Apple will modify its rules to conform to the court's decision. Google agreed to accept other payment methods when South Korea passed a new law. Apple, however, claimed that its policies are in compliance with the law's requirements.
Apple was reminded by the court that it had to comply within 90 days of the original ruling. It still has 30 days before the injunction goes into effect.
gov.uscourts.cand.364265.830.0_8 by TechCrunch on Scribd
