A US district judge has dealt a blow to Apple’s business model by ruling that it cannot prevent app developers from including links that allow users to buy items outside the Apple App Store. The App Store is highly profitable for the tech firm, with analysts estimating that it makes annual revenues of about $20bn (£14m) and has a profit margin of 75%.
Who was suing Apple and why?
The lawsuit was brought by Epic Games, the maker of Fortnite, in August 2020 after it tried to get around the App Store payment system, which takes a cut of 15%-30% on purchases made on apps. Apple had promptly removed Fortnite from its store in response, triggering a lawsuit in which Epic accused the Cupertino company of stifling competition by controlling what apps could appear on the store and how they operate.
What was Apple’s response?
As well as countersuing Epic – accusing it of trying to steal that 30% commission with its workaround – Apple said the chunky fee cut was largely in line with other digital marketplaces such as Google Play and that only a comparatively small number of developers pay the highest figure because their apps require sophisticated Apple software to function on Apple devices.
What did the judge say?
Yvonne Gonzalez Rogers handed down an immediate injunction against Apple prohibiting developers from providing links that steer users away from in-app purchases. It means apps can guide users towards a separate website to make purchases and avoid giving a cut of up to 30% to Apple. The order allows developers to put into their apps “buttons, external links, or other calls to action that direct customers to purchasing mechanisms”.
What does it mean for Apple customers?
The ruling applies to the US, so the impact for customers in Europe is not immediately clear (Epic has filed lawsuits in the EU and the UK). There is the implication that the avoidance of the 15%-30% cut will allow savings to be passed on to consumers. And, after a ruling in Japan earlier this month, restrictions on apps such as Spotify, Netflix and Kindle are being lifted globally – so customers of so-called reader apps will have access to a link that helps them set up and manage their account. Friday’s decision at least adds games to the list in the US (games are a huge part of the Apple app store ecosystem).
Is there any good news for Apple?
The judge could not conclude that Apple was a monopolist under “under either federal or state antitrust laws”, which would have put the tech giant in deep legal trouble. The ruling also refused to allow alternative app stores on the Apple platform. Indeed, Apple won on nine out of 10 counts – it described the ruling as a “resounding victory” – but its tight control of the App Store has been loosened.