Apple must allow other forms of in-app purchases, rules judge in Epic v. Apple

[CTR640]

6 minutes ago, lewdicrous said:

The way I understood it is that Apple lost, but Epic didn't necessarily win either.

The part about Epic didn't won is because they have to pay around 3.6m to Apple, is that correct?

[lewdicrous]

Just now, CTR640 said:

The part about Epic didn't won is because they have to pay around 3.6m to Apple, is that correct?

That and them still being banned from the store.

[harryk]

58 minutes ago, CTR640 said:

So what is it? It's not really clear to me as there are many other sites saying different things. Did Apple win or lose?

Here is the text from the actual legal ruling:

Quote

On the complaint, in favor of plaintiff Epic Games, Inc. on the Tenth Count for violation of California’s Unfair Competition Law (with a separate injunction issuing herewith) and in favor of defendant Apple, Inc. on all other counts; 

 

On the counterclaim, in favor of Apple on the counterclaim for breach of contract. Epic Games shall pay (1) damages in an amount equal to (i) 30% of the $12,167,719 in revenue Epic Games collected from users in the Fortnite app on iOS through Epic Direct Payment between August and October 2020, plus (ii) 30% of any such revenue Epic Games collected from  November 1, 2020 through the date of judgment, and interest according to law. The second and third counts are denied as moot. The claim for declaratory judgment is granted in part as set forth therein.

The tldr is Apple must allow developers to includes links to payment options outside the app (e.g. a website). Epic loses on everything else. 

This is and always was the most likely outcome of this trial. A solid middle of road ruling in which neither side totally wins. Though IMO this ruling far favors Apple, as barring links to outside payment options was always a dumb rule and this is fairly minor change does nothing to change the App Store business model (which the court essentially affirmed is not a monopoly). I predict most developers will elect to continue to use Apple's in-app payment system because throwing users to an external website is clunky and less tech-savvy users will fail to complete the purchase. This change will most benefit the largest entities like Netflix, Amazon, Spotify etc. who already have external systems with user accounts and subscriptions. 

 

On another note, I wonder if this will increase scams and phishing schemes. The App Store security is Apple's main talking point. Taking payment through an external website seems to open the door for a variety of scams either via overcharging, website spoofing, phising for account logins or credit card numbers etc. Allowing other vetted payment options inside the app would likely be better from a security stand point.

[RedRound2]

4 hours ago, sounds said:

Summary

The judge issued a permanent injunction. Epic wins.

 

 

1 hour ago, CTR640 said:

So what is it? It's not really clear to me as there are many other sites saying different things. Did Apple win or lose?

Apple can simply fuck off with their 30% bullshit. Not sure if this saying applies to other countries too but here in the Netherlands it's "getting rich while sleeping".

Apple won. Apple won 9 counts out 10 in the case.

Apple is extremely happy with the verdict while epic plans to appeal

 

https://9to5mac.com/2021/09/10/apple-epic-games-ruling-statement/

 

Reponse from Apple

Quote

We are very pleased with the Court’s ruling and we consider this a huge win for Apple. This decision validates that Apple’s “success is not illegal,” as the judge said. As the Court found “both Apple and third-party developers like Epic Games have symbiotically benefited from the ever-increasing innovation and growth in the iOS ecosystem.”

The only thing Apple has to do is avoid anti steering policies (which is good imo) but Epic has to pay Apple 30% of whatever revenue they made duirng the period they had the external in app purchase. And it's completely up to Apple if they want to allow Epic back in the App Store

 

Epic wanted to get third party stores into iOS. And they lost.

[RedRound2]

@soundsYou should probably add the response from both sides in your original posts. And modify that Apple won 9/10 counts, so effectively Apple won. The one count they lost is in the anti steering policy, which they had already announced for reader apps, and they had a ruling for that in south korea. Apart from that Epic has to pay Apple for damages

 

This is Apple's full repsonse below

Quote

We are very pleased with the Court’s ruling and we consider this a huge win for Apple. This decision validates that Apple’s “success is not illegal,” as the judge said. As the Court found “both Apple and third-party developers like Epic Games have symbiotically benefited from the ever-increasing innovation and growth in the iOS ecosystem.”

The Court has confirmed, after reviewing evidence from a 16-day trial, that Apple is not a monopolist in any relevant market and that its agreements with app developers are legal under the antitrust laws. Let me repeat that: the Court found that Apple is not a monopolist under “either federal or state antitrust laws.”

We are still analyzing the decision which is 180 pages long but the headline is that Apple’s App Store business model has been validated. The Court correctly rejected Epic’s “artificial” view of the competitive environment in which Apple operates and determined that “developers like Epic Games have benefited from Apple’s development and cultivation of the iOS ecosystem, including its devices and underlying software.” Underlying the App Store business is a framework, including App Review, curation and protection of the security and privacy of our users. The Court has ruled that this framework is lawful and Apple was justified in terminating Epic’s status as a developer on the App Store. Apple’s rigorous process for app review protects consumers. As the Court observed, “security and privacy have remained a competitive differentiator for Apple.” The Court agreed, and I quote, that “by providing these protections, Apple provides a safe and trusted user experience on iOS, which encourages both users and developers to transact freely and is mutually beneficial.” Importantly, the Court also recognized the value of Apple’s ever-increasing innovation and growth of the iOS ecosystem.

In short, this is a resounding victory and underscores the merit of our business both as an economic and competitive engine.

 

And Epic's response 

 

[LAwLz]

This is a big loss for basically everyone in the entire world, except Apple. It's really sad to see.

For a company that prides itself (and their fans praise) for having such a great ecosystem with a superb app store, they sure seem very afraid of having to compete.

 

Quote

Our app store is the best!

Then why are you forcing everyone to use it? If it's the best then surely people would use it over other stores even if they were given the choice, right?

 

Quote

Apple payment is the best!

Then why does Apple have to force everyone to use it? Why are they so afraid of having to compete with other payment options if they are the best on their own merits?

 

Apple and their fans are speaking out of both sides of their mouths'. They always talk about how bad the competitors and alternatives are, but at the same time they are very worried that if users were given the choice, they would abandon the already established services they are used to and flock to these "inferior" competitors.

If you have to force your customers to use your products and block competitors, then maybe your service isn't as good as you pretend it is.

 

 

The free market doesn't work if you have one of the worlds biggest and most powerful companies actively blocking competitors from being able to compete.

[CarlBar]

3 hours ago, RedRound2 said:

And modify that Apple won 9/10 counts, so effectively Apple won.

 

Yes but the one count they lost is the one that actually matters worth a damm. The rest is fluff and nonsense in impact relative to the one they lost on.

[Dracarris]

So does all of this only count for the US or also apply in other countries?

[hishnash]

9 hours ago, sounds said:

I wonder if Apple will appeal the case... ? Yes, Apple will appeal.

 

I think not, out of the 10 things epic looks against apple apple won 9 of them.  The only change the judge is requiring is apple permit linking out to a website for purchases (you are not permitted to collect card details within the app for example). Also Epic lost big time, the judge determined apple can ban epic, and its parent company that makes Unreal from the developer program and does not need to re-instrate them. This means Fortnight will be off the app store for ever and it will be a lot harder for Epic to developer unreal for iOS/macOS. This will massively harm Epic as many game devs will now thing twice about using it as the engine as they might want to ship on iOS

[williamcll]

WeChat pay is going to have a good time.

[hishnash]

1 hour ago, Dracarris said:

So does all of this only count for the US or also apply in other countries?

It could be as narrow as only applying to California since that is the jurisdiction of this judge.  I expect however apple will come up with a solution that is global. Likly they will introduce a new api that payment providers can integrate into (like stripe) so that things like parental controls etc still work on the device even if the dev opts to use the third party payment provider. the ruling does not force apple to permit any third party and it even agrees with apple about the increase fraud issues so if apple presented such a solution to the judge i expect she would agree it is the best solution.

[DrMacintosh]

Incomplete post and misleading information. Epic did in fact not win. Apple didn't win either but Epic lost the most from this ruling. 

 

[hishnash]

16 minutes ago, DrMacintosh said:

Incomplete post and misleading information. Epic did in fact not win. Apple didn't win either but Epic lost the most from this ruling. 

 

Key in this is that Epic will not be able to make use of this rule change, the judge clearly said that apple was correct to ban them and is also permitted to continue to do so for ever and can even ban other Epic subsidiaries, shell companies etc such as the Epic that makes Unreal engine.  

This will decimate Unreal as many developer will not want to use an engine if that limits their ability in the future to create an iOS port of their game.  A large % of epics revenue is lost with this ruling and furthermore epic backer (Tencent/Chinese gov) who want to have code running on every child's machine will be pissed off as well. 

In addition the judge said that Epic had not shown apple was monopolistic, and that apples app store review etc was good and that side loading would be bad and was not required.  

Apple will likely build a solution for `linking out` that the judge will be ok with but will not just be a `link` that you put in your app.  It will likely be a button you can put in the app that will present a system UI asking you if you want to buy with Appel IAP our buy on the develops website (with a load of scary text about that fact that develop is `may steal your data... and apple is not liable ...`) in addition this will provide parental controls protections as well as the parent will be promoted (on their phone) before the child can select either of these options. I expect apple will propose this to the judge sometimes soon (they likely have been working this for the last year already to have it ready to ship soon).  

[WolframaticAlpha]

12 hours ago, Brooksie359 said:

Tbh I sorta find this verdict somewhat stupid. If the app is hosted on their app store then they should get a cut of the sales if that is how they are making revenue off of the app store and how they maintain the app store. Really I could only see an argument of making them allow a competing app store on IOS but I guess that likely won't happen. 

Allow the developer to use their own hosting & payment service, like MS is doing with it's store.

 

imo, this is a win for nobody. Anyway, the 30% of 3.6 million is probably pennies for a company like epic. Pretty fair ruling.

 

EDIT: @Roswell made sense

[Roswell]

11 hours ago, SlidewaysZ said:

I'm sure that stings for epic but they really went to batt for the consumer in this instance and they beat a giant in the industry that has been known for years to lock down their platform

 

1 hour ago, WolframaticAlpha said:

Allow the developer to use their own hosting & payment service, like MS is doing with it's store.

 

imo, this is a win for neither. But a win for the consumer nonetheless. Anyway, the 30% of 3.6 million is probably pennies for a company like epic. Pretty fair ruling.

 

They didn’t go to bat for the consumer, this was never about consumers. It was about getting the entire slice of the pie.
 

Nobody will lower prices for their apps. If anything, Apple (and inevitably everyone else, including console makers if this sets precedent) will start jacking up hardware prices to compensate for the loss in revenue.

 

This is bad for consumers and the people that got blindly co-opted into rooting for these huge publishers based on some childish dislike of Apple will soon feel very foolish when they’re forced to spend more than they were previously.
 

 

[RedRound2]

4 hours ago, CarlBar said:

Yes but the one count they lost is the one that actually matters worth a damm. The rest is fluff and nonsense in impact relative to the one they lost on.

This was already something Apple couldn't stop from happening. It was ruled in south korea and I'm sure EU would follow the same. I think even internally in Apple, they knew they didn't have any actual merits to prevent developers offering consumers another option to pay as well

 

Epic's main goal was to make a third party app store on iOS and allow sideloading of apps. That IMO would've completely uppended the app policies and security of iOS devices. Is it ideal solution for Apple to be only be in control of the App store? Probably not. But I don't think pointing naive consumers to sideloading or downloading from something they need from a shady third party store and potetially compromising their devices is the right solution either.

[Kisai]

11 hours ago, CTR640 said:

So what is it? It's not really clear to me as there are many other sites saying different things. Did Apple win or lose?

Apple can simply fuck off with their 30% bullshit. Not sure if this saying applies to other countries too but here in the Netherlands it's "getting rich while sleeping".

On the surface, there are no winners. Apple "won" more than they lost in it. Epic meanwhile didn't gain anything. Netflix, Spotify, Amazon, and all the food courier apps, etc probably won more. So this means potentially more apps might come to the App store that have subscription models that cut out Apple.

 

Honestly, this is pretty much the outcome I predicted weeks ago.

 

That said, I really doubt, like REALLLY doubt, that this will cost Apple anything. The vast majority of developers are small developers and they aren't going to want to cut apple out unless they have their own existing infrastructure to handle payments, and really, it's a step backwards unless you have a super-popular app.

[hishnash]

1 hour ago, Kisai said:

That said, I really doubt, like REALLLY doubt, that this will cost Apple anything. The vast majority of developers are small developers and they aren't going to want to cut apple out unless they have their own existing infrastructure to handle payments, and really, it's a step backwards unless you have a super-popular app.

The court will likely also be one with apple requiring devs to call a system api when linking out and apple will use that to present a warning sheet informing users that they are about to go to ... were their private data may be stolen etc and apple is not responsible for the enviable identify theft that could take place.  Also on the side apple will then block this if it is on a childs device until the parent confirms on their phone or even let the parent open the link on the parents phone and do the purchase (as your an with IAPs) apples parental controls around purchases was recognised by the judge as important so i suspect if apple present that as a solution she will accept it. 

[Fasterthannothing]

2 hours ago, hishnash said:

The court will likely also be one with apple requiring devs to call a system api when linking out and apple will use that to present a warning sheet informing users that they are about to go to ... were their private data may be stolen etc and apple is not responsible for the enviable identify theft that could take place.  Also on the side apple will then block this if it is on a childs device until the parent confirms on their phone or even let the parent open the link on the parents phone and do the purchase (as your an with IAPs) apples parental controls around purchases was recognised by the judge as important so i suspect if apple present that as a solution she will accept it. 

 

4 hours ago, Kisai said:

On the surface, there are no winners. Apple "won" more than they lost in it. Epic meanwhile didn't gain anything. Netflix, Spotify, Amazon, and all the food courier apps, etc probably won more. So this means potentially more apps might come to the App store that have subscription models that cut out Apple.

 

Honestly, this is pretty much the outcome I predicted weeks ago.

 

That said, I really doubt, like REALLLY doubt, that this will cost Apple anything. The vast majority of developers are small developers and they aren't going to want to cut apple out unless they have their own existing infrastructure to handle payments, and really, it's a step backwards unless you have a super-popular app.

How is this a step backwards in anyway at all? You guys do know that PayPal exist right? So even small devs can setup a payment system with much lower fees than what Apple charges. If you don't think that small developers won't be more than happy to do this and maybe even give a small 5-10% discount for going out of the app store so that they only lose a few percent apposed to 30 percent then I would challenge you all to take an accounting and money management class. I predict Apple will be forced to cut dev fees at least in half or they risk losing almost all of it. 

[Video Beagle]

15 hours ago, harryk said:

The tldr is Apple must allow developers to includes links to payment options outside the app (e.g. a website). Epic loses on everything else. 

And this was a point they conceded on a week or three ago.

[Video Beagle]

12 hours ago, LAwLz said:

The free market doesn't work if you have one of the worlds biggest and most powerful companies actively blocking competitors from being able to compete.

There's android. There's Windows, there's MacOS, there's linux. plenty of places to compete. the iPhone is not a market. It's one place in a market.

 

 

10 hours ago, CarlBar said:

 

Yes but the one count they lost is the one that actually matters worth a damm. The rest is fluff and nonsense in impact relative to the one they lost on.

It's one they had largely conceeded on already. Epic wanted their own app store...that's what this was about. Just like they have the epic store to get money that steam gets, they wanted one to get the money apple gets. They didn't get it, and an appeal isn't going to win, if there's even grounds (you didn't get your way isn't grounds for appeal)

[harryk]

3 hours ago, SlidewaysZ said:

How is this a step backwards in anyway at all? You guys do know that PayPal exist right? So even small devs can setup a payment system with much lower fees than what Apple charges. If you don't think that small developers won't be more than happy to do this and maybe even give a small 5-10% discount for going out of the app store so that they only lose a few percent apposed to 30 percent then I would challenge you all to take an accounting and money management class. I predict Apple will be forced to cut dev fees at least in half or they risk losing almost all of it. 

FYI PayPal's cut for digital purchases is ~3% +$0.49 per transaction. The vast majority of in app purchases are small $1-$5 transactions. So while the percentage cut is smaller the flat $0.49 fee really bites compared to Apple's flat 15% cut. Plus adding friction to the purchase process is going to drive down sales. It is difficult to compete with Apple on this.

[Tenelia]

For those who value lucid wisdom in a world overrun by personal narratives and runaway headlines, this is the excerpt from the first page of  the court document : https://www.documentcloud.org/documents/21060631-apple-epic-judgement

Quote

Antitrust law protects competition and not competitors. Competition results in innovation and consumer satisfaction and is essential to the effective operation of a free market system. Antitrust jurisprudence also evaluates both market structure and behavior to determine whether an actor is using its place in the market to artificially restrain competition. Central to antitrust cases is the appropriate determination of the “relevant market.” Epic Games structured its lawsuit to argue that Apple does not compete with anyone; it is a monopoly of one. Apple, by contrast, argues that the effective area of competition is the market for all digital video games in which it and Epic Games compete heavily. In the digital video game market, Apple argues that it does not enjoy monopoly power, and therefore does not violate federal and state law.

 

The Court disagrees with both parties’ definition of the relevant market. Ultimately, after evaluating the trial evidence, the Court finds that 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 mobile gaming market itself is a $100 billion industry. The size of this market explains Epic Games’ motive in bringing this action. Having penetrated all other video game markets, the mobile gaming market was Epic Games’ next target and it views Apple as an impediment.

 

Further, the evidence demonstrates that most App Store revenue is generated by mobile gaming apps, not all apps. Thus, defining the market to focus on gaming apps is appropriate. Generally speaking, on a revenue basis, gaming apps account for approximately 70% of all App Store revenues. This 70% of revenue is generated by less than 10% of all App Store consumers. These gaming-app consumers are primarily making in-app purchases which is the focus of Epic Games’ claims. By contrast, over 80% of all consumer accounts generate virtually no revenue, as 80% of all apps on the App Store are free.

 

Having defined the relevant market as digital mobile gaming transactions, the Court next evaluated Apple’s conduct in that market. Given the trial record, 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% and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal. 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 Court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist.

 

[Fasterthannothing]

1 hour ago, harryk said:

FYI PayPal's cut for digital purchases is ~3% +$0.49 per transaction. The vast majority of in app purchases are small $1-$5 transactions. So while the percentage cut is smaller the flat $0.49 fee really bites compared to Apple's flat 15% cut. Plus adding friction to the purchase process is going to drive down sales. It is difficult to compete with Apple on this.

First off Apple's app store fee is 15% for under $1 million per year otherwise it's higher. Second let's take square payments for example at only $1000 per month in sales the fee is 18.5% so in this regard Apple will win. However if you go over 250k in sales you get custom pricing for payments which I would almost guarante would be 15% or lower if you hit a million dollars in transactions it would be impossible to not find a payment processing company that will give you a better rate than 15% and that is building your payments into an existing platform. If you went with a more custom payment system it would easily beat out Apple's pricing (something epic and other large companies would be doing anyway). I'm not saying Apple doesn't have convenience for smaller companies however any decent sized mobile application will be moving (especially ones like floatplane) . As for friction while paying if a user can handle a pop-up for PayPal style payments on websites they can handle one in a app no problem. That's just my opinion though.

 

 

[harryk]

1 hour ago, SlidewaysZ said:

First off Apple's app store fee is 15% for under $1 million per year otherwise it's higher. Second let's take square payments for example at only $1000 per month in sales the fee is 18.5% so in this regard Apple will win. However if you go over 250k in sales you get custom pricing for payments which I would almost guarante would be 15% or lower if you hit a million dollars in transactions it would be impossible to not find a payment processing company that will give you a better rate than 15% and that is building your payments into an existing platform. If you went with a more custom payment system it would easily beat out Apple's pricing (something epic and other large companies would be doing anyway). I'm not saying Apple doesn't have convenience for smaller companies however any decent sized mobile application will be moving (especially ones like floatplane) . As for friction while paying if a user can handle a pop-up for PayPal style payments on websites they can handle one in a app no problem. That's just my opinion though.

Exactly, Apple's payment system is likely the best option for small developers, who are the vast majority on the App Store. The biggest players (i.e. Netflix, Spotify etc.) with existing external payment systems are going to benefit the most from this change.