In its ongoing fight with Epic Games over the future of the App Store, Apple has won the latest round. The Appeals Court decision likely means the company will have to make some changes, though it may hold off making others for the time being.
An Epic fail
Epic launched litigation against Apple in 2020 after its Fortnite game was ejected from the App Store for breaking the rules by offering access to Epic’s own payment systems. The case did not go Epic’s way and the company later appealed the judgment; that decision has now been upheld by the US Ninth Circuit Court of Appeals.
Epic’s three primary arguments against Apple were that it was acting unlawfully by:
- Restricting app distribution on IOS devices to the App Store.
- Preventing developers from informing customers about alternative payment systems within the App Store.
- Requiring in-app purchases on iOS devices to use Apple’s in-app payment processing systems.
The court ruled that Apple was not violating antitrust rules on the first two points, but agreed developers should be able to promote external payment systems when making in-app purchases.
The court also supported Apple’s arguments that its existing systems promote consumer privacy and security, allowing it to tap “into consumer demand and differentiating its products from those of its competitors, goals that are plainly procompetitive rationales.”
What Apple said
Apple called the decision a “resounding victory. For the second time in two years, a federal court has ruled that Apple abides by antitrust laws at the state and federal levels.” (Apple also said it “respectfully disagrees” with the ruling on anti-steering provisions.”
Epic CEO Tim Sweeney succintly tweeted: “Apple prevailed at the 9th Circuit Court.”
“Fortunately, the court’s positive decision rejecting Apple’s anti-steering provisions frees iOS developers to send consumers to the web to do business with them directly there,” he also wrote. “We’re working on next steps.”
What happens next?
In the short term, these results mean Apple continues to control app distribution on iOS, subject to local regulations. That said, it’s possible Apple will announce a smattering of changes at WWDC 2023 in June.
Apple may decide to make voluntary adjustments to some of its business practises, if only to resolve the complexity of managing different regulatory environments. But the only mandatory change it will need to apply in the US is to allow developers to tell users about third-party payment options for in-app purchases.
It’s unclear at the moment how it will apply that process.
In the Netherlands, local regulations require it to permit developers of dating apps to support external payment systems. But in enabling the system, the company demanded a hefty slice of sales (27%) made via external payment systems, which generated numerous complaints.
But the regulatory environment is increasingly less harmonious, which means Apple will need to make some changes in some markets. In Europe, the European Digital Markets Act will, for instance, require the company to open up to third-party stores on its platforms.
That ability is thought to be included within iOS 17, but the ability to shop at those stores might be restricted to EU users only. Could Apple instead choose to settle all these problems by opening things up more widely? It would make sense to do so to provide platform consistency.
Another example, in the UK a new Digital Markets, Competition and Consumers bill will give additional powers to fight fake reviews and subscription renewal traps to the Competition and Markets Authority (CMA). Apple recently prevailed in an investigation by the CMA, so it’s plausible it will continue to face oversight by that body.
All eyes on WWDC
Apple continues to face regulatory investigation worldwide. In the short term, the next big moment during which the company would likely announce tweaks to its App Store rules to make developers happier is at its WWDC event in early June.
While Apple has largely prevailed in the courts, it knows it must also continue working to placate at least some developer grievances, particularly as it seeks their help in building its next big new platform.
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