The new Apple/Epic ruling will change the app landscape | Opinion
When last we checked in with the legal battle between Epic and Apple, things seemed to have mostly turned out in Apple’s favour. Almost all of the rulings in the case sided with Apple, with the judge only agreeing with Epic on one relatively narrow-seeming question regarding anti-steering provisions – the App Store rules that forbid developers from pointing app users at alternative ways to purchase digital items or subscriptions.
Compared to the regulatory hot water Apple was simultaneously finding itself in in Europe, where the company was even forced to permit third-party app stores to operate on iOS, the legal process in the USA appeared to have produced little more than a wrist-slap; far from the seismic shift in the app distribution landscape Epic had hoped for when it picked this fight.
Several years and one explosive court ruling from the original judge later, it feels like Apple may have snatched defeat from the jaws of victory. Judge Yvonne Gonzalez Rogers this week issued an absolutely scathing opinion on Apple’s non-compliance with the original ruling, accused a company executive of lying under oath (for which a referral for potential criminal charges has been made), and essentially ordered the company to follow a new, much more restrictive, set of steps to implement the ruling.
“To Tim Sweeney’s credit, ‘offering’ to put Fortnite back on the App Store as part of his peace deal is a genuinely funny bit of cheek”
Epic’s Tim Sweeney did an immediate victory lap with the press, claiming that Fortnite would be back on the App Store next week (it hasn’t been available directly on iOS since Apple barred Epic’s developer account for breaching their terms of service back in 2020) and publicly offering Apple a “peace proposal” whereby they would return Fortnite to the App Store and drop their ongoing litigation in return for Apple extending compliance with the court’s ruling worldwide.
That’s a great bit of PR work, and you can’t blame Sweeney for capitalising on the situation – but it’s worth remembering that this ruling, rightfully furious at Apple’s conduct as it may be, still only applies to the single issue where the judge originally sided with Epic.
It does not change any of the other rulings, and certainly doesn’t order Apple to reinstate Epic’s developer account or any of its software (to Sweeney’s credit, “offering” to put Fortnite back on the App Store as part of his peace deal is a genuinely funny bit of cheek, given that its absence is due to a ban on Apple’s part).
The ruling and the remedies it orders are still exclusively related to anti-steering practices – there’s nothing here to suggest that Apple will be ordered to open up to third-party app stores like in Europe, for example.
Even if the question of anti-steering is a narrow topic compared to the overall scope of the original lawsuit, the new ruling is still very significant in a couple of ways. Firstly, it means that how Apple operates the App Store in these regards is now going to be subject to strict oversight.
You don’t get to piss off the courts this much and still get broad leeway to devise your own remedies and interpretations of rulings. Apple’s behaviour in this regard has been labelled as anti-competitive and deliberately non-compliant, which means its room to manoeuvre and make its own decisions on this topic will be extremely restricted in future.
There will of course be appeals (though the appeals of the original ruling came to nothing, and there’s no particular change to the legal reasoning in this new ruling) but for now, it seems that the court will order Apple to remove all fees on off-platform transactions, and forbid it from implementing any anti-steering practices at all other than a simple screen telling users they are proceeding to a third-party site.
That’s the obvious significance of the ruling – and if that’s upheld on appeal, it will have major ramifications for the App Store business overall – but there’s a less obvious aspect that’s also worth thinking about.
When the original ruling found in Apple’s favour on most issues but handed Epic a victory on anti-steering policies, it was widely seen as being a very narrow victory – quite a minor concession that Apple would have to make, while keeping most of its platform business entirely intact.
What this ruling and the events it documents show, however, is that that’s absolutely not how a lot of senior figures within Apple viewed things. Some commentators have characterised Apple’s actions and decisions that led to the judge being so furious at them as if they were merely mistakes or missteps, but I find the screw-up interpretation tough to believe.
Apple has great legal advice, and Tim Cook is nothing if not a cautious leader – but despite senior figures like Phil Schiller arguing against this path, and the downside risks being openly discussed, the company’s most senior management still chose an option they knew risked a serious and impactful rebuke from the courts.
An officer of the company even put their own neck on the line by (according to the ruling) lying under oath, which could potentially have serious personal consequences rather than just the usual slap-on-the-wrist financial penalties major corporations generally face for their antics.
Unless Apple has genuinely ended up feeling itself above the law and beyond consequences (which isn’t impossible, of course, but doesn’t seem like a culture that would persist under so sober and generally risk-averse a CEO as Cook), it seems that they saw the original ruling as a massive threat to their business model, one so serious that even very risky measures were justified in trying to undermine its impact.
“What this should do, in theory, is open up a very significant new form of competition over payment processing for these transactions”
With the judge now ordering a maximalist interpretation of the original ruling that shuts down Apple’s ability to act anti-competitively in its implementation, we will now see whether the company’s assessment of that risk was justified.
To be clear, this doesn’t directly impact the App Store’s own commission structure. It just means developers can push customers to other platforms off-app and Apple can’t interfere with or block those transactions in any way, or charge any fee related to them (it had originally planned to levy 27% on off-app transactions, a processing discount of 3% compared to its usual 30% IAP fee).
What this should do, in theory, is open up a very significant new form of competition over payment processing for these transactions, so Apple’s fees may eventually be forced to drop in order to keep the company’s in-house transaction solution competitive with third-parties.
In practice, it’s unlikely that this ruling – if enforced and upheld over the long term – will impact the market in quite such a straightforward way. A core difference between the new court order and the original ruling is that the original left leeway for Apple to charge some fee for off-platform transactions as long as they could justify it in terms of the services offered by the App Store to developers – a justification which, it noted, had never been made for the existing 30% fee structure, which Apple had seemingly just pulled out of its ass around the time it started the App Store business.
The new ruling removes that leeway. Since Apple just picked the most anticompetitive option and didn’t follow the order to justify its fee structure, it now doesn’t get to set an off-platform fee at all.
For now, that will create new opportunities and options for developers, and yes, it may force Apple to be more competitive with its fees to some extent; but the company still clearly feels that it’s justified in charging developers for using the App Store platform in some way (which is probably fair), and rather than getting caught in a downward spiral of competition over fees with third-party processors, it’s very likely that it will try to levy its fees through an alternative structure.
In the EU, it experimented with per-install fees, which developers quite reasonably hate. It’s not clear which other paths are open to it in wake of this ruling, but it’s extremely unlikely that it will give up on the idea of taking a cut from App Store transactions entirely.
The decisions it makes in that regard could potentially change the business model for apps and games in a very fundamental way. The initially narrow nature of this anti-steering ruling just changed into an inflection point that could alter the landscape for every developer in this space over the coming years.
