Apple vs. Epic Games Case - The app Store and What the Ruling Means to You

Apple vs. Epic Games Case - The app Store and What the Ruling Means to You

In a seemingly major blow to Apple, a federal judge said the company can no longer force app makers to use only Apple's payment system. The ruling opens the door for third-party in-app payment methods.

Put another way, Epic Games, the developer of "Fortnite," will be able to sell in-game skins and items to Apple users without paying Apple a 30% commission on each sale. In return, Epic Games can direct game users to its website. At least, Epic Games can do so if Fortnite is still on the App Store. At this time, Fortnite has been banned from the App Store for violating Apple's terms and conditions.

So why is Apple happy with this decision?

According to Dot Esports, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California, in a 185-page permanent injunction, found that Apple's App Store policies violate California's Unfair Competition Law Judge Rogers stated that Apple had engaged in anticompetitive conduct under California law, but did not go so far as to call Apple a "monopolist," as Epic Games had argued.

In a public statement on the case, Apple addressed the last part of the ruling, saying, "Today, the court affirmed what we have known all along: that Apple is a monopolist.

Epic CEO Tim Sweeney disagreed with this point, tweeting, "Today's ruling is not a win for developers or consumers," adding, "Fortnite is a win for developers and consumers because Epic will compete fairly with Apple's in-app purchases to offer in-app purchases and pass the savings Fortnite will return to the iOS App Store when and where it can offer in-app purchases in fair competition with Apple's in-app purchases and pass the savings on to consumers," he added.

The case may not be over, as the decision could be taken to appeal. As it stands, the decision could upend the multi-billion dollar App Store economy.

Still, from Apple's perspective, it may have won the war, if not the battle, by not being defined as a monopoly. Avi Greengart, founder and principal analyst at Techsponential, said, "This ruling is a huge victory for Apple."

Nevertheless, Apple can no longer restrict in-app purchases. While this will affect Apple's App Store revenue, many apps will continue to use Apple's in-app payments." Because for smaller developers, it makes little economic sense to set up their own payment process, and for larger developers, Apple's system provides a seamless user experience," he said.

Wedbush Securities analyst Michael Pachter said via Twitter that Apple got away with not being defined as a monopoly, while Epic won by making players pay directly. The ruling will cost Epic Games millions of dollars, while Apple could effectively lose billions of dollars if app makers begin using alternative payment methods en masse.

Prior to this ruling, and after an investigation by the Japanese Fair Trade Commission, Apple announced that it would relax payment policies for some apps like Netflix and Spotify, allowing users to subscribe through its website rather than directly through the App Store.

At this time, Fortnite is not available on the App Store. It is unclear if and when Fortnite will resume distribution. Judge Rogers' order will go into effect within 90 days unless Apple seeks to block the order.

Google's App Store is not immune from the case either, as Epic Games sued the Android maker over a similar policy. Last month, 36 states and the District of Columbia also sued Google for the same conduct; Epic Games also co-founded, along with Spotify, Basecamp, and Match Group, the Coalition for App Fairness to pursue anti-competitive practices by platform holders.

Editor's note: This article was updated at 5:09 p.m. ET to add analyst comments.

Categories