Apple wins bittersweet victory in Epic antitrust violation case

Court ruling states that the iPhone maker must limit its restraints on outside app developers

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A California federal court has ruled in favour of Apple in an antitrust case filed by Epic Games, saying that up to 30 per cent commission charged by the iPhone maker for subscriptions and downloads from its App Store does not violate state or federal law.

US district judge Yvonne Gonzalez-Rogers said that “the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws”.

“While the court finds that Apple enjoys considerable market share of over 55 per cent and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal," she said.

Apple and Epic have been at loggerheads for many years over the App Store’s fee system, which the iPhone maker considers an essential operating charge. However, Epic has called it a monopolistic tax.

In August last year, Epic created a substitute payment system in its popular game Fortnite to bypass the App Store’s transaction fees. In reaction, Apple removed Fortnite from its app gallery, leading to a legal complaint from Epic.

This illustration photo shows the opening screen of Epic Games’ Fortnite reflecting onto the Apple logo of the back of an I-mac in Los Angeles on  May 3, 2021. In a court clash with potentially huge repercussions for the world of mobile tech, Fortnite maker Epic Games takes on Apple starting on May 3, 2021, aiming to break the grip of the iPhone maker on its online marketplace. - 
 / AFP / Chris DELMAS

The court concluded that Epic breached its contract with Apple by organising its own payment gateway and it must pay Apple to compensate.

The North Carolina-based video game and software developer will pay Apple 30 per cent of all revenue it collected through direct payments, which will amount to more than $3.5 million.

The trial included evidence given by both companies’ chief executives.

Epic contended that Apple’s iPhone and its peripheral services such as the App Store have become a market by itself, and argued that Apple should allow other app stores and payment options on its iOS operating system.

In the ruling, the court rejected both Apple’s and Epic’s definition of the marketplace.

“The relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store,” the judge wrote in the ruling.

However, in a setback to Apple, Ms Gonzalez-Rogers said the App Store’s restrictions that bar app developers from informing customers about other available economical options do violate California state law. It ordered the Cupertino-based company to remove those contractual provisions.

“The court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice,” the judge said.

“These anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”

Updated: September 14th 2021, 10:41 AM