Apple-Epic Games feud: What does the App Store ruling mean?

A US district judge ruled on Friday in Apple’s battle with Epic Games, maker of Fortnite. The ruling forces the Cupertino-based Apple to loosen its grip on its App Store payment system. Now developers will be able to take steps to skirt the up to 30 per cent commission Apple takes on App Store sales. The tech giant, however, avoided being branded an illegal monopoly in the case. 

The App Store is the lone gateway for mobile apps onto iPhones or other Apple devices. Developers must follow strict Apple rules for what apps can or cannot do, and have to use the App Store for all transactions there.

Apple takes a commission of up to 30 per cent of app purchases or transactions, contending it is a fair fee for providing a safe, global platform for developers to sell their creations.

The tech giant maintains that 85 per cent of the approximately 1.8 million apps at the digital shop pay nothing.

The App Store, however, is highly profitable. Analysts estimate that the tech giant makes annual revenues of about $20 billion from the payment system, which has a profit margin of 75 per cent.

Origins of the Apple-Epic Games Fued

The lawsuit was brought by Epic Games in August 2020 after it tried to get around the App Store payment system. Apple had promptly removed Fortnite from its store in response, triggering the lawsuit in which Epic accused the company of stifling competition by controlling what apps could appear on the store and how they operate.

Also read: Apple’s App Store fees a ‘de facto global tax on the Internet’: Elon Musk

Apple countersued, accusing Epic of trying to steal that 30 per cent commission with its workaround. It said the fee cut was largely in line with other digital marketplaces such as Google Play.

What Was the Ruling?

US District Court Judge Yvonne Gonzalez-Rogers said that Apple’s control of the App Store did not amount to a monopoly, but that it must let developers include links to other online venues for buying content or services.

App makers will be able to provide links that users can click on to take them to another website to buy content or otherwise interact.

Apple can still require App Store to be used for in-app purchases, meaning it should still get its share of transactions. The judge wrote that Apple violated California’s laws against unfair competition but that it was not “an anti-trust monopolist… for mobile gaming transactions.”

Big Changes?

Apps can now start showcasing links enticing users to leave the App Store to spend money. Apple called the ruling a validation of the App Store business model. The judge did not order Apple to let Fortnite back in the App Store, and Epic CEO Tim Sweeney tweeted the game would only return “when and where Epic can offer in-app payment in fair competition with Apple”.