After a year-long battle in court, Apple won against Epic Games, the creator of Fortnite. The court did not find Apple guilty of antitrust conduct just because it enjoys 55% market share and high profit margins in digital mobile gaming transactions. It did, however, order Apple to ease up restrictions against third-party payments for in-app purchases.
It all started last year when Epic inserted a code in a Fortnite update allowing users to purchase in-game currency ‘V-bucks’ directly from them. It wasn’t mentioned in their filings for the update and so it was approved. They then activated a ‘hotfix’ (which does not require a review by Apple) in order to make the option visible in the game. After announcing the new option and saying that direct purchases from Epic would be 20% cheaper, Apple kicked them out of the App Store stating that bypassing their payment gateway is a violation of their terms of service. They did this to Android too and met the same fate in the Google Play Store.
Shortly after being booted out, Epic has filed a suit against Apple and Google separately for violation of antitrust and anti competitive laws. For their part, Apple has filed a countersuit stating breach of contract, seeks to block Epic’s payment system from any app in the iOS storefront, and sought monetary damages.
Epic Games is ‘found liable for breach of contract’ and is ordered to pay 30% of the $12,167,719 revenue it received from the Fortnite app in iOS through Epic Direct Payment between August and October 2020, plus 30% of revenue they collected from November 1 2020 through date of judgement, September 10, 2021.
Tod Sweeney, founder of Epic Games, said in a tweet that “Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.” He also said that Fortnite will return to iOS “when and where Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers.”
Meanwhile, Apple said in an official statement, as posted by Bloomberg’s Mark Gurman, that they are committed to ensuring that the App Store is a safe and trusted marketplace that supports a thriving developer community and more than 2.1 million US jobs and where rules apply equally to everyone.
While the case is a technical win for Apple, the court also ordered changes for their app store policies. The ruling states that they are “hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.”
What this basically means is Apple must allow app developers to give third-party payment options to acquire in-app purchases. This is a step further than the recent resolution from the court in Japan that says Apple must allow ‘reader’ apps (those that provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video) to redirect users to external websites for content or subscription purchases.
The ruling will certainly change how business is done online, especially in these app-store ecosystems. This will not only affect Apple but Google as well, who has a similar tax rate of 30% to in-app purchases in their Play Store.
It will also affect Apple’s revenue. CNBC reports that App Store made $64 billion in gross sales in 2020, and according to the court ruling, 70% of the revenue from this is made up of game content generated by less than 10% of all customers. Allowing customers to make purchases via external means will have a direct impact on Apple’s revenue for the category. However, it would also depend how many people actually go for the alternative payment options since Apple prides itself in ease of use and security in payments.
