In recent months, Apple and the “Fortnite” game developer Epic have argued fiercely about the framework of the App Store. Now Apple had to take a defeat in court.
The decision could make one of Apple’s most important sources of revenue less – and save app developers billions of dollars. That’s because a U.S. federal judge’s order requires Apple to loosen its control over the app store, which is as lucrative as it is tightly shielded.
Judge Yvonne Gonzalez Rogers thus upheld a lawsuit filed by “Fortnite” developer Epic Games, which had gone to court against access restrictions for its gaming software. Easier access to the store could ultimately encourage app producers to lower their prices for end consumers.
Core of the dispute: commissions
At the heart of the dispute was a commission of up to 30 percent that Apple charges for digital transactions on apps. Such transactions range from Netflix or Spotify subscriptions to sales of digital content such as songs, movies or virtual characters for video games. Epic criticized the lucrative fee as tactical price gouging that wouldn’t be possible if competing stores were allowed to offer iPhone apps. Epic also wanted to bring down the app installation monopoly. However, that was not ordered. Until now, Apple has only allowed applications to be installed via the App Store on the iPhone and iPad.
Gonzalez Rogers ruled that Apple could not, however, prohibit developers from including buttons or links in their apps that direct customers to other payment options outside of Apple’s own in-app purchase system. The ruling also said that Apple could not prohibit developers from communicating with customers using contact information that developers received when they signed up within the app.
The dispute with Epic Games had escalated a year ago when the game maker tried to circumvent the payment system. Apple subsequently banned “Fortnite” – Epic’s most popular game – from its app store. “Fortnite” is played by around 400 million people worldwide. Epic Games had sued over this.
However, because of the violation of Apple’s terms of business, the court also ordered Epic to pay Apple damages of nearly four million dollars.
“Apple is not a monopolist”
But the decision as a whole is a defeat for Apple, the world’s most valuable company: according to analysts, the group’s app store generates more than $20 billion in annual revenue. The profit margin here is said to be over 75 percent.
Apple interpreted the ruling as a success despite the preliminary injunction. “Today the court confirmed what we’ve always known: the App Store does not violate antitrust law.” The court also found that “success is not illegal,” he said. After reviewing the evidence, he said, the court confirmed that Apple was not a monopolist in any relevant market and that the agreements with app developers were legal under antitrust law. “Let me repeat that: The court found that Apple is not a monopolist under either federal or state antitrust law,” Adams said.
Epic CEO Tim Sweeney commented on the Apple statement on Twitter, saying, “Today’s ruling is not a win for developers or consumers. Epic is fighting for fair competition between in-app payment methods and app stores for a billion consumers.”
Stock drops significantly after ruling
After the verdict, Apple shares fell by around 2.5 percent. Investors were apparently uncertain about the impact of the verdict, which is not yet legally binding, on Apple’s future balance sheets.
Epic, which raked in more than five billion dollars last year with “Fortnite,” is also taking legal action against Apple in the EU, the UK and Australia. In addition, the game maker sued the Internet company Google for similar business models in the Google Play Store.
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