Apple ordered to loosen rules around App Store

National and World

(NewsNation Now) — A federal judge ruled Apple must allow app developers to “steer” their users away from App Store payments as part of a lawsuit from game maker Epic. The judge said Apple’s behavior was anti-competitive, but not monopolistic.

The decision could lead to cheaper prices on digital goods.

The issue stems from Apple taking a 30% sales cut from developers making more than $1 million annually from the App Store. Apple also banned developers from letting users know they could pay the developer outside the store.

For example, if a subscription costs users $10 to buy on the App Store, the developer could not sell that subscription for less somewhere else and tell its customers they could save money by buying it there as opposed to the App Store. If that developer sold it through their own website for $7, they could keep the same amount in revenue without giving Apple a dime.

Epic, which makes the ultra-popular game Fortnite, sued Apple in 2020 after Fortnite was removed from the App Store. The game broke Apple’s rule banning workarounds to its payment system. Epic knew what it was doing, and had a marketing plan ready to go along with the court challenge.

Epic argued the practice was monopolistic since there was no way around Apple’s 30% fee. There is no way to download an app on an iPhone without it being in the App Store.

Although the ruling by U.S. District Judge Yvonne Gonzalez Rogers requires Apple to make some changes in its app store, it also upheld the company’s right to block other stores from offering apps for its iPhone.

“As the Court recognized ‘success is not illegal,’” Apple said in a statement. “Apple faces rigorous competition in every segment in which we do business, and we believe customers and developers choose us because our products and services are the best in the world.”

Gonzalez Rogers also dealt Epic a blow by ruling that the game maker breached its contract with Apple when Fortnite added a non-Apple payment system to its app. That defiance prompted Apple to oust Fortnite from its app store 13 months ago, triggering Epic’s lawsuit. She ordered Epic to pay Apple nearly $3.7 million, or 30% of the revenue it collected while violating Apple’s commissions.

Epic, a privately held company based in Cary, North Carolina, didn’t immediately respond to a request for comment. But Epic CEO Tim Sweeney denounced the ruling in a tweet, writing that it “isn’t a win for developers or for consumers.”

He said Fortnite will return to Apple’s app store once it can offer competitive in-app payments. “We will fight on,” he added in a subsequent tweet.

Apple could appeal the ruling. Epic may also appeal to see if a different judge may take an even stiffer stance against Apple.

Big tech companies have worked around Apple’s rule silently for years. Netflix, for example, will not let users subscribe to their streaming service on an iPhone app. However, it is not violating Apple’s rules because it does not tell customers where to go to sign up for an account.

Apple has taken two steps to loosen some of its App Store rules in recent weeks — one to settle a lawsuit and another to appease Japanese regulators without altering its commissions. Those concessions make it easier for many apps to prod their users to pay for digital transactions in ways that avoid triggering Apple’s fees.

Apple shares dipped sharply immediately upon the issuance of the ruling and were trading down 3% Friday.

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