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Epic v. Apple case results in permanent injunction that could pry open the App Store

"This measured remedy will increase competition, increase transparency, increase consumer choice and information."

Apple has been hit with a permanent injunction that will prevent it from prohibiting links to third-party payment options on the App Store as a result of the Epic v. Apple lawsuit.

As reported by The Verge, the injunction was issued by Judge Yvonne Gonzalez-Rogers in a bid to increase competition and transparency, and will seemingly allow developers to more effectively highlight alternative payment methods on the App Store -- and in some cases, in applications themselves.

Specifically, Apple has been "permanently restrained and enjoined from prohibiting developers from 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."

Outlining her rationale in the full ruling, Gonzalez-Rogers said that while the court couldn't conclude whether Apple is a "monopolist" under federal state or anti-trust laws, by forcing developers to use its own payment services -- which allow it to take a cut of sales -- the iPhone maker had engaged in "anti-competitive" behaviour under California's competition laws.

"This measured remedy will increase competition, increase transparency, increase consumer choice and information while preserving Apple's iOS ecosystem which has precompetitive justifications," added Gonzalez-Rogers. "Moreover, it does not require the court to micromanage business operations, which courts are not well-suited to do as the Supreme Court has appropriately recognized."

As for Epic, the Fortnite developer has been accused of overreaching during the lawsuit, and has been ordered to pay $3.65 million in damages to Apple for a breach-of-contract, which amounts to 30 percent of the $12.16 million in revenue it collected from Fornite users on iOS through the Epic Direct Payment system between August and October 2020. The company has also been told to pay 30 percent of any such revenue it collected from November 1, 2020, through to the judgement date.

"This trial highlighted that 'big tech' encompasses many markets, including as relevant here, the submarket for mobile gaming transactions. This lucrative, $100 billion, market has not been fully tapped and is ripe for economic exploitation," continued Gonzalez-Rogers.

"As a major player in the wider video gaming industry, Epic Games brought this lawsuit to challenge Apple’s control over access to a considerable portion of this submarket for mobile gaming transactions. Ultimately, Epic Games overreached. As a consequence, the trial record was not as fulsome with respect to antitrust conduct in the relevant market as it could have been."

The outcome of the legal skirmish -- which began when Apple removed Fortnite from the App Store after Epic breached platform guidelines by adding an alternative payment option -- could have consequences for other platform holders, too, with Gonzalez-Rogers warning of "serious ramifications for Sony, Nintendo, and Microsoft" in October last year.

In the hours after the ruling, Apple claimed victory in the case (even though the judge found it to have enacted anti-competitive policies), and Epic Games CEO Tim Sweeney expressed dissatisfaction with the outcome. "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," he tweeted. 

Apple's took heart in the court's argument that the company is not in violation of federal antitrust law. "As the court recognized 'success is not illegai,'" the company wrote 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." 

"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 U.S. jobs, and where the rules apply equally to everyone."

Omdia principal games analyst George Jijiashvili observed that for however jubilant Apple is about the ruling, its policies have finally attracted attracted regulatory interest that isn't going away anytime soon. "The decision will most likely be appealed, but the writing is on the wall for Apple," he told Game Developer. "The overriding political mood has become hostile to the enormous amount of power concentrated in the hands of the tech giants, so now we’re now seeing regulators, lawmakers, and litigators in North America, Europe, and Asia scrutinizing app-store billing rules."

He also alluded to South Korea's recent law that puts new limits on the App Store's billing rules. "Apple allowing other forms payments might not have a huge impact on the App Store revenues, since existing users who have their payment details already registered with Apple will most likely continue to pay via the App Store for convenience’s sake," he added. "But, no doubt, app publishers will try to lure them over to their payment engines with lower prices and other special offers."

Those interested can read the entire 180-page Epic v. Apple ruling by clicking here (PDF).

Update, 9/13/21: Epic Games has already made its intent to appeal known. The Fortnite developer filed a notice of appeal over the weekend, with CEO Tim Sweeney reiterating over Twitter that "Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers." Epic does not believe the above decision aligns with that mission.

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