Apple must allow outside payment methods on App Store, judge rules

Apple was ordered by a court to allow developers to steer consumers to outside payment methods for mobile apps, in a ruling that is a severe blow to the iPhone maker.

A US federal judge granted an injunction sought by Fortnite-maker Epic Games on Friday while also ordering the game-maker to pay damages to Apple for breach of contract. The order could take a big bite out of the profitability of the App Store: according to analysts the App Store takes in more than $20 billion (€17 billion) a year with a profit margin above 75 per cent.

The decision is a significant setback for the world’s most valuable company as it faces growing antitrust scrutiny from lawmakers and global regulators. Apple is expected to appeal, setting the stage for the fight to carry on for at least another year and possibly make its way to the US Supreme Court.

Apple recently has made some modest concessions amid criticism of its market dominance, including allowing developers of media apps such as Netflix to link from its App Store to external websites for payments by users and making it easier for developers to promote alternative pricing plans and ways to pay – without Apple taking a cut.

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Warning shot

Still, the ruling by US district judge Yvonne Gonzalez Rogers is a warning shot across the bow for the California-based company as legislators and regulators examine the role Apple and other big tech companies have as gatekeepers to the digital economy. It could also open the floodgates to follow-on lawsuits seeking millions of dollars in damages.

The evidence outlined in the three-week Epic trial in Oakland, California, cast a harsh light on tech's power and will help build the larger case against Apple and other technology giants including Alphabet, Amazon and Facebook.

Epic sued Apple in August 2020, after the iPhone-maker removed the Fortnite game from its App Store because the gaming company created a workaround to paying a 30 per cent fee on customers’ in-app purchases. Epic wasn’t seeking monetary damages, but sought a court order to stop what it called Apple’s “illegal restraints” on competition.

The outcome of the trial won’t be the last word from the game maker in its global campaign against the world’s most valuable company.

Epic, which took in more than $5 billion (€4.2 billion) from Fortnite last year, also has filed complaints against Apple in the European Union, UK and Australia, and the game maker is suing Google over its Google Play store.

– Bloomberg