Judge bars Apple from forcing App Store payments on apps in Epic Games case

The gaming giant had sued Apple and Google last year, after the two companies took Fortnite off their platforms, accusing Epic of breaching contractual terms. Apple and Google do not allow app developers to include links to third party payment options, or direct users to their own websites, when distributing apps through their app stores. They charge 30% fees for in-app purchases, subscriptions etc., which is reduced to 15% for app makers who earn less than $1 million per year.

On 30 August, South Korea passed a new law, which bars platform companies from using such policies. Though the law is yet to come into effect, Epic asked Apple to allow Fortnite back and the iPhone maker refused to do so. “Epic has admitted to breach of contract and as of now, there’s no legitimate basis for reinstatement of their developer account,” the company said in a statement, adding that Epic will be allowed to return if it agrees to “play by the same rules” that others do.

As part of the ruling in the US, the judge also said that Apple isn’t allowed to stop app makers from communicating other means of payments with customers “through points of contact obtained voluntarily”. However, Rogers also affirmed that Epic was indeed in breach of contract with Apple and must pay the company 30% of all revenues collected through its own payments system since it was implemented, which amounts to $3.5 million.

She also rejected both Epic and Apple’s definition of the marketplace. “The relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store,” she said. She added that Apple isn’t a monopolist under that definition, but the company is still engaging in “anti-competitive conduct under California’s competition laws”.

The injunction issued by the judge is scheduled to come into effect on 9 December, which is 90 days from the date of issue. However, appeals and challenges to the judgment are expected, meaning it may still be delayed.

“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,” Tim Sweeney, Epic’s CEO, said on Twitter after the judgment. He also told NPR that the company has plans to appeal the judgment.

The ruling from Judge Rogers is significant in the larger scheme of things, as it sets precedent for regulations that many countries, including India, are working on. Startups had approached the Competition Commission of India (CCI) last year, while a non-profit organization based in Rajasthan had filed an information with the CCI against Apple earlier this month.

In response to growing criticism and pushback from developers, both Apple and Google had made changes to their policies. While both companies reduced commissions to 15% for apps that earn up to $1 million a year from their stores, Apple has also signed agreements in the US and Japan, which allow developers to communicate alternate modes of payments to their customers.

Epic’s case is also significant for game developers as they are amongst the biggest earners on app stores. Even Microsoft, which allows app makers to keep 100% of their revenues by using third party payments modes on their apps, doesn’t do so for gaming companies.