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Epic Games, publisher of the Fortnite video game series, has condemned the “sad outcome” of its three-year fight to open up the Apple App Store to third-party payments providers.
On Tuesday (January 16), the Supreme Court of the United States (SCOTUS) denied appeals from both sides against the outcome of an antitrust lawsuit against Apple.
The SCOTUS denials mean that a Ninth Circuit appellate decision, reached in 2023, will stand, handing victory in the case mostly, but not entirely, to Apple.
Originally filed in August 2020, Epic’s lawsuit did manage to extract some key concessions from Apple.
However, as Epic CEO Tim Sweeney said in a statement, the plaintiffs were hoping to gain much more from the case.
“The court battle to open iOS to competing stores and payments is lost in the United States,” he said. “A sad outcome for all developers.”
App Store ban leads to antitrust suit
Epic originally filed the suit against Apple after the Fortnite app was removed from the App Store in August 2020.
Although the app itself was free to download, Epic monetised Fortnite by selling in-game items to players.
Previously, these items could be bought from the App Store or Google Play Store, but in August 2020, Epic launched a new direct payment method that bypassed Apple and Google.
Alongside the direct payment method, Epic also introduced a discount that allowed players to save 20 percent by purchasing in-game items directly from Epic.
When Apple and Google became aware of the direct payment feature, they immediately removed Fortnite from their app stores for violating their rules against third-party billing systems.
“Epic enabled a feature in its app which was not reviewed or approved by Apple,” Apple said in a statement at the time.
“They did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services.”
Since then, Epic CEO Sweeney has been on a mission to break what he sees as monopolistic and anticompetitive practices by Apple and Google.
Opening up the two app stores to third-party billing systems was one of Sweeney’s main aims, as was scrapping, or at least curtailing, the 30 percent commissions that Apple and Google used to charge on in-app payments.
Wins and losses in Epic v Apple
On the plus-side for Epic, an injunction against Apple’s previous “anti-steering” rules went into effect alongside the SCOTUS denials.
Up until this week, these rules had prohibited iOS developers from adding buttons, external links or other calls to action that directed users towards third-party purchasing mechanisms.
“As of today, developers can begin exercising their court-established right to tell US customers about better prices on the web,” said Sweeney.
“These awful Apple-mandated confusion screens are over and done forever,” he added, sharing two examples of these screens from the Spotify and Netflix apps on iOS.
Source: Tim Sweeney, X
However, Sweeney also objected strongly to Apple’s “bad-faith” effort to comply with these requirements, which he believes “totally undermine” the spirit of the injunction.
Adding friction to the user journey
Firstly, Apple has imposed new rules around the placement of external purchasing links. These rules benefit Apple at the expense of developers and third-party payments providers.
As noted by Sweeney, the rules also prohibit developers from placing external purchasing links within the app's ordinary payment flow.
“Rather, links must be separated out into a different section of the app, away from places where users actually buy stuff,” he said.
Secondly, upon clicking an external purchasing link, Apple requires developers to force the user to open a generic web browser session to continue their purchase.
This could mean that the user has to log in with the merchant again to complete the purchase, and it could also mean that their desired item is abandoned.
Finally, Apple will “front-run” competing payment providers by placing its own "scare screen" over the app, as shown below, when a consumer clicks an external purchasing link.
Source: Apple Developer Support
Sweeney said Epic will return to District Court to contest the “bad-faith” compliance measures described above.
App Store still a high-commission environment
But perhaps the biggest disappointment for Sweeney is that the SCOTUS ruling means that Apple is allowed to keep its high commissions on in-app payments.
Previously, Apple had imposed a commission of 30 percent on all in-app purchases. This changed in 2021, when Apple introduced a 15 percent commission for qualifying small businesses (those that generated up to $1m in App Store revenue in the previous year).
Following the Epic lawsuit, Apple has now introduced a new 27 percent commission for in-app payments made via external purchase links.
For those apps that qualify as small businesses and where the purchaser uses an external purchase link, the commission is reduced to 12 percent.
The same 12 percent commission applies to external transactions that are classed as auto-renewals in the second year or later of an auto-renewing subscription.
However, Sweeney described the 27 percent commission as “anticompetitive” and said Epic will continue to oppose it.
“It kills price competition,” he said. “Developers can't offer digital items more cheaply on the web after paying a third-party payment processor 3 to 6 percent and paying this new 27 percent Apple Tax.”
The 27 percent commission introduced by Apple is similar to the 26 percent commission introduced by Google for developers using so-called “Alternative billing systems”.
Currently only available in India and South Korea, Epic has nonetheless referred to Google’s 26 percent offer as a “fake choice” for developers, when combined with other payment fees.
“The fight goes on,” he said, noting that the EU’s Digital Markets Act goes into effect on March 7.
“Regulators are taking action and policymakers around the world are passing new laws to end Apple’s illegal and anticompetitive app store practices.”
Vixio contacted Apple for comment but did not receive a response before publication.
