Fortnite maker Epic Games has hailed a court ruling which it hopes will finally abolish the Apple Tax in the US, allowing developers to take in-app payments on iOS devices without paying any commissions to Apple.
Judge Yvonne Gonzalez Rogers was forthright in her criticism of Apple in that ruling, lambasting the tech giant for failing to properly comply with an earlier court order that said it must allow developers to sign-post alternative payment options within their apps. That Apple “thought this court would tolerate such insubordination was a gross miscalculation”, she wrote.
Although most app makers have been critical of Apple’s rules around in-app payments, both Epic and Spotify have been particularly vocal. Spotify sought to force a change to those rules in Europe by filing a complaint with the European Commission, while Epic filed a lawsuit in the US. Both have enjoyed some success, each benefiting from the other’s actions.
In response to the Epic ruling, Spotify posted on X, “Yesterday, a US federal judge ordered Apple to loosen its iron grip on its App Store rules”. Gonzalez Rogers’s judgement is a “consequential action” that will “deliver significant benefits for American consumers”, it added, before confirming that it has already submitted an update to its iOS app in the US which will include new features enabled by the ruling.
Under Apple’s original App Store rules, not only did in-app payments on iOS devices have to be taken using Apple’s own commission-charging transactions system, but developers couldn’t sign-post or link to alternative payment options elsewhere on the internet. The latter rule was called the anti-steering provision.
For Spotify, this made it difficult to sell premium subscriptions within its app, because it would have to pay 15-30% of any subscription income to Apple. It’s also made it difficult for the streaming service to add pay-as-you-go functionality to its app as it moved into audiobooks and online learning. That functionality is also arguably required for Spotify to properly offer direct-to-fan monetisation tools for artists and podcasters.
Epic, Spotify and others argued that Apple’s rules were anti-competitive. Those arguments proved strongest in relation to the anti-steering provision, with both the competition regulator in the European Union and Gonzalez Rogers in the US concluding that it was anti-competitive to prohibit app developers from sign-posting alternative payment options elsewhere online.
In response, Apple amended its rules allowing other payment options to be sign-posted within iOS apps, but put in place restrictions on how things could be communicated, and said that developers would still need to pay Apple a commission if a transaction began within an app. The rate for that alternative commission payment was only a few percent lower than the standard 15-30% commission.
Epic and Spotify accused Apple of failing to comply with its legal obligations in the EU and the US. Which resulted in further regulator action in the Europe and, in the US, Epic and Apple back in court in front of judge Gonzalez Rogers. Where the judge concluded that, with those new restrictions and the alternative commission charge, Apple had set out to “maintain its anticompetitive revenue stream”.
“In the end”, the judge added, “Apple sought to maintain a revenue stream worth billions in direct defiance of this court’s injunction”. But that conduct must now stop. And, indeed, it already has thanks to another speedy rewrite of Apple’s rules. Although Apple has vowed to appeal Gonzalez Rogers’ latest ruling.
Gleefully welcoming the forced change to Apple’s rules, Epic boss Tim Sweeney declared on X, “NO FEES on web transactions - game over for the Apple Tax”.
Though, of course, this ruling only impacts on Apple within the US and Epic is also fighting the tech giant elsewhere in the world. To that end, Sweeney has proposed a truce.
“Epic puts forth a peace proposal”, he wrote. “If Apple extends the court’s friction-free, Apple-tax-free framework worldwide, we'll return Fortnite to the App Store worldwide and drop current and future litigation on the topic”. It’s a nice offer, but it seems unlikely that Apple is ready to give up on all that in-app purchase commission income just yet.