In a move that has caused Apple’s stock prices (AAPL) to dip, a judge has ruled that the Apple App Store can no longer require developers to use its payment system for in-app purchases. The precedent-setting ruling came on Friday, September 10, 2021, in a case brought forth by Epic Games, maker of Fortnite, amongst other iconic games.
Judge Yvonne Gonzalez Rogers of the Northern District of California’s U.S. District Court ruled that by requiring developers to use the App Store’s payment system for in-app purchases, Apple was violating California’s Unfair Competition Law. Judge Rogers subsequently issued an injunction that prevents Apple from mandating developers to use its payment system, freeing developers to include their own payment portal or a link to a website where the purchase can be completed.
This ruling comes as a tremendous blow to Apple, which was taking a 15% to 30% cut on each sale that was processed via it’s in-app purchase system. This opens a new door for developers, who can now offer up their own payment portal or direct users outside the app to make a purchase, while avoiding Apple’s 15% to 30% fee.
Notably, the California judge’s ruling stopped short of calling Apple a monopoly, which was amongst the arguments claimed in the Epic Games lawsuit. Judge Rogers’ ruling indicated that, “Given the trial record, the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws…Success is not illegal. The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market.”
This ruling comes following months of legal maneuvers. As of mid-day Friday, September 10, 2021, Apple had not yet filed an appeal, but there’s widespread speculation that the tech giant will almost certainly take its case to the appellate courts.
What Does the Court Ruling Mean for Developers and Apple?
The September 10 ruling will have far-reaching impacts across the industry for Apple and developers alike. The judge’s decision has essentially required Apple to modify its business model, as in-app purchases account for a sizable portion of its App Store profits.
For developers, the ruling is good news, as they can now circumvent fees of up to 30%. Previously, mobile app developers had no choice but to use Apple’s payment portal for in-app purchases, making that 15% to 30% fee unavoidable. If a developer tried to circumvent Apple’s payment system, they would lose their ability to offer app downloads via the Apple App Store.
This ruling means that some mobile developers may lower prices for subscriptions and other in-app purchases, since they no longer need to account for Apple’s piece of the pie. Developers will be free to install buttons for their own payment portal or a link to a website where the user can complete a purchase.
Notably, a similar case was brought forth by the U.S. Department of Justice against Google and its Google Play App Store practices, leading many to conclude that Big Tech is facing some significant legal issues in the coming months and years.
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