Judge Rules Massive Blow Against Apple’s App Store Business

  • The judge in the case between “Fortnite” maker Epic Games and Apple issued a ruling on Friday.
  • Apple must allow app makers the ability to monetize their apps without paying Apple.
  • Epic has to pay Apple over $3.5 million in owed royalties, and still can’t charge users directly in apps.

The end of the months-long legal saga between Apple and “Fortnite” maker

Epic Games
finally came on Friday when Judge Yvonne Gonzalez Rogers issued a ruling with bad news for both parties — and a major blow to Apple’s App Store business.

In Apple’s case, the App Store is being forced to allow app makers the ability to link out and sell items directly to their users via external payment methods. That means app makers will be allowed to directly link out to alternative ways for purchasing, giving them a new way to avoid App Store commissions that can cost as much as 30%.

Apple 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 communicating with customers through points of contact obtained voluntarily from customers through account registration within the app,” the judge wrote in her permanent injunction ruling.

The ruling will go into effect in 90 days unless any motions to delay or reverse the order are successful.

Moreover, the judge chastised Apple for continuing to charge a 30% commission despite years of criticism from app makers. “Unlike those in the computer gaming market,” she wrote, “nothing other than legal action seems to motivate Apple to reconsider pricing and reduce rates.”

While that’s good news for Epic, it wasn’t the total victory Epic was hoping for: The company is being ordered to pay over $3.5 million owed royalties to Apple, and still isn’t able to directly charge “Fortnite” players for items within the game.

Apple charges app makers on its iPhone and iPad App Store a commission for sales, ranging from 15 to 30%, which Epic Games sought to circumvent in an update to its hit game, “Fortnite,” in August 2020.

Fortnite (Epic payment through iOS)

An image of the “Fortnite” update that included the ability to pay Epic Games directly rather than paying through Apple.

Epic Games

A new payment option was introduced in the update that said “Epic direct payment,” which is exactly what it sounds like: Instead of paying Apple, then Apple paying “Fortnite” maker Epic Games, you could pay Epic directly. Epic even charged less for the same virtual items.

By doing this, Epic intentionally circumvented paying Apple the cut it takes from app makers for selling through its digital storefronts. It was this move that caused “Fortnite” to be kicked off the App Store last year, and subsequently sparked a lawsuit between Epic and Apple.

In the suit, Epic Games accused Apple of operating a monopoly with its iOS App Store — a charge the judge on Friday disagreed with, ruling that Apple’s practices were not monopolistic.

The smartphone is an “essential computing device,” Epic CEO Tim Sweeney argued in a letter to Apple leadership, and opening up the platform would give iPhone users, “the rights and freedoms enjoyed on the world’s leading open computing platforms including Windows and macOS.”

In a better world, Sweeney argued, iPhone users could choose from a variety of App Stores with competing libraries of content and sales — a world where games like “Fortnite” could offer players the ability to pay less by purchasing stuff directly from Epic, or to download another store entirely (like, say, Epic’s own digital storefront, the Epic Games Store).

In defense, Apple argued that Epic’s foundational assertion is incorrect: The App Store is intentionally operated as a “walled garden,” the company says, because it protects users from harm.

Without Apple vetting each app before publishing, “the health of Apple’s ecosystem” is at risk, Apple Chief Legal Counsel Douglas Vetter argued. Moreover, Apple said that Epic knowingly, intentionally violated developer agreements it signed.

“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 sent to Insider. “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 US jobs, and where the rules apply equally to everyone.”

Epic Games did not immediately respond to a request for comment, but Epic Games CEO Tim Sweeney took to Twitter to respond.

“Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers,” he wrote. “‘Fortnite’ will return to the iOS App Store when and where Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers.”

Epic will appeal the ruling, an Epic Games representative confirmed to Insider.

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