Apple’s App Store Illegally Stifles Consumer Choice, District Court Rules

By Jonathan Ponciano, Forbes Staff

Topline

A federal judge in California on Friday ruled Apple must allow developers to route customers to third-party payment options in applications and not force them to pay the App Store's high fees for in-app purchases, offering some relief to app developers in a high-profile suit brought forth by gaming giant Epic. 

Though it stopped short of calling Apple a monopoly, a district court ruling says the company can't prohibit developers from using non-App Store payments. LightRocket via Getty Images

Key Facts

In an injunction filed Friday, U.S. District Judge Yvonne Gonzalez Rogers ordered Apple to stop barring developers from including external links to third-party payments vendors in applications hosted on Apple's App Store.

The order, slated to take effect in 90 days, also says Apple must not prohibit developers from communicating with customers through contact information they voluntarily provide while registering for accounts within an app.

In a separate filing, Rogers said Apple did engage in anticompetitive conduct under California's competition laws by illegally stifling consumers' choice to pursue payment options outside the App Store's in-house offering, but also denied Epic's claims that Apple is an antitrust monopoly in the gaming market.

Rogers found Apple "enjoys considerable market share" of more than 55% in digital mobile gaming transactions and "extraordinarily high" profit margins, but argued those factors alone didn't show antitrust conduct, and added: "Success is not illegal."

Apple stock sank immediately after the ruling, reversing early morning gains to fall nearly 3.5% below Thursday's closing price of $154.

In a statement Friday afternoon, Apple said it faces "rigorous competition" across its business as it touted the judge's decision that it was not in violation of antitrust law.

Epic CEO Tim Sweeney responded to Apple on Twitter, saying the ruling "isn't a win" for developers or consumers and pledging to "fight on" for fair competition among app stores.

Crucial Quote 

“The court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice," Rogers wrote in the Friday ruling. "When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted."

Key Background

Epic's case marks one of the most high-profile battles taken up against big tech over concerns about Apple and Google's power in the digital-app ecosystem. The disagreement started last August, when Apple removed Epic's popular Fortnite game from the iPhone and iPad app store because it circumvented Apple's 30% app-store fee by offering an external payment option for in-app purchases—a practice prohibited under Apple’s rules. In addition to the California case, Apple’s App Store fees are facing a flurry of antitrust investigations in the U.S. and abroad. In July, a group of bipartisan senators introduced a bill that would bar companies from forcing their payment system on app developers, and last year, the European Union unveiled a set of proposals that would force the likes of Apple and Google to divest parts of their business if they fail to adhere to fair competition rules.

Further Reading

Epic Wants Fortnite Back On South Korean App Store After New Legislation, Apple Says No (Forbes)

Apple Vs. Epic Ruling: A Verdict With No Clear Winners (Forbes)


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