Judge issues permanent injunction against Apple in win for Epic's App Store payment crusade

Judge Yvonne Gonzalez Rogers ruled that Apple is not monopolistic, but it has engaged in anti-competitive practices.

41

A major ruling has taken place in the ongoing case of Epic Games v. Apple. Judge Yvonne Gonzalez Rogers has ruled somewhat in favor of Epic Games and issued a permanent injunction against Apple, ordering that it allow app developers the option to include in-app purchase mechanisms in their apps and restricting it from punishing devs for doing so. This is a win for a major part of Epic’s overall case against Apple.

The ruling was passed down on Epic Games v. Apple in official documentation filed on September 10, 2021. In the full ruling, Judge Gonzalez Rogers disagreed with both parties definitions of the overall market that was of central concern in the case.

“The relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store,” the Judge wrote.

Moreover, Judge Gonzales Rogers ruled in this regard that while she did not find Apple to be acting monopolistic, she did find the company to be engaging in anti-competitive practices regarding the App Store. With this in mind, the Judge issued a permanent injunction barring Apple from prohibiting external links and payment methods circumventing the App Store.

One of the crux's of Epic's case against Apple was the removal of Fortnite from iOS for including an in-app purchase system that circumvented the App Store.
One of the cruxes of Epic's case against Apple was the removal of Fortnite from iOS for including an in-app purchase system that circumvented the App Store.

The following excerpt from the injunction is the specific point which bars Apple from prohibiting alternative purchase methods within App Store apps as it did with Epic Games and Fortnite:

This follows closely on the heels of South Korea’s government signing further litigation against storefronts like the App Store, forcing both Apple and Android to allow developers to include alternative payment methods and purchases under penalty of losing a percentage of revenue within the country. Epic Games has acted quickly on these rulings and laws as well, already requesting that Apple restore its dev account status for a Fortnite re-release on iOS in South Korea. However, an adendum for the ruling also declares that Apple's action against Epic in the removal of Fortnite was valid and lawful, so we're unlikely to see Fortnite on iOS in the United States anytime soon.

The case is not over yet and Apple is likely to appeal the matter. However, it would appear that in the case of Epic Games v. Apple, the initial tide is turning for Epic Games and its argument against Apple’s anti-competitive practices.

News Editor

TJ Denzer is a player with a passion for games that has dominated a lifetime. When he's not handing out beatdowns in the latest fighting games, exploring video game history, or playing through RPGs with his partner, he's searching for new food and drinks in the constant pursuit of good times with good people inside and outside the South Texas area. You can also find him on Twitter @JohnnyChugs.

From The Chatty
    • reply
      September 10, 2021 8:40 AM

      Judge rules against Apple in Epic Games suit

      https://www.cnbc.com/2021/09/10/epic-games-v-apple-judge-reaches-decision-.html

      • reply
        September 10, 2021 8:42 AM

        Hell yeah!

      • reply
        September 10, 2021 8:45 AM

        To be clear, while Apple was cleared of 9 of 10 counts, they will be required to allow devs to point users to other storefronts for purchases within apps.

        "Rogers ordered an injunction that said that Apple will no longer be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing, of which it takes 15% to 30%. The injunction addresses a longstanding developer complaint."

        Theres still additional parts of the case that are under consideration

        • reply
          September 10, 2021 9:04 AM

          Oh sorry you point this out here.

        • reply
          September 10, 2021 4:10 PM

          Hmm, can this be used against steam seeing that steam is the dominant storefront?

          • reply
            September 10, 2021 4:39 PM

            Doubtful. Steam isn't controlling the underlying platform it runs on and using that to anticompetitively control sales upstream.

            • reply
              September 10, 2021 6:15 PM

              What about steam deck?

              • reply
                September 10, 2021 7:14 PM

                A selling point is literally that you can install Windows and do whatever you want with it, and they've said that since day one.

            • reply
              September 10, 2021 7:12 PM

              Now do your bit where PS and XB are somehow different even though they own the platforms

              • reply
                September 10, 2021 9:21 PM

                Maybe they’re not.

                Or maybe iOS’s market power is meaningfully different than what any console manufacturer has over the console/PC gaming market. Maybe the presence of physical discs sold by 3rd parties creates competition with the digital copies sold by the platform owners in a way unlike iOS. More broadly you have other differences like how Apple’s 30% rake creates real constraints on available business models for all business sectors given its use as a general purpose computing platform whereas consoles are only applying that rake to a very specific kind of software (games).

                You can make all sorts of potential arguments but I suspect you’ll find they’re all much more likely to lead me to thinking consoles should abide by similar rules rather than believing Apple should get to keep doing what they’ve been doing.

      • reply
        September 10, 2021 8:51 AM

        So this doesn’t appear to create a third party App Store, but just lets companies direct players to their own websites and offer promo emails for what would otherwise be in-app purchases. Apple still has control over their own storefront and what is actually allowed to be installed.

        • reply
          September 10, 2021 8:53 AM

          Yes, but now they cannot block Epic if they have a button in game "Buy more V-bucks on the App Store (Button 1) or via EGS (button 2)", which is basically what Epic did when they started all this last year.

          • reply
            September 10, 2021 9:03 AM

            I'm not a lawyer but it kinda sounds as if it's less that and more "or you can click this link to go to our website to buy V-bucks there instead"

            Either way though I wonder how it shakes out - if some people will still use Apple's IAP system in the app because they think it's more convenient. If Epic was some small indie developer I could see someone saying "why yes I want them to have as much money as possible" but they're not, they're literally a billion dollar corporation.

            • Zek legacy 10 years
              reply
              September 10, 2021 9:07 AM

              This is exactly the outcome Epic wanted, they know that players care about saving money first and foremost. So given the choice between the convenience of the iOS storefront, and a 10% discount found elsewhere, a lot of players will go elsewhere. This gives Apple an incentive to give a competitive cut of revenue from the store.

            • reply
              September 10, 2021 9:08 AM

              I read it you can't directly include the storefront in your app - but you can directly link to the external storefront (eg if on the App Store, going to a Safari webpage to complete the transaction) via in-game actions.

              • reply
                September 10, 2021 9:10 AM

                When Epic pulled the shit to get it booted from the store, was it that they sent you somewhere or did they do the processing in-app? Does anyone remember? The thing got pulled quickly so I'm not sure how many people actually experienced it.

                • reply
                  September 10, 2021 9:14 AM

                  I'm reviewing the materials back then, and it looks like it might have been a direct payment within the app. But even if they had a button that took the user to a third-party website, that would have violated Apple's terms (as several other apps also have fallen problems for this type of payment mechanism)

          • reply
            September 10, 2021 10:34 AM

            So can an app cut Apple out entirely or do they have to offer IAP in addition to their own option? Other than “reader” apps perhaps. Or maybe them too?

        • reply
          September 10, 2021 9:13 AM

          Seems like a reasonable decision.

      • reply
        September 10, 2021 8:55 AM

        The judge decided that the market (in determining if there was a monopoly) was "digital mobile gaming transactions" (not gaming in general, and not Apple's App Store). Under this, Epic failed to show Apple in violation of federal laws, but did find them in violation of California's anti-competitive laws, hence the ruling.

        https://www.theverge.com/2021/9/10/22662320/epic-apple-ruling-injunction-judge-court-app-store

        • reply
          September 10, 2021 8:58 AM

          It’s a reasonable ruling.

          • reply
            September 10, 2021 9:01 AM

            Yeah, it doesn't disrupt the market compared to some of the other aspects Epic wanted.

            • reply
              September 10, 2021 9:07 AM

              I do expect that to be coming, though, given some other recent decisions. Apple is clearly also seeing that with their recent policy changes.

        • reply
          September 10, 2021 9:02 AM

          */Those damned liberal elites in California ruining.... uh... fuckin... ruining uh... ah fuck MAGA!/*

          Thats my impression of my inlaws.

      • reply
        September 10, 2021 8:57 AM

        Doubt it holds up on appeal at the SC.

      • reply
        September 10, 2021 9:00 AM

        So does this mean they can redirect you to make purchases outside the app store to avoid giving Apple a cut?

        • reply
          September 10, 2021 9:01 AM

          100% yes.

          Direct from ruling:
          "permanently restrained and enjoined from prohibiting developers from including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app."

      • reply
        September 10, 2021 9:04 AM

        Apple lost 1 of the claims, the other 9 went to Apple.

      • reply
        September 10, 2021 9:20 AM

        Apple likely cost themselves many billions of dollars by refusing to drop their rake

      • reply
        September 10, 2021 9:22 AM

        Full ruling for those interested: https://www.documentcloud.org/documents/21060631-apple-epic-judgement

      • reply
        September 10, 2021 9:22 AM

        The thing I find interesting is this.

        People complain about the 15% or the 30% cut but it's not like now Epic will get 100% of the money from direct V-buck sales. When you accept money online there's a whole bunch of things that have to line up like credit card processors and internet gateways and so forth. Each of them want a cut. Here lately companies like PayPal and so forth will handle a lot of that for you, but they want a cut as well in addition to the cut they have to give to the other companies involved. When you go to a store in real life to buy something for $5 and hand them a $5 bill they get all five bucks, if you pay with a credit or debit card they get less than five bucks due to the fees (which is why there's a decent chance your $5 thing used to be $4)

        Epic is probably already paying some % of their money for EGS transactions to backend companies, in addition to maintaining the whole infrastructure to handle secure transactions, etc. Let's say it works out to like 10% of the transaction cost. They want to keep the difference between the 30% and the 10%. That's what this whole thing is about.

        But if you're a small indie developer you're not going to want to deal with all of that. Having Apple maintain all that shit for you is great. Especially since now if you make less than $1M a year you're only paying 15% (there's a program you have to enroll in so that's not automatic but it is a thing)

        I'm obviously pro-Apple but this ruling is probably either the right one or close to it. But I think the only companies it's going to really benefit are big ones like Epic and Amazon. The smaller guys aren't going to see the cost benefit from it. They might see some benefit from at least not being prohibited to point out a link to a signup website like that whole Hey! debacle but the changes Apple made a week or so ago already allow for that as I follow it.

        To me the biggest thing is that they didn't rule that Apple has to allow other app stores on the phone. That alone will keep iOS from becoming Android where antivirus for your phone is a legit concern.

        • reply
          September 10, 2021 9:25 AM

          Yep, that’s how I see it. But maybe Apple drops their rate for App Store purchases to entice the smaller companies from creating their own payment systems.

        • reply
          September 10, 2021 9:25 AM

          I've never been concerned about AV for my android. It's open enough that you can do stupid shit if you want, but you still have to go out of your way to do so and confirm granting all those permissions.

          • reply
            September 10, 2021 9:28 AM

            Though that aside, I largely agree. I'm definitely not "pro-Apple", but especially for smaller devs you can get a lot for that cut - even just managing update distribution is a huge thing to do on your own.

            Less so for Apple than on some other platforms; Steam offers devs far more actual infrastructure though of course not as large a consumer base.

            But I also don't have a problem with letting people go their own way if they don't want to use that infrastructure.

        • reply
          September 10, 2021 9:29 AM

          What I can see happening now is Epic or another company coming in to act as a middleware storefront for small app developers to handle all the CC processing, redemption/etc. issues at a far lower cut than 30% or even 15% that Apple offers. Larger companies (eg King, Supercell, etc.) can make their own without problems, but just as Humble and Steam were godsends for smaller devs of premium games, this type of service now can help the smaller mobile devs.

          • reply
            September 10, 2021 9:37 AM

            Personally I'm skeptical that Epic's 12% cut thing is going to last forever. One of the things we found out is EGS is not profitable and they don't plan on it being profitable until 2027. They've got a ton of money so they're willing to take the loss to get into this market (and look how EGS is a force to be reckoned with in the way that Origin and others weren't, so it's working) but I think at some point - and it may be after 2027 - they'll ratchet that up some. Every large company does. YouTube reduced payments to content makers. eBay upped fees. Once you're a dominant force you can put the screws to folks. This isn't a charity it's a company that makes a F2P transaction festival.

            That said there's more to the thing than just who takes a cut. Epic has no problem managing V-bucks through their centralized thing but some developers won't want to bother with a centralized thing. Others could provide that, or Apple could. They're now in more of a position to have to prove to their developers that they're worth it, which is a good thing and it's what competition is designed for.

          • reply
            September 10, 2021 9:43 AM

            Epic is singularly well positioned to do that as part of their general Unreal engine offering, but it's unrealistic to expect them to charge way lower than Apple, at least in the long run.

            There's a lot of how they've been operating lately that is funded by external money, especially with EGS; it's not necessarily viable in and of itself.

          • reply
            September 10, 2021 9:46 AM

            There’s already Stripe for this

        • reply
          September 10, 2021 9:45 AM

          People complain about the 30% rake because it’s required anticompetitively. The entire problem is Apple refused to make a payment system that was chosen on its merits (by devs and/or customers) and instead enforced it by fiat (for great financial gain).

          Twitter for instance is trying to allow its users to sell tickets to their followers for digital performances. But Apple was going to take a higher cut of each ticket sale than Apple. Creators were asked to give Apple a 30% cut of every transaction from a fan while the relationship actually exists because of Twitch? It’s terrible economically for all sorts of new business ideas.

          • reply
            September 10, 2021 12:24 PM

            Can we agree leaving tech companies to behave ethically on their own is not working.

            • reply
              September 10, 2021 12:38 PM

              There’s nothing special about tech. Capitalism assumes companies will behave badly given financial incentives so we have government mechanisms to regulate that behavior. We’ve been in such a loose regulatory environment for decades a lot of folks aren’t even used to the concept.

        • reply
          September 10, 2021 9:47 AM

          The problem is the rest of the payment processing market is nowhere near 30%. Stripe takes 2.9% + .30 and is soooo much easier to work with.

          • reply
            September 10, 2021 10:24 AM

            Yeah but Stripe doesn’t have mobile IAP integrations (why would they? It’s been verboten up until now)

            Although yes that % is much lower and very competitive.

            But you’re still having to make the backend, the system that communicates with the app, tracks all that stuff, and maybe all of that is coming down the pipe since we’ve had this ruling come down, but Stripe is more aimed around taking payments in existing systems or for your softball charity.

            • reply
              September 10, 2021 10:37 AM

              Apple does not try to justify the 30% rake based on features. We don’t need to either. It’s 30% because they blocked competition from trying to ship the same feature set with a lower rake.

              It was an arbitrary number they came up with in the days before IAP. Their public comments were they planned to run the store at cost. Then it turned out 30% was enough to generate billions in yearly revenue so it persisted anticompetitively. We don’t need to try to backfill a different justification.

        • reply
          September 10, 2021 9:48 AM

          Nah, multiple parties will compete to do what Apple provides for less. New equilibrium will be found.

        • reply
          September 10, 2021 9:52 AM

          I had thought of this as well. The other thing that crossed my mind about this is if this might open the door for more cross-platform IAP items to tie to one publisher level account. Today this can't happen because all the purchase data is tied up at Apple from what I've gathered from dev/publisher comments. But, if you can give the option that "if you buy from our website instead of Apple, your purchase will be available across all mobile platforms" that would be a pretty compelling reason to buy direct from the dev/pub instead of Apple.

          But, the your point about the transaction fees, and even dealing with customers about refunds, etc., is a pretty big reason to stick with letting Apple deal with all of that.

          • reply
            September 10, 2021 9:57 AM

            So V-bucks bought on apple didn’t show on PC? I noticed this phenomenon on Warzone between the Xbox and PC. If I earned 100 coins on Xbox it didn’t show on PC and vice versa.

      • reply
        September 10, 2021 9:29 AM

        Hahahahaha

        Won’t somebody think of poor grandma getting scammed????

      • reply
        September 10, 2021 9:48 AM

        I called this a while back: https://youtu.be/ezNW_p8D2wQ

      • reply
        September 10, 2021 10:05 AM

        Found this interesting. From the article on Ars technica: "Additionally, because Apple's choice to cut off Epic Games' developer account within the Apple ecosystem was, according to the ruling, "valid, lawful, and enforceable," Apple can continue to not let Epic Games return to the App Store as a licensed and approved developer."

        I can't imagine Apple letting Epic back on the app store after that injunction.

        • reply
          September 10, 2021 10:11 AM

          Yep. And Epic has to pay Apple 30% of what they earned during the period they subverted the App Store rules.

          Really took one for the team.

          • reply
            September 10, 2021 10:31 AM

            Wasn’t that “period” just a few hours. My memory is

            1. Epic puts out Fortnite update with hidden option to pay Epic directly
            2. Fortnite update goes live
            3. Option to pay Epic directly goes live (not sure if it was triggered remotely or was time delayed or what)
            4. People notice. News stories run on it
            5. Apple pulls Fortnite off App Store, both for subverting IAP as well as hiding something from the review team.

            I recall it all happening on the same day basically.

            • reply
              September 10, 2021 10:38 AM

              Yes but the point is Epic basically loses on all counts personally. They just opened up the App Store for everyone else at great cost to themselves.

              • reply
                September 10, 2021 10:41 AM

                I predict at some point they’ll kiss and make up.

                Apple sued Samsung for a billion dollars and won and Samsung still renewed their contract with Apple to be a chip supplier, also Apple still wanted to renew the contract in the first place.

                Business is business. Steve Jobs isn’t running the ship, I don’t see Tim Cook keeping Epic off the store out of spite. They eventually let Gizmodo back into press events after they ran the big iPhone 4 leak story.

                • reply
                  September 10, 2021 10:48 AM

                  I think this misunderstands the dynamics of the businesses in play.

                  Samsung is a major hardware supplier. Apple can’t exactly easily cut them out. Gizmodo has exactly no bearing on Apple and aren’t even worth thinking about.

                  Epic is exactly the business Apple has been trying to stifle with the App Store policies from day 1. A developer creating an app that is more desirable than the platform it runs on is their nightmare post Office/Adobe on Mac. Wonder why the iPad has no serious productivity ecosystem like the Mac/PC? Because App Store policies prevent it from happening so there’s no chance you’d switch to another platform for those apps one day.

                  Epic just had a game so powerful and popular they used it to cost Apple billions of dollars. This is exactly what Apple was always trying to avoid because their conception of a platform is one where they extract the majority of the value and exert maximal control.

      • reply
        September 10, 2021 10:21 AM

        So this means that all of those apps that got rejected for having a donation link on their website or a paypal link or whatever can re-add those now?

    • reply
      September 10, 2021 11:39 AM

      I can't wait to read all the complaints from people getting fleeced from third party payments in the next year..

      • reply
        September 10, 2021 11:41 AM

        That's a weird expectation.

    • reply
      September 10, 2021 11:55 AM

      Epic is not satisfied with the result

      “Today’s ruling isn’t a win for developers or for consumers,” Epic boss Tim Sweeney says in a series of tweets. “Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers. Fortnite will return to the iOS App Store when and where Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers. Thanks to everyone who put so much time and effort into the battle over fair competition on digital platforms, and thanks especially to the court for managing a very complex case on a speedy timeline. We will fight on.”

      https://www.pcgamesn.com/fortnite/ios-2021

      • reply
        September 10, 2021 11:57 AM

        So they think they are going back to the app store? Seriously?

        • reply
          September 10, 2021 11:59 AM

          I think as pointed out in another top level Shack article, the decision says that other factors in the specific case related to Epic's behavior gives Apple every reason to block Fortnite for other reasons from the App Store.

          • reply
            September 10, 2021 12:22 PM

            Was there ever a monetary loss attributed to Fortnite being removed from the App Store? Just curious how much money Epic has lost by not being there.

            • reply
              September 10, 2021 12:40 PM

              iOS was a pretty low share of their players, I forget if it was 8-10% of active users or revenue.

    • reply
      September 10, 2021 6:19 PM

      Ultimately, the Court finds persuasive that app review can be relatively independent of app distribution. As Mr. Federighi confirmed at trial, once an app has been reviewed, Apple can send it back to the developer to be distributed directly or in another store. Thus, even though unrestricted app distribution likely decreases security, alternative models are readily achievable to attain the same ends even if not currently employed.

      https://www.theverge.com/2021/9/10/22667256/apple-vs-epic-trail-judge-craig-federighi-macos-security-arguments-iphone-ios-response

      Judge correctly deduces how Apple has attempted to mislead consumers and the court by conflating app review and an OS/app security programming model as both equally necessary and important to achieve security when in fact Apple themselves have shown (and publicly marketed) that isn't the case on another platform they own.

      • reply
        September 10, 2021 6:54 PM

        Yeah, there's a few other red flags regarding Apple in it. Eg: the judge took issue that the 30% revenue cut may be unjustified for what service Apple provides, but she doesn't have evidence due to lack of competition presently to enforce any action on it

Hello, Meet Lola