On September 10 Judge Gonzalez Rogers gave Apple a partial victory in a lawsuit in which it was forced to defend itself against Epic Games’ claims of anti-trust. The ruling, however, prevents Apple from preventing developers from displaying their own in-game app purchase payment systems. Legal observers, gaming industry insiders and Vegas casino online players have been following this case because there’s a lot riding on the outcome. Developers and designers, online casino platforms, social media giants and other industry heavies have been waiting to see whether Epic Games would be successful in shaking Apple’s tight grip on its Apple Store where it holds a partial monopoly in marketing games.
After months of testimony and maneuvering and several more months of consideration, Judge Gonzalez Rogers ruled that Apple had not violated antitrust law in demanding that payments for in-game purchases for games that Apple sells be facilitated through the Apple Store.
At the same time the judge ruled that in the future, Apple would not be able to prevent developers from providing their own in-game app purchase payment systems which is what caused the rift between Apple and Epic Games in the first place. That ruling will negatively impact on Apple’s business strategy -- Apple has made millions of dollars over the years by refusing to allow any in-app purchases for games that Apple does not control (and take a percentage). If the ruling stands, it will significantly impact game makers and subscription service providers.
Implications of the decision for the gaming industry are considerable. The ruling gave a partial victory to both sides and, if it survives the appeals, will impact on gaming companies and platforms for years to come.
According to Judge Rogers, Epic failed to prove that Apple operates as a monopoly. It must now pay Apple revenue commissions as back payment for its efforts to subvert its agreement with Apple to have all in-game app payments run through the Apple Store.
However, Rogers cited California competition laws when ruling that in the future, Apple cannot prevent developers from offering alternative payment methods outside the Apple App Store. If the ruling stands, developers will be able to cut Apple out of the commissions that Apple had taken for granted by funneling iOS users to other payment methods. Observers foresee developers looking forward to a huge profit margin expansion.
Until now, developers of iOS-compatible software have been required by Apple to use its payment system. That system gives Apple a commission on every sale. The alleged antitrust nature of that system was Epic’s complaint all along.
Mark Lemley, professor of law at Stanford Law School who specializes in antitrust issues and technology, summarizes. "It’s a split decision. It will improve competition on the edges, but it's not the fundamental change that Epic and advocates of the antitrust case would have hoped for."
The suit was triggered by Epic’s frustration over Apple’s control of its in-game purchases for its Fortnite game and its belief that, by requiring that in-game purchases be funneled through the Apple App Store, anti-trust laws were being broken.
In essence, Rogers upheld the App Store’s general structure as legal. She said that Apple isn’t holding an illegal monopoly over the way that developers can process payments for mobile games. But she ordered Apple to allow other payment options within 90 days, a system that will deprive Apple of its 30% commission that until now, it had accepted as its due for allowing the games to be featured in the app store.
Apple originally removed the Fortnite game from the App Store because Epic was providing ways for people to make in-game purchases directly. That’s what led to Epic’s lawsuit. Apple claimed that, as soon as the suit was settled they would allow Fortnight in-game purchases to resume. Now however, Apple has denied Epic’s request for reinstatement of its developer’s license until all appeals have been settled. This means that Fortnite and other game software will not be returning to the Apple App Store for the foreseeable future.
For people who buy apps for their iOS devices, there will now be a link available at the App Store that will take you to another site – generally directly to the site of the product – where you can pay through that system. Rogers ruled that by limiting users’ options to pay the company directly, Apple was limiting customers’ choice and hiding information from consumers which California law prohibits.
Bypassing Apple’s payment system – and their 30% commission – will allow developers to lower the prices of these in-game purchases.
Who is the real loser here, Epic or Apple? Both have lost something and gained something so, in the short run, the situation seems to have ended in a draw. In the long run, the appeals processes will take years to sort out who is allowed to do what. But in the short term, Epic is paying a price for challenging Apple App Store’s control. By its own admission, it breached its contract with Apple so, for now, Apple can justify denying it a new developer’s license.
In addition, the judge ruled that 30% of the $12 million that Epic made during this time from sales that it was contractually obligated to funnel through the App Store must go to Apple.
But Epic has earned the support and admiration of the game development community for taking on the Apple Goliath. This as Round 2’s launch is being readied and Epic is showing no signs of backing down.