A US federal court judge has struck down Apple's restrictions on how developers collect payments for their apps, a ruling which would help them avoid the hefty commission they had to pay Apple for app sales.
Apple does not allow developers to put external links or direct modes of payments or contracts in the application. When a customer subscribes or buys a service or item from the iPhone app store, the developer can direct the customers to other websites to complete the transaction. But developers were forced to use only the Apple payments system till now.
The decision is a major setback for Apple as revenues from app sales contribute immensely to its profits. According to estimates quoted by The New York Times, the app store generates nearly $20 billion annually for Apple.
The ruling could be considered a partial win for Epic Games, maker of the popular game Fortnite, which has been fighting a legal battle with Apple since last year over its app store policies.
In the lawsuit filed in August 2020, Epic Games had asked Apple to either reduce the 30 percent commission charged by it for in-app purchases or allow customers to bypass the Apple App Store while making payments. The lawsuit came on the heels of Apple removing Fortnite from the Apple App Store.
Judge Yvonne Gonzalez Rogers of the Northern District of California said Apple was violating Californian laws against unfair competition. In an injunction, the judge said Apple is "hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to in-app purchasing and (ii) communicating with customers through points of contact, obtained voluntarily from customers through account registration within the app."
She asked Apple to allow developers to include external links in their app for accepting payments within 90 days. Apple could, however, challenge the order within that period.
Interestingly, Apple is already in the process of easing restrictions on payments mode due to a separate lawsuit and antitrust investigation by Japanese authorities.
"The court does not find that Apple is an antitrust monopolist in the submarket for mobile gaming transactions," the judge wrote. "However, it does find that Apple’s conduct in enforcing anti-steering restrictions is anticompetitive."
Speaking in favour of Apple, Judge Gonzalez Rogers said Epic had breached its contract with Apple by asking Fortnite users to pay directly instead of using the Apple payments mode last year.
"Today, the court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law," Apple said in a statement. "We remain committed to ensuring the App Store is a safe and trusted marketplace that supports a thriving developer community and more than 2.1 million US jobs, and where the rules apply equally to everyone."
What Epic Games said
"Today's ruling isn’t a win for developers or for consumers," Epic Games CEO Tim Sweeney tweeted. "Fortnite will return to the iOS App Store when and where Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to customers," he said.
The case highlights the rising concerns among regulators seeking to rein in big tech firms like Amazon, Facebook, Microsoft and Apple.
"Big Tech was watching this case because it addressed whether antitrust law will countenance successful walled gardens," Paul Swanson, a Denver-based antitrust lawyer at Holland & Hart LLP, told The Wall Street Journal.
(Edited by : Jomy Jos Pullokaran)