In a recent development, the U.S. 9th Circuit Court of Appeals upheld a federal court’s order that could potentially force Apple to change its payment practices on its App Store. The ruling stems from an antitrust lawsuit brought by Epic Games, the creator of the popular video game Fortnite, and could require Apple to permit third-party in-app payment options by allowing developers to provide links and buttons for these options while avoiding paying sales commissions to Apple.
Apple has expressed its intention to appeal the ruling, which it says could significantly impact its business. Despite this, the appeals court sided with Apple on nine other aspects of the case, agreeing that Apple’s App Store rules do not violate antitrust laws, allowing its in-app payment commissions of up to 30% to remain.
Apple’s shares on NASDAQ rose slightly to $165.33 following the ruling. The company has 14 days to appeal, during which time the trial court’s orders will remain suspended.
Epic Games did not respond to requests for comment on the ruling.
Court Orders Apple to Change its Practices on Third-Party Payment Links
The trial judge found that Apple violated California’s unfair competition laws by prohibiting developers from informing users of other payment options. While Epic Games lost most of its allegations at trial, the judge did rule that Apple could no longer ban links and buttons to third-party payment options. However, the trial judge did not provide any guidance on how these links or buttons should be allowed, leaving open the possibility of future legal challenges.
The appeals court supported the trial court’s decision to require Apple to alter its behavior. This decision was based on the premise that it would be challenging to estimate the damages caused by Apple’s rules to Epic. The court stated that “the district court did not clearly err in finding that Epic suffered an injury for which monetary damages would be inadequate.”
Apple has previously been required to open up its in-app payment systems by competition authorities in other countries, including South Korea, the Netherlands, and Japan.
Potential Impact on Apple’s Business
Apple’s App Store is a vital component of its business, generating approximately $64 billion in revenue in 2020. Apple’s practice of taking commissions from in-app payments has been a source of controversy among developers for years, with many arguing that it stifles competition and limits consumer choice.
While the ruling could have far-reaching implications for Apple, it is unclear how the company will respond. It is possible that Apple may seek to appeal the ruling to a larger group of judges on the 9th Circuit or the U.S. Supreme Court. Alternatively, Apple may choose to comply with the ruling and allow third-party payment links and buttons on its App Store.
Final Thoughts
The recent ruling by the U.S. 9th Circuit Court of Appeals is a significant blow to Apple and its App Store payment practices. The ruling could result in Apple being required to permit third-party in-app payment options, which could impact the company’s bottom line. However, it remains to be seen how Apple will respond to the ruling, and it is possible that the company may seek to appeal the decision.
