The decision will be likely appealed, perhaps by both sides. Since the decision, Apple’s share price has fallen by 3%, wiping billions of dollars from its valuation.
The judge said Apple would have to loosen some rules on developers. But the ruling favoured Apple as it dealt a significant blow in the Epic Games trial, allowing the iPhone maker to continue its prohibition of third-party, in-app payment systems.
In a high profile trial, the creator of the video game “Fortnight”, Epic Games, had challenged the “up-to-30% cut” on iOS app purchases from the App Store under the policies of Apple’s payment processing system, arguing that the App Store was monopolistic.
On Friday, a court in Oakland has ruled that Apple could not stop app developers from directing its users to third-party payment options, which can save as much as 30% commission for app developers.
But this does not help Epic Games for proving the tech giant’s monopoly over the market.
District Judge Yvonne Gonzalez Rogers ruled the Apple v. Epic Games lawsuit on Friday stating that Epic has failed in proving Apple’s monopoly and now owes Apple revenue commissions as a back payment.
The judge also agreed that Apple is forcing people to pay for in-app payments and apps through its App Store, keeping developers from directing customers to alternative payment methods via external links, citing California competition laws.
“The court cannot ultimately conclude that Apple is a monopolist”, ruled Judge Yvonne Gonzalez Rogers on Friday.
But she issued a permanent injunction, where Apple could no longer prohibit developers linking to their purchasing mechanisms.
In simple words, from now say a movie-streaming service will tell customers to subscribe via its website without violating App Stores policy and giving users an option to opt-out from Apple’s in-app purchasing mechanism.
The fate of Fortnight
Gonzalez Rogers’s high profile trial ruling will mean that many start-ups and developers can now funnel iOS users to other payment methods, increasing their profit margins by cutting Apple out of some commissions.
CEO of Recurly, a billing and subscription management platform, Dan Burkhart, said, “This verdict opens a path for tremendous [profit] margin expansion for developers.”
Burkhart hypothesizes that now developers won’t route customers’ purchases through Apple, making the purchasing process smoother and more user-friendly.
Earlier, installing any software on Apple’s mobile operating system was only possible via Apple’s App Store, which forced developers to follow Apple’s rules and its payment system—also charged a commission on every sale of the product.
Epic Games updated its “Fortnite” iPhone app last August to offer players the ability to directly pay Epic, bypassing Apple’s payment processing system, its policies, along with its 30 per cent commission.
The result was that Apple removed “Fortnite” from its App Store. Even though the video game–“Fortnite” can not be found in the App Store, the players who had already downloaded the game can still access it, making it possible for transactions and eventually paying Epic through the app.
Gonzalez Rogers ruled that Epic must pay Apple from the more than $12 million of revenue, rightfully its 30 per cent cut — amounting to about $3.6 million. Collected between August and October last year from “Fortnite” iOS users and 30 per cent from an undisclosed revenue amount that Epic has till date continued to gather while the trial was underway.
As for the fate of the video game “Fortnite,” on Apple’s platforms is still a mystery. “Fortnite will return to the iOS App Store”, said Tim Sweeney, Epic Games CEO, adding a condition as he said, “when and where Epic can offer in-app payment in fair competition with Apple in-app payment,”
In her ruling explaining the judgment, Judge Yvonne Gonzales-Rogers pointed out that Apple told Epic multiple times that it (Apple) could bring the game back to the iOS platform as long as Epic complied with its rules. At the same time, the Epic stands declining these offers so far.
Although the ruling states that Apple cannot obstruct apps from linking to other ways to pay, it does not mean those different ways to pay are as easy and convenient as simply using Apple’s payment method.
That’s what Sweeney was referencing in his tweet where he says “Fortnite” will not return to iOS until Epic can offer a direct, in-app way to make purchases that’s just as convenient as Apple’s way.
What is Apple vs Epic Game Lawsuit? What would the ruling mean for developers?
Apple had always argued that all apps should use Apple’s in-app payment options as directing customers to pay elsewhere could be a hassle for the user experience.
Since they have to open up a separate browser, make an account and enter their credit card information rather than paying through the traditional way– the iOS app,
As Gonzalez Rogers in her order said: “Apple enjoys a considerable market share of over 55% and extraordinary high-profit margins.” Also adding, “These factors alone do not show antitrust conduct. Success is not illegal.”
“Today, the Court has affirmed what we’ve known all along:” said a spokesperson from Apple, making a somewhat controversial statement particularly at this time, “the App Store is not in violation of antitrust law”.
While the tech giant Apple faces tough competition in almost every segment in which they do business, he said, adding that Apple believes that “customers and developers choose us because our products and services are the best in the world.”
The judge ruled that Apple must allow developers to direct users to other ways of payment, including buttons, external links in their apps, or “other calls to action” that lead people to payment options outside of Apple’s proprietary payment system, i.e., the App Store. This way will keep Apple from its 30 per cent revenue cut on in-app purchases.
Since often consumers get cheaper options away from the App Store, however, Apple did not allow companies to tell consumers of this.
Epic had argued on this, claiming that this was unreasonable and that developers should be allowed to inform users that they can make purchases away from the App Store.
While the ruling effectively states that Apple cannot ban developers from communicating with customers.
In a statement, Eli Hodapp, ex-vice president at GameClub, a game subscription service, said he doesn’t see the“mass exodus away from Apple’s payment methods”.
Instead, he says it is a more promotional avenue which developers can choose to utilize.” He also added, “More options are always good for the consumer.”
Epic Games CEO Tim Sweeney said the ruling was “not a win for developers or consumers” and vowed to “fight on”.
Apple’s secure payments system is hugely lucrative for the tech giant, although the company says it does not know precisely how much it makes. Epic Games has already taken legit action against Google over its Play Store.
