The Epic v. Apple legal tussle came to an end on Friday morning, with Judge Yvonne Gonzalez-Rogers issuing a permanent injunction, putting new restrictions on Apple’s App Store rules that had prohibited developers from using external links for payment.
The decision is the result of a fight that’s been brewing for years between Apple and larger developers, particularly in gaming, whose businesses account for a hefty majority — 70%, the judge noted — of App Store revenue.
The ruling reads partly:
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Apple Inc. and its officers, agents, servants, employees, and any person in active concert or participation with them (“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.
Putting a permanent end to what has been described as monopolistic practice by Apple, the ruling said that iOS apps must be allowed to direct users to payment options beyond those offered by Apple. The injunction is scheduled to take effect in 90 days — on December 9th — unless it is enjoined by a higher court.
However, Judge Gonzalez-Rogers sided with Apple in the issue of its contract with Epic, and gave Apple its biggest win of the year. The Judge said that “the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws.” That does not only exonerate Apple from Epic’s allegation, it takes the tech giant off the hook of federal watchdogs who have placed it under antitrust investigations over the iOS Store alleged monopoly.
The ruling was based on the interpretation of the marketplace. The judge rejected both parties’ definition of the marketplace at issue in the case and redefined it. “The relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store,” Gonzalez-Rogers wrote.
Based on this market definition, Gonzalez-Rogers explained that “the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws,” she added. “Nonetheless, the trial did show that Apple is engaging in anti-competitive conduct under California’s competition laws.”
But the court ruled that Epic Games was in breach of its contract with Apple when it implemented the alternative payment system in the Fortnite app. It ordered Epic to pay Apple 30% of the $12 million it earned when it introduced its alternative payment system in Fortnite, — a sum of more than $3.5 million.
Apple said the ruling is a victory for the App Store model which has grown over the years through rigorous competition.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,” an Apple spokesperson said. “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 Games CEO Tim Sweeney tweeted that Fortnite will return to the App Store when and where it can offer in-app payment in “fair competition with Apple in-app payment,” and would pass along the savings to consumers.
“Thanks to everyone who put so much time and effort into the battle over fair competition on digital platforms, and thanks especially to the court for managing a very complex case on a speedy timeline,” he wrote. “We will fight on.”
The dispute between Apple and Epic Games has lasted for years. It took a drastic turn in August 2020, when Epic installed an alternative payment feature to avoid paying the 30% commission Apple has imposed on apps in the iOS App Store. Apple sees the commission as operating cost while Epic sees it as a monopolistic tax.
When Apple responded by removing Fortnite from the app store, Epic filed a legal complaint. However, as The Verge noted, Epic’s lawsuit has triggered inquiries into Apple Store’s activities outside the US, with watchdogs in Japan and South Korea forcing Apple to allow for alternate means of payment in its apps store with new laws.
Although recently, amidst the growing controversy that surrounds Apple’s App Store policies, the smartphone maker has made some changes in attempt to calm nerves; including slashing the 30% commission for apps making less than $1 million yearly, the ruling allowing for external links for payments is likely going to spark a flurry of antitrust inquiries against Apple outside the US.
Shares of gaming companies went up following the ruling on Friday. AppLovin, which owns several game studios saw its shares went up 8.5%, while mobile game developer Zynga rose 6.28%. The shares of Playtika, an Israeli game company with many popular games in the iOS Store recorded a 6.08% rise, while Roblox, a gaming app for kids, jumped 1.77%.