Apple Inc. has filed an appeal of a judge’s ruling that ordered Apple to allow apps to direct customers to external websites. This ruling would let app businesses circumvent Apple’s requirement to allow payments only inside of apps, where Apple takes up to a 30% cut.
Epic Games, Inc., a video game and software developer based in Cary, North Carolina, created Fortnite, a remarkably successful video game. Epic Games brought a lawsuit against Apple in August of 2020, claiming that the tech giant had abused a monopoly on the iOS app ecosystem.
Apple has long banned app developers from allowing apps to direct customers to external websites for payment. U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple was breaking the law by forcing people to pay for apps and in-app items through the App Store. Gonzalez Rogers ruled that Apple was hiding information from consumers and limiting choice, which is prohibited under California competition laws. She told Apple to allow other payment options. Notably, she said that Apple’s considerable power and profit margins alone do not show antitrust conduct, proceeding to state, “Success is not illegal.”
Gonzalez Rogers also noted that “nothing other than legal action seems to motivate Apple to reconsider pricing and reduce rates.” Apple’s trial witnesses, however, contended that iOS was an unusually safe and secure ecosystem because of its walled-garden model, saying no other option would be appropriate for the sensitive data on people’s phones.
Gonzales Rogers upheld the App Store’s overall structure and said that Apple does not have an illegal monopoly over how developers can process payments for mobile games. Apple called the ruling a “resounding victory.” Apple Senior Vice President and General Counsel Katherine Adams said that Apple was very pleased with the Court’s ruling and considered it a huge win for Apple. Apple expressed that it remained committed to ensuring the App Store is a safe and trusted marketplace that supports more than 2.1 million U.S. jobs and was a place where the rules apply equally to everyone.
As part of Apple’s appeal of the ruling, Apple is asking for a stay to prevent the company from having to implement the new anti-steering rules. Apple states that this portion of the injunction would upset the balance between developers and customers provided by the App Store and would irreparably harm both Apple and consumers.
In support of its case, Apple presents compelling arguments based on the theory that it would not be able to protect users from fraud if it were forced to allow app developers to link to external payment systems. Rather than a genuine concern for user security, however, it is certainly possible that Apple, which enjoys considerable market share of over 55% and extraordinarily high profit margins, is motivated by profit.
Apple argues that links and buttons to alternate payment mechanisms are fraught with risk. Apple says that developers may attempt to take advantage of user trust, which is carefully cultivated by Apple’s safe and secure platform, and deceive users into providing their payment information to a malicious platform. Moreover, Apple argues that because external links operate outside of iOS, Apple has no visibility into its technological and financial functions and limited ability to redress fraud by identifying and removing bad actors from the App Store. Apple also states that it has no ability to determine whether users who click on external links actually receive the products or features they paid for.
In support of its case, Apple presents compelling arguments based on the theory that it would not be able to protect users from fraud if it were forced to allow app developers to link to external payment systems. Rather than a genuine concern for user security, however, it is certainly possible that Apple, which enjoys a considerable market share of over 55% and extraordinarily high profit margins, is motivated by profit. The App Store brings in roughly $19 billion a year for Apple (although the ruling only impacts US-based companies for now, which comprises only about a third of Apple’s global App Store revenue).
Gonzales Rogers’s ruling came with wins and losses for either side. In addition to asking Apple to change its practices, she ordered Epic Games to pay damages for violating its developer agreement with Fortnite. In addition to Apple doing so, Epic Games has appealed the verdict.
Apple is not the only Big Tech company with which Epic Games has had a legal dispute. In 2020, Epic Games filed a complaint against Google. Epic Games also took legal action against Google in Australia and the UK. On the other hand, Epic Games’s lawsuit against Apple is not completely unprecedented. Spotify filed an antitrust complaint against Apple in 2019. Is Epic Games failing to acknowledge practical security considerations in the digital age? Or, is the company rightfully determined to bring justice to technology by suppressing a tech giant’s ability to exploit app makers while maximizing its own profits?
Vishal attended Arizona State University for college and majored in Political Science. In law school, Vishal serves as Vice President of the Asian American Law Students Association as well as a competing member of the Holderness Moot Court Arbitration team.