Apple last week told the maker of the popular video game Fortnite that it wouldn't be allowed to return to the App Store until its legal dispute with the tech giant was resolved. The decision marked the latest sign that Epic Games' litigation against the iPhone maker will continue to resonate among mobile marketers and app developers.
Epic CEO Tim Sweeney tweeted that he had asked Apple to reinstate his company's developer account, which was suspended since last year. At that time, Epic tried to offer its own in-app payment (IAP) system in Fortnite that avoided paying commissions to Apple. The move violated Apple's rules, leading the company to remove the game from its App Store. Epic responded by suing Apple for violating antitrust laws and abusing its power over app marketplaces.
Fast forward to September 2021, when a judge ruled that Apple had the right to remove Fortnite because Epic breached its contract with the App Store owner. Epic plans to appeal that verdict, while other parts of the ruling by U.S. District Judge Yvonne Gonzalez Rogers will continue to shape the app ecosystem.
"A lot of the press coverage of the ruling has taken the view that it's mostly a loss for Epic — I don't totally agree with that," said Mike Woosley, chief operating officer at data management company Lotame. "The ruling says that Apple will have to make a change to allow app developers to collect payment from customers without having to give Apple 30%."
Epic's suit argued Apple improperly restricted the distribution of third-party apps for the iPhone through its App Store, while also requiring consumers to make in-app purchases through its own payment system. The arrangement positioned Apple to collect commissions of as much as 30% on those transactions. Apple claimed it wasn't a monopoly and that Epic had other distribution channels for its games, citing that Epic was trying to dodge the 30% fee, which Apple contended was an industry standard.
"Epic didn't win its argument that Apple was a monopoly, but that would have been hard for a judge to rule on," Woosley said. "Those cases take years, sometimes decades. They're hard to prove and take tons of data — which is why they're usually advanced by either the Federal Trade Commission or Department of Justice in the U.S."
Antitrust scrutiny swells
Apple is among the major tech companies facing multiple antitrust investigations throughout the world. Much of the scrutiny on the iPhone maker has focused on its App Store policies and in-app payment requirements. Meanwhile, South Korea this month enacted the world's first law requiring Apple and Google open their app stores to other payment systems. The country asked the companies to submit plans to comply with the law by mid-October, Reuters reported.
"The ruling says that Apple will have to make a change to allow app developers to collect payment from customers without having to give Apple 30%."
Mike Woosley
Chief operating officer, Lotame
Any effort to loosen Apple's grip on app distribution in the U.S. may require revisions to antitrust law. The September verdict in the Epic lawsuit against the tech giant highlighted the weaknesses in U.S. policies to limit monopolies from abusing their market power, several lawmakers said.
"This ruling reaffirms what we heard in our Senate hearing last spring: app stores raise serious competition concerns," Sen. Amy Klobuchar, chair of the Senate antitrust subcommittee, said in a Sept. 10 statement. "We need to pass federal legislation on app store conduct to protect consumers, promote competition and foster innovation."
Klobuchar, together with Sens. Richard Blumenthal and Marsha Blackburn, in August introduced a Senate bill to force changes on how consumers download and use apps on Apple and Google devices.
Since then, Apple has shown signs of potential compromise with app developers amid the heightened antitrust scrutiny. The company in September began to allow media apps such as Netflix and Spotify to include an in-app link to their websites. Before that, Apple announced a plan to allow developers to notify customers by email of other payment methods outside its system, as part of a proposed settlement of a class-action suit.
Passing on savings
In her ruling on the Epic case against Apple, Judge Gonzalez Rogers issued a permanent injunction ordering Apple to not interfere with app developers that want to show iPhone users other payment options. Unless the ruling is delayed or reversed, it will take effect in mid-December.
"By offering users these alternatives, app developers can decrease IAP costs for users. They can also reduce their own overall App Store commissions by 30%," Brian Bowman, chief executive of Consumer Acquisition, an agency that specializes in marketing apps on social media, said in a blog post. "Increasing the diversity of the monetization ecosystem will ultimately benefit the entire mobile game industry."
