Epic Games wins injunction favoring alternative payments in antitrust lawsuit against Apple

A federal judge today ordered Apple to change its policies and enable developers to use alternative payment systems in their apps in a ruling in Epic Games antitrust lawsuit.

The permanent injuction will allow game and app makers to sidestep Apple’s 30% commission that it has had on the App Store for more than a decade. That commission generates billions of dollars a year for Apple.

The order from U.S. District Court judge Yvonne Gonzalez Rogers in Oakland, California. She ruled that Apple violated California’s laws against unfair competition. Still, she ruled in favor of Apple on other important counts in the complicated antitrust lawsuit.

For instance, she favored Apple on a breach of contract allegation that stemmed from Epic deciding to enable alternative payments for its Fortnite users. When Epic updated Fortnite with a “hot fix” to enable payments through the web, Apple removed Fortnite from its App Store and that prompted the antitrust suit from Epic. A similar confrontation happened with Google and Epic’s antitrust lawsuit against Google is still pending.

When Apple set up the App Store in 2008, it instituted a 30% commission on every in-app purchase transaction. While Apple may have earned that commission with the investments in made in the App Store and the iPhone, Epic argued that it effectively became a tax that sucked billions of dollars out of the game industry and should have been reduced. Epic’s own store, the Epic Games Store, takes a 12% commission. Apple believes the fee is necessary for its continuing operating costs, but Epic offered evidence at the trial that Apple makes a lot of profits from the fees, while Apple said it could not calculate the actual profits.

Above: Epic takes a swing at Apple.

Image Credit: Epic Games

The judge’s order takes effect in three months, and Apple will have a chance to appeal. Under the ruling, Gonzalez Rogers found that marketplace owners such as Apple can set their own marketplace terms, but she directed Apple to end its rules that prohibit game companies from communicating with players and steering them to better deals elsewhere.

Apple had put in place “anti-steering” policies that directed developers to use its payment system — which generates the 30% commission — in part because it reduced security risks for players. Apple is permanently stopped from prohibiting developers from including external links or other calls to action that direct players to alternative payments.

Gonzalez Rogers said that Apple does not have a monopoly in the market of digital mobile gaming transactions under either federal or state antitrust laws. She ruled that the relevant market for antitrust assessment is the digital mobile gaming market, not gaming generally and not Apple’s own internal operating systems related to the App Store. She noted that the digital mobile gaming market is a $100 billion a year market.

But she did say that “the trial did show that Apple is engaging in anti-competitive conduct under California’s competition laws.”

In a statement, Apple told the Verge, “Today the court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law. 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.”

However, on September 1, Apple agreed to allow outside links for signups for what it called “reader” apps like Netflix and Spotify, following a regulatory probe in Japan. And South Korea implemented a new law to require alternative payment systems in that country.

We have asked Epic for comment.