US Judge Rules Apple Can't Block In-app Purchasing

In a mixed verdict in the high-profile court battle between Epic Games and Apple, a federal judge on Friday ruled that Apple can't block third-party developers from adding in-app purchasing mechanisms to iOS apps. At the same time, the judge ruled that Apple has not violated state or federal antitrust laws. 

"Success is not illegal," US District Judge Yvonne Gonzales Rogers wrote.

While the judge ruled that Apple is an antitrust monopolist, she did find that Apple is engaging in anticompetitive conduct under California's competition laws. Consequently, she issued the injunction blocking Apple's App Store rules. In addition to addressing in-app purchases, the injunction says Apple can't stop developers from communicating with customers via contact information that customers voluntarily submit when they set up an account within an app. The permanent injunction goes into effect in 90 days.

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

Epic Games filed suit against Apple after the tech giant kicked Epic's game Fortnite off the App Store. Epic was booted from the App Store after it implemented a direct payment system for in-game currency in Fortnite, bypassing the 30 percent fee that Apple charged developers. Epic attempted to lure users to use the new payment system by offering discounts of up to 20% on virtual purchases. Epic charged that Apple's actions violated antitrust laws.

The Apple-Epic case began in May, in the US District Court in the Northern District of California. Apple CEO Tim Cook testified in court for the first time during the trial, and a series of other Apple executives also took the stand.  

Gonzales Rogers ruled that Apple is entitled damages from Epic Games for breach of contract. Epic will have to pay damages in an amount equal to 30% of the more than $12 million in revenue Epic Games collected from users in the Fortnite app on iOS via Epic Direct Payment between August and October 2020. Additionally, it has to pay 30% of any such revenue Epic Games collected from November 2020 through the date of judgment. 

Apple was justified in terminating its Developer Program License Agreement with Epic Games, the judge said.

Before concluding that Apple is not a monopolist, the judge said she disagreed with both parties' definition of the relevant market. 

"Ultimately, after evaluating the trial evidence, the Court finds that 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," she wrote. "The mobile gaming market itself is a $100 billion industry. The size of this market explains Epic Games' motive in bringing this action. Having penetrated all other video game markets, the mobile gaming market was Epic Games' next target and it views Apple as an impediment."

In response to the ruling, Apple issued a statement saying, "Today the Court has affirmed what we've known all along: the App Store is not in violation of antitrust law. As the Court recognized 'success is not illegal.' Apple faces rigorous competition in every segment in which we do business, and we believe customers and developers choose us because our products and services are the best in the world. We remain committed to ensuring the App Store is a safe and trusted marketplace that supports a thriving developer community and more than 2.1 million U.S. jobs, and where the rules apply equally to everyone."