Apple’s new App Store pricing procedures have sparked uproar among software developers, who believe the iPhone maker is circumventing the purpose of a court order. The United States Supreme Court declined to accept appeals on Tuesday of an antitrust order affecting the App Store resulting from a legal fight between Apple and Epic, the producer of the popular videogame “Fortnite.”
That move forced Apple to create new policy requiring developers to pay it a 27% commission if they use an alternative payment mechanis
m, similar to what the company did in the Netherlands and South Korea in response to legal rulings on related issues there.
Apple is effectively stating “we refuse to back down,” according to Fiona M. Scott Morton, a former antitrust official in the Obama administration. “It’s a clear statement by Apple that they intend to fight.” Epic’s CEO, Tim Sweeney, stated on X that his company will challenge Apple’s new policies in Northern California District Court, where a trial judge ruled largely against Epic in 2021, with the exception of finding that Apple must allow developers to direct customers to payment options within their own apps. Sweeney described the tech giant’s method to complying with the steering component as “bad faith.”
In a statement, Spotify stated, “Once again, Apple has demonstrated that they will stop at nothing to protect the profits they make from developers and consumers under their App Store monopoly.” The music streaming service criticized the move as “outrageous and contrary to the Court’s efforts to enable more competition and user choice.”
In a petition filed with the court on Tuesday, Apple revealed the new regulations and stated that the court confirmed Apple’s right to earn commissions on off-app transactions. Separately, Apple sought that Epic reimburse it for nearly $73 million in legal expenditures incurred throughout the legal struggle.
Legal experts believe Apple’s revisions comply with the District Court’s order. “Apple is taking the smallest steps possible under the court order, which is quite limited,” explained Paul Swanson, an antitrust lawyer with Holland & Hart in Denver.
US District Judge Yvonne Gonzalez Rogers, who presided over the Apple-Epic litigation, has already stated that she will monitor Apple’s compliance with her order and may reconsider her judgment at some point.
Swanson went on to say, “She still has the jurisdiction to clarify or refine the order if she concludes that Apple is infringing.” “She can clearly say that it does nothing to address the conduct that I found inappropriate in my judgment.”
Herb Hovenkamp, an antitrust professor at the University of Pennsylvania Law School, said he thinks it will be a big challenge for Epic to go after Apple again. The appeals court has already rejected Epic’s claim because of Apple’s lack of market power, he said.
Still, Hovenkamp said, “the whole idea of using the App Store as a barrier to shut down sales, rather than keeping these things open and competitive, that’s a problem that the courts will have to deal with one way or another.” Will have to face.”
Apple’s new levies have sparked strong criticism from the app-developer community, with opponents claiming that the 27% commission the corporation would now charge on in-app purchases made with alternative payment methods will cost developers and, ultimately, users more money. Developers would also be liable to payment processing fees, which would likely raise the total amount paid much above Apple’s 30% cut.
“It defeats the entire purpose of allowing competition in the payments space,” said Rick VanMeter, executive director of the Coalition for App Fairness, an advocacy group whose members include over 70 app developers such as Epic, Spotify, and Match Group. “They’re reaching beyond the App Store to web-based payments, which is new and pretty audacious.”
The fresh attention on Apple comes as the Justice Department investigates the corporation for a potential antitrust complaint based on its business practices. The investigation began in 2019 and is partly concerned with Apple’s restrictions governing mobile third-party applications on its devices, which have been criticized, according to The Wall Street Journal.
Apple has previously faced legal challenges over similar compliance difficulties. When the Dutch competition authorities ordered Apple to allow alternative payment methods for dating apps in the Netherlands, Apple replied by charging these apps a 27% fee to use other payment methods. Dutch authorities fined Apple almost $55 million after charging that the corporation failed to comply with their directives.
“Apple believes its solution is fully compliant with Dutch law,” Apple’s then-Chief Compliance Officer Kyle Andeer stated in a letter to the regulator in 2022.
In 2021, South Korean legislators approved legislation forcing Apple and Google to offer other payment options for app developers. Apple responded by informing developers in that country that they would face a 26% commission if apps used third-party payment methods. Last year, South Korea’s telecom regulator announced that it will pay Apple and Google a total of $51 million for violating the country’s legislation.
Apple is also facing legal challenges over its restrictive App Store standards. The European Union’s Digital Markets Act, in particular, will oblige Apple to allow so-called sideloading of software onto iPhones and iPads that are not available through the App Store, including rival app shops. The European rule goes into effect in March, and Apple is prepared to comply by an early March deadline, the Journal previously reported.
Developers are concerned that the company’s intention to charge 27% to use a third-party payment mechanism will stifle sideloading. Apple has warned that sideloading may allow bad actors to gain access to users’ phones, and last year it stated that the EU rule would “cripple the privacy and security protections that users have come to expect.”
Apple does not disclose how much money it makes from the App Store, but analysts believe it generates billions in very profitable revenue. Data.ai, a mobile data and analytics organization, reported that app store expenditure hit $171 billion last year.
Meanwhile, demand for has recently fallen. According to the company’s fiscal fourth-quarter figures, which were reported in November, phone sales increased by 2.8%. On a conference call at the time, Apple stated that overall revenue for the December quarter would be flat compared to the same period a year before.