Apple Doesn’t Have to Allow Apps to Offer Alternative Payment Methods Despite Epic Games Case

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In the aftermath of its landmark case with Epic Games, Apple was ordered to open up its payment platform to allow developers to offer alternative methods of in-app payments, but now it looks like that won’t be happening anytime soon.

It was the singular point that Apple lost in its court battle with Epic, where Judge Yvonne Gonzalez-Rogers otherwise ruled that Apple was not a monopolist merely because of its considerable market share. “Success is not illegal,” the judge said.

However, Judge Rogers did take umbrage with one aspect of the case, which was Apple’s long-criticized “anti-steering” rule that prevents app developers from even mentioning that there could be other ways to pay for the services offered by their apps.

It’s the same rule that’s long prevented apps like Netflix from presenting anything more than a sign-in page when first opening their apps. Put simply, Apple’s rule was that you either made your users pay for things using the App Store’s in-app purchasing system — giving Apple the requisite 30 percent commission — or you couldn’t take about collecting money from your users at all.

While Apple has relaxed that rule for apps like Netflix and Spotify, it still limited that to these so-called “Reader” apps — those that it says “allow a user to access previously purchased content or content subscriptions,” such as magazines, newspapers, books, audio, music, and video.

Judge Rogers, however, ruled that Apple couldn’t make such hair-splitting distinctions. In September, she issued a permanent injunction prohibiting Apple from blocking links to other payment methods. The problem, according to the ruling, was that such behaviour was anticompetitive under California law because it “hide[s] critical information from consumers,” which also “illegally stifle[s] consumer choice.”

The injunction was expected to come into effect today — December 9 — but Apple naturally moved to appeal the decision right away while also requesting a stay of the order until the appellate court handed down a ruling.

The request for a stay originally went to Judge Rogers, who denied it last month, saying that Apple was looking for “an open-ended stay with no requirement that it make an effort to comply.” Judge Rogers’ new order also added that Apple was being disingenuous by saying that it needed more time to implement the changes, yet at the same time asking “for an injunction which would effectively take years.”

Of course, Apple appealed this decision as well, making the case to the Ninth Circuit Court of Appeals that not only do these changes require more time, but they also complicate things financially.

The original ruling never prohibited Apple from still collecting its 15-30 percent commission on transactions that occur on the App Store. In fact, Judge Rogers specifically stated that Apple would still be “entitled to a commission or licensing fee, even if IAP was optional.”

In its motion to stay the injunction, Apple made the case that it would be very costly to create a system that process to collect a commission from purchases outside the App Store, and these are costs that Apple would not recoup if the appellate court later ruled that it never had to do this in the first place.

Apple has not previously charged a commission on purchases of digital content via buttons and links because such purchases have not been permitted. If the injunction were to go into effect, Apple could charge a commission on purchases made through such mechanisms. Apple would have to create a system and process for doing so; but because Apple could not recoup those expenditures (of time and resources) from Epic even after prevailing on appeal, the injunction would impose irreparable injury.

Apple’s Reply in Support of Motion for Administrative Stay

The Ninth Circuit appellate court obviously agreed with this point, particularly since it feels that Apple has a reasonable chance of seeing the original ruling overturned once all is said and done.

Apple has demonstrated, at minimum, that its appeal raises serious questions on the merits of the district court’s determination that Epic Games, Inc. failed to show Apple’s conduct violated any antitrust laws but did show that the same conduct violated California’s Unfair Competition Law.

United States Court of Appeals for the Ninth Circuit

In its ruling, the higher court cited a previous case that held if the conduct doesn’t violate antitrust laws in the first place, it then can’t be considered unfair under state competition laws.

However, this is merely a preliminary finding, and the final decision will have to wait until the actual appeal winds its way through the courts. For now, the Ninth Circuit court has merely said that these questions, combined with Apple’s “sufficient showing of irreparable harm,” is enough for them to stay that part of the injunction and “maintain the status quo pending appeal.”

What This Means

For the most part, this means that Apple won’t have to make any sweeping changes to the App Store anytime soon. So it’s business as usual for now.

This doesn’t mean it’s all over, though. While the appeal could take a few more years before a final decision is reached, Apple will still have to prove its case if it wants to avoid finding itself staring down the barrel of this particular injunction later on.

Meanwhile, however, Apple will not be required to relax its anti-steering rules any more than it already has. A few other recent changes will still be coming into effect, but none of them are nearly as significant as what Judge Rogers had ordered the company to do.

For one thing, Apple’s decision to relax the rules for “Reader” apps like Netflix and Spotify still holds. This came as a result of preliminary findings by the Japan Fair Trade Commission (JFTC), to which Apple voluntarily offered to remove these anti-steering provisions, resulting in the JFTC investigation being closed without any official censure against Apple.

The stay also doesn’t apply to the second part of the injunction, which orders Apple to allow developers to communicate alternative payment options to customers directly, using any information that’s been provided voluntarily through account information, such as an email address or phone number.

However, Apple was also poised to do this before Judge Rogers’ ruling, as it had agreed to similar terms in August to settle a 2019 class action lawsuit. Apple made those changes official in October, with an update to the App Store Review guidelines that deleted the section that prohibited “target[ing] individual users outside the app to use purchasing methods other than in-app purchase.” An additional clause was added that prevented developers from forcing their users to supply a name and email address to use their apps but didn’t place any serious restrictions on how that information can be used, apart from the standard limitations on collecting information from kids.

However, the main part of the original injunction would have been considerably more onerous since it would have required Apple to let developers place buttons and links out to completely separate purchasing systems.

This wouldn’t have merely made it more difficult for Apple to collect its commission, but it also would have opened up a much bigger can of worms when it came to features like parental controls, Screen Time, refunds, and subscription management. These are things that are automatically handled when using Apple’s in-app purchasing system but would be much more complicated to address in a scenario where hundreds of developers were all linking out to different payment systems.

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