A federal judge has delivered a major blow to Apple’s long-standing control over its App Store, ordering the tech giant to stop collecting commissions on purchases made outside the App Store and sharply rebuking CEO Tim Cook and other executives for defying previous court orders.
U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple “willfully” violated a 2021 injunction intended to open its App Store to more competition. Instead of complying, Apple created a new system that imposed a 27% commission on external purchases – just shy of its original 30% fee-and displayed pop-up warnings to discourage users from paying developers directly. Judge Gonzalez Rogers called these actions a “cover-up” and referred Apple and one executive to federal prosecutors for possible criminal contempt, stating, “Apple aimed to preserve a revenue stream valued in the billions, directly defying this court’s injunction.”
The ruling is a significant victory for Epic Games, the maker of Fortnite, which brought the original antitrust case in 2020, as well as other app developers. Epic CEO Tim Sweeney said the decision “is a wonderful, wonderful day for everybody,” and announced the returning of Fortnite to the U.S. App Store.
Apple has strongly disagreed with the decision and stated it would appeal but must comply with the order in the meantime. The changes could dramatically reshape the app economy, allowing developers to keep more of their revenue and potentially offer lower prices to consumers, while threatening a key source of Apple’s services revenue.
As the legal battle continues, developers now have unprecedented freedom to direct users to alternative payment options – at least in the U.S. – with broader implications for how digital marketplaces operate worldwide.
History of the Case
The legal battle between Epic Games and Apple began in August 2020, when Epic intentionally bypassed Apple’s in-app payment system by introducing a direct payment option in its game. This move allowed Epic to avoid Apple’s standard 30% commission on in-app purchases and offer users discounted prices. Apple swiftly responded by removing Fortnite from the App Store, prompting Epic to file an antitrust lawsuit accusing Apple of monopolistic and anti-competitive practices. Epic argued that Apple’s rules forced developers to use its payment system as the only way to distribute apps on iPhones, securing a substantial portion of the company’s nearly $100 billion annual services revenue.
The case saw a partial victory for Epic in September 2021, when Judge Yvonne Gonzalez Rogers ruled that Apple’s “anti-steering” policy-which prevented developers from informing users about alternative payment options-violated California’s competition laws. However, the court stopped short of declaring Apple a monopoly, and most of Epic’s antitrust claims were dismissed. Both companies appealed, but the Supreme Court ultimately let the lower court’s decision stand. In response, Apple introduced a new “link-out” policy that allowed developers to direct users to external payment options but still imposed a 27% commission on those transactions. Epic and other tech companies argued that these changes did not comply with the court’s intent, leading to the recent ruling that further restricts Apple’s control over app payments.
Immediate Changes for App Developers
Under the new order, Apple is prohibited from:
- Charging commissions on purchases made outside the App Store.
- Restricting developers’ ability to use design or placement of links, buttons, or calls to action directing users to alternative payment methods.
- Using “scare screens” discouraging users from making purchases elsewhere beyond a neutral message stating: “You’re about to go to an external website. Apple isn’t responsible for the privacy or security of purchases made on the web.”
- Retaliating against developers who use external payment systems.
Apple must comply immediately, though it plans to appeal.
Opportunities for Developers
- Eliminate Apple’s commission: Direct users to your website for transactions without paying Apple’s 15-30% fees.
- Freely communicate with users: Use in-app buttons, emails, or push notifications to promote lower prices or special offers available outside the App Store.
- Optimize purchase flows: No more static URLs or forced placement restrictions-design frictionless pathways to external payments.
Risks to Consider
- Apple’s appeal: The 9th Circuit may stay the order, but compliance is required pending further rulings.
- Global implications: This ruling applies only to U.S. App Store transactions.
- Future enforcement: The court referred Apple for potential criminal contempt proceedings, signaling strict oversight.
The CommLaw Group can help!
For tailored guidance on updating your app or navigating compliance, contact Susan Duarte at 703-714-1318 or sfd@commlawgroup.com.