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Friday, September 17, 2021

Explained: How to read the Apple vs Epic Games ruling

Here are the highlights of the Apple vs Epic Games ruling, and what it means for iPhone and iPad users.

Written by Anuj Bhatia , Edited by Explained Desk | New Delhi |
Updated: September 14, 2021 9:22:39 am
FILE PHOTO: 3D printed Lady Justice figure is seen in front of displayed Apple and Epic Games logos in this illustration photo taken February 17, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

The verdict in the high-profile Apple vs Epic Games case was not what either side wanted. Epic Games had claimed Apple’s App Store is a monopoly and charges exorbitant fees on games like its Fortnite. But the judgment of the federal court in Oakland, California, despite being a compromise of sorts, will set the tone for how big tech will work in coming years in many ways.

Highlights of Apple vs Epic Games ruling, and what it means for iPhone and iPad users:

Apple is not ‘monopolistic’

Epic Games had repeatedly tried to prove that Apple’s App Store was a monopoly, forcing developers to follow its rules in order to reach out to billions of iOS devices. But Judge Yvonne Gonzalez Rogers ruled in Apple’s favour saying the company is not a monopoly and its success is not “illegal.”

“While the Court finds that Apple enjoys a considerable market share of over 55% and extraordinarily high-profit margins, these factors alone do not show antitrust conduct. Success is not illegal,” ruled Judge Rogers.

For Apple, this is a big win as the company from the very beginning argued that the App Store’s structure is legal.

“The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market,” the judge wrote. “The Court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist.”

Epic won ‘partially’ but lost the case

Judge Rogers issued an injection that said Apple has to let developers show customers different ways to pay outside of the App Store. Simply put, the App Store must allow third-party payments.

Apple cannot prohibit developers “from including in their apps and their metadata buttons, external links or other calls to action that direct customers to purchasing mechanisms.” The order is set to take effect in 90 days. Apple had argued that all apps should use Apple’s own in-app payment options. The company typically takes between 15 per cent and 30 per cent cuts on app purchases.

“This measured remedy will increase competition, increase transparency, increase consumer choice and information while preserving Apple’s iOS ecosystem, which has procompetitive justifications,” Rogers ruled.

Even though it appears that Apple’s lucrative App Store business received a major blow by the court ruling, it does not impact the Cupertino company much on the surface level. Sure, it’s a win for developers but not for Epic in particular.

Apple will continue to go with the App Store practices and does not need to make significant changes, something Epic had argued from the beginning. In fact, the Apple-Epic Games lawsuit was all about Cupertino’s rigid control over the App Store. This was the core reason Epic sued Apple.

The ruling, in a way, eases some of the restrictions Apple has put on its developers. The company recently allowed developers of “reader” apps like Netflix, Spotify, and Kindle to link to the web to sign up. That way they could bypass Apple’s 30 per cent cut. To be clear, the concession doesn’t cover apps that feature in-app purchases or subscriptions, such as Epic Games’ Fortnite or the Tinder app.

The impact of ruling on iPhones and iPad users

If you are an iPhone or iPad user and want to subscribe to a streaming app, you could get an option to pay through the developer’s own systems. You might see a new button in popular apps that lets you buy things (say Roblox) through its own payment system or you could subscribe or complete payment on a web browser. Does that mean buying in-app purchasing items gets cheaper? We don’t know yet. Since developers are no longer obliged to Apple’s own payment system – they could either lower their prices or keep the savings with them.

Epic Games ‘overreached with antitrust claims’

The takeaway from the verdict is that Apple’s 30 per cent commission on its own payment processor isn’t going anywhere. In fact, Judge Rogers said Fortnite developer Epic Games “overreached” in its antitrust lawsuit against Apple. From the very beginning, the argument was whether to call Fortnite an actual game. The judge found fault in Epic’s way of defining the product market as there is no legal definition of a game. She said the argument was never about how video games are distributed but how video game payments are processed. Epic Games’ only win comes in the form of the ruling that clearly states that Apple cannot stop app developers directing users to third-party payment options. Apple actually won on nine of 10 counts except for this one.

The ruling directs Epic to compensate Apple for the App Store cut that the company avoided paying for months as it breached its contract with Apple. The Fortnite maker now has to pay Apple $3.6 million for violating App Store policies last year. Last year Epic had introduced its own payment method within Fortnite, breaking the App Store rules and that led Apple to kick Fortnite from the App Store. It was the beginning of the legal battle between Apple and Epic Games.

Epic Games’ chief Tim Sweeney said the ruling was “not a win for developers or consumers” and stated the company was “fighting for fair competition among in-app payment methods and app stores for a billion consumers.” As expected, the high-profile developer has filed a notice of appeal in the case against Apple over App Store policy.

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