US Supreme Court Declines to Hear Apple vs. Epic Games Case

[BaldiMac]

I don’t expect it, or anything, to be perfect. Just alternatives in the areas where it is weak. Apple provides no safety valve for the legitimate use cases that don’t work well. And I don’t like the trend toward centralized software control.

I have no idea what that has to do with what I said. You brought up a few apps that publicly complain out of 5 million apps and then say you don't expect them to be perfect.

But I suspect that what you actually mean is that you want Apple to allow emulators on iOS.

 

[Carnegie]

Citations? If apple can collect the same commissions outside the app store, then the ruling would have no teeth. i.e., Apple could effectively ban off-app purchasing by increasing commissions to an absurd degree off app.

First, I didn't suggest that Apple can collect the same commissions outside the app store. Indeed, I've suggested at various times that Apple might need to reduce its commission somewhat for sales made outside an app (or the App Store). That would be to mitigate the risk that future plaintiffs could make an antitrust case based on illegal tying (to the use of the App Store or Apple's IAP). As we now know that's what Apple has done; it reduced the commission by 3 percentage points to reflect the cost of payment processing. Further, Apple certainly shouldn't increase the commission for sales made through other parties. That would make a potential antitrust tying case stronger.

That said, the best citation would be the ruling which I referred to. I encourage people to read it (among other court documents), in its entirety, if they want to understand for themselves what it actually says and what it means for Apple going forward. It discusses Apple's right to collect commissions multiple times. Because of how antitrust law works - looking for anti-competitive effects, then considering pro-competitive justifications, then considering possible alternate means - Apple's legitimate business interest in being compensated for the use of its IP is relevant to the case.

So I'm not going to quote every part of Judge Rogers' Rule 52 order which refers to this issue. Again, people can read the opinion for themselves if they want a fuller sense of what it means (and want to be in better positions to discuss various issues related to it). But in response to your doubts, I'd point to this one specific passage and corresponding footnote:

First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple’s intellectual property. Even in the absence of IAP, Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission. 617

617 In such a hypothetical world, developers could potentially avoid the commission while benefitting from Apple’s innovation and intellectual property free of charge. The Court presumes that in such circumstances that Apple may rely on imposing and utilizing a contractual right to audit developers annual accounting to ensure compliance with its commissions, among other methods. Of course, any alternatives to IAP (including the foregoing) would seemingly impose both increased monetary and time costs to both Apple and the developers.

I'd also note that the court was aware of the terms of Apple's developer agreements. The opinion discusses some of them, to include the commission requirement. Then it issued the injunction stating what Apple couldn't do. That injunction says nothing about Apple no longer being able to enforce the terms of its developer agreements which require the paying of commissions. If the court meant to prevent Apple from continuing to require commissions be paid, the injunction would have said as much. Of all the contractual terms considered in the case, the court only prohibited what it prohibited - the so-called anti-steering policies.

What will happen now is plaintiffs (e.g. Epic) will challenge the amount of the commissions Apple requires for payments made through other parties. And that's where Apple will present evidence and make arguments as to what is reasonable compensation for, perhaps among other things, the use of its IP. The irony is that, the more the commission requirement (which Apple has an indisputable right to based on its legal monopoly on its own IP) is un-tied from other requirements (e.g. that developers use IAP or distribute apps through the App Store), the less Apple needs to justify the amount of that commission. It's only because of the tying that the amount of the commission is somewhat challengeable.

 

[Carnegie]

Thanks for all the really good analyses. I like it, and hopefully it provides some clarity to the netizens here.

You're welcome.

 

[CarAnalogy]

I have no idea what that has to do with what I said. You brought up a few apps that publicly complain out of 5 million apps and then say you don't expect them to be perfect.

But I suspect that what you actually mean is that you want Apple to allow emulators on iOS.

All I really mean is that I don’t want Apple to abuse their position of monopoly power over all software on iOS. I don’t know what the solution to that is. But they have abused it, and even when aren’t intentionally abusing it, it is often an unnecessary roadblock that favors Apple. I just want to see Apple do a better job on their own and not be forced to, and/or allow some alternative to exist.

 

[BaldiMac]

All I really mean is that I don’t want Apple to abuse their position of monopoly power over all software on iOS. I don’t know what the solution to that is. But they have abused it, and even when aren’t intentionally abusing it, it is often an unnecessary roadblock that favors Apple. I just want to see Apple do a better job on their own and not be forced to, and/or allow some alternative to exist.

That's as clear as mud. Obviously, this thread is about how the courts found that Apple isn't abusing monopoly power. So instead of using loaded language to imply that you are all about defending the law, why not say what you really, really mean?

 

[laptech]

As a result of the Supreme Court's decision today, the previous rulings stand and Apple is able to continue to disallow third-party payment processing within apps, but will have to allow developers to inform users about other purchasing options outside of the App Store.

There is a catch for developers being able to inform their users about other purchasing options outside of the app and that is they are going to have to pay to do so due to Apple implementing it's new Storekit Entitlement which Apple will receive a commission every time it's used. (MR has reported on this Entitlement function)

So basically, instead of an app developer just being able to do a quick update of coding to show on their app that the user can purchase items on their website and provide a link to the website, the app developer now has to agree to the new T&C's of the app store which now includes this 'Entitlement' function where Apple has made it a point of explaining how such links should be displayed in an app and because of this Apple is entitled to commission every time this 'Entitlement' function is used.

Apple are an absolute disgrace. If an app developer want's to use a different payment system, they cannot. Now, if app developers want to inform their users of other purchasing options outside of the app store, they must use the 'Entitlement' Storekit function (which has commission attached to it's usage) to do so and if they do not use it then they cannot inform their users of other outside purchasing options.

In my opinion Apple are going to find themselves back into court over this.

 

[BaldiMac]

There is a catch for developers being able to inform their users about other purchasing options outside of the app and that is they are going to have to pay to do so due to Apple implementing it's new Storekit Entitlement which Apple will receive a commission every time it's used. (MR has reported on this Entitlement function)

So basically, instead of an app developer just being able to do a quick update of coding to show on their app that the user can purchase items on their website and provide a link to the website, the app developer now has to agree to the new T&C's of the app store which now includes this 'Entitlement' function where Apple has made it a point of explaining how such links should be displayed in an app and because of this Apple is entitled to commission every time this 'Entitlement' function is used.

Apple are an absolute disgrace. If an app developer want's to use a different payment system, they cannot. Now, if app developers want to inform their users of other purchasing options outside of the app store, they must use the 'Entitlement' Storekit function (which has commission attached to it's usage) to do so and if they do not use it then they cannot inform their users of other outside purchasing options.

In my opinion Apple are going to find themselves back into court over this.

Why? The court specifically approved this remedy and clearly stated that Apple was entitled to seek the commission in the decision.

 

[Zest28]

Sure. My source is math and my opinion. 5 million apps. Many developers with multiple apps. So I’d guess 250-400 million in developers fees per year.

Based on that, I think it is unlikely that the AppStore costs that little to run.


I’m aware of the stories, but I’m also considering the scale. The news stories that you are referring to are about a few dozen or maybe even a few hundred apps that constitute edge cases. A small fraction of a percent of the apps.

Again, I’m not claiming App review is perfect by any means, but perfection is an unreasonable standard.

Also note that a software engineer in Big Tech makes around $300.000 - $500.000 per year. And since Apple has around 6000 developers (not including contractors), you can see how the developer fees don't cover the salaries even.

 

[CarAnalogy]

That's as clear as mud. Obviously, this thread is about how the courts found that Apple isn't abusing monopoly power. So instead of using loaded language to imply that you are all about defending the law, why not say what you really, really mean?

I mean I thought I was. I had a feeling you’d hit on that word monopoly. I don’t mean they have a market monopoly. I mean they are the sole authorized entity allowed to install software on iOS. That is a de facto monopoly in the strict definition in the word, in the way that the government has a “monopoly” on legal use of force.

What I really, really mean is I don’t want to see a world where app stores are the only way to distribute software. So I appreciate any reasonable pushback testing the limits, and keeping at least some semblance of the computing I remember from the old days alive.

 

[BaldiMac]

I mean I thought I was. I had a feeling you’d hit on that word monopoly. I don’t mean they have a market monopoly. I mean they are the sole authorized entity allowed to install software on iOS. That is a de facto monopoly in the strict definition in the word, in the way that the government has a “monopoly” on legal use of force.

That's exactly the problem. You are using loaded terms like "abuse" and "monopoly" to imply illegal behavior. When you really just mean that they control their own property (IP).

What I really, really mean is I don’t want to see a world where app stores are the only way to distribute software. So I appreciate any reasonable pushback testing the limits, and keeping at least some semblance of the computing I remember from the old days alive.

Great! You have many OSs to choose from across multiple markets, that keep the old days alive. Why does every option have to be the same as the old days?

 

[gregmancuso]

Apple are an absolute disgrace. If an app developer want's to use a different payment system, they cannot. Now, if app developers want to inform their users of other purchasing options outside of the app store, they must use the 'Entitlement' Storekit function (which has commission attached to it's usage) to do so and if they do not use it then they cannot inform their users of other outside purchasing options.

In my opinion Apple are going to find themselves back into court over this.

What? Granted, while I got the developer update email I have not read the details yet so please forgive any errors related to my assumptions.

Steering a user to another platform (website) to make a purchase or adding in and account system that allows import of funds, coins, baubles, whatever from an online app wallet is already allowing a "different payment system". How many apps or services to you see that support a merry-go-round of payment processor options for a user to select when buying something? None! Edit to add before someone brings it up: Selecting the credit card (MC vs Visa) is not the same as payment processor.

The entitlement in and of itself does not incur a commission directly. It allows the Apple to force the presentation of a warning that a user is leaving the app and that Apple is no longer involved in the transaction. This notice, while not legally required, is definitely a necessary liability notice and not extreme or unreasonable in any way.

The entitlement likely triggers some internal audit notifications since Apple will be charging commissions as is allowed in the ruling. And it is the same effective process as used in the Dutch dating apps.

How is Apple being an "absolute disgrace"? In my opinion nothing here will cause Apple to find themselves back in court.

 

[Unregistered 4U]

The thumbs down people apparently do not grasp that subscription prices are set to account for the hefty cuts Apple and Google take from the service.

I doubt you'll see cheaper pricing outside of the App store but def promotion offers.

No, subscription prices are set to account for the fact that unless a company has hundreds of thousands of new folks buying their app every day, they’re not going to be able to stay in business long. Subscriptions give developers a steady income from folks that are happy to send a few bucks their way every month.

 

[Unregistered 4U]

To be fair, they don't get all of it. There are still transaction fees and other administrative costs associated with processing the transactions on their own.

And, there’s also housing, power, the cost of any cloud services they use, all of these are the cost of doing business. The percentage that any App Store charges is usually one of the smaller charges companies have to deal with in a transaction.

 

[Abazigal]

Macstories has a pretty good breakdown of this.

What’s Next for Apple and Epic’s Legal Disputes?

Yesterday, the US Supreme Court told Epic Games and Apple, “No, thank you,” and Apple served up an ugly alert to developers who can now offer payment options outside the App Store. If you’re thinking, “Wait, didn’t this all get resolved ages ago?” I feel you. The legal system moves at its own...

www.macstories.net

 

[HurtinMinorKey]

First, I didn't suggest that Apple can collect the same commissions outside the app store. Indeed, I've suggested at various times that Apple might need to reduce its commission somewhat for sales made outside an app (or the App Store). That would be to mitigate the risk that future plaintiffs could make an antitrust case based on illegal tying (to the use of the App Store or Apple's IAP). As we now know that's what Apple has done; it reduced the commission by 3 percentage points to reflect the cost of payment processing. Further, Apple certainly shouldn't increase the commission for sales made through other parties. That would make a potential antitrust tying case stronger.

That said, the best citation would be the ruling which I referred to. I encourage people to read it (among other court documents), in its entirety, if they want to understand for themselves what it actually says and what it means for Apple going forward. It discusses Apple's right to collect commissions multiple times. Because of how antitrust law works - looking for anti-competitive effects, then considering pro-competitive justifications, then considering possible alternate means - Apple's legitimate business interest in being compensated for the use of its IP is relevant to the case.

So I'm not going to quote every part of Judge Rogers' Rule 52 order which refers to this issue. Again, people can read the opinion for themselves if they want a fuller sense of what it means (and want to be in better positions to discuss various issues related to it). But in response to your doubts, I'd point to this one specific passage and corresponding footnote:



I'd also note that the court was aware of the terms of Apple's developer agreements. The opinion discusses some of them, to include the commission requirement. Then it issued the injunction stating what Apple couldn't do. That injunction says nothing about Apple no longer being able to enforce the terms of its developer agreements which require the paying of commissions. If the court meant to prevent Apple from continuing to require commissions be paid, the injunction would have said as much. Of all the contractual terms considered in the case, the court only prohibited what it prohibited - the so-called anti-steering policies.

What will happen now is plaintiffs (e.g. Epic) will challenge the amount of the commissions Apple requires for payments made through other parties. And that's where Apple will present evidence and make arguments as to what is reasonable compensation for, perhaps among other things, the use of its IP. The irony is that, the more the commission requirement (which Apple has an indisputable right to based on its legal monopoly on its own IP) is un-tied from other requirements (e.g. that developers use IAP or distribute apps through the App Store), the less Apple needs to justify the amount of that commission. It's only because of the tying that the amount of the commission is somewhat challengeable.

Finally had a chance to review it. Overall this is a pretty bad ruling for Apple, that doesn't settle much beyond the current facts of the current matter. Basically the subtext of the entire opinion is (essentially) that Apple very well could be an anticompetitive monopolist, and points out there is some significant evidence to support that finding, but ultimately concludes Plaintiff's experts suck so they didn't meet their burden.

And this is all under what I would consider a somewhat overly friendly market definition for apple.

But more to the point in hand, let's use Netflix as an example. They ruling clearly indicates that apple will no longer be able to prevent Netflix from steering most of it's customers away from in-app purchasing netflix (for which apple can collect revenue), to a web based subscription (for which Apple cannot collect). Netflix can easily accomplish this steering by either turning off in-app purchases, or (perhaps more likely) making it much cheaper to purchase the subscription outside the app store. I don't see how the ruling affords Apple an opportunity to prevent this.

 

[BaldiMac]

Finally had a chance to review it. Overall this is a pretty bad ruling for Apple, that doesn't settle much beyond the current facts of the current matter. Basically the subtext of the entire opinion is (essentially) that Apple very well could be an anticompetitive monopolist, and points out there is some significant evidence to support that finding, but ultimately concludes Plaintiff's experts suck so they didn't meet their burden.

Sounds like you had some predetermined conclusions here. This was a resounding win for Apple. The only change it requires is to allow a single external link for payment within an app. They still get to collect their commission.

But more to the point in hand, let's use Netflix as an example. They ruling clearly indicates that apple will no longer be able to prevent Netflix from steering most of it's customers away from in-app purchasing netflix (for which apple can collect revenue), to a web based subscription (for which Apple cannot collect). Netflix can easily accomplish this steering by either turning off in-app purchases, or (perhaps more likely) making it much cheaper to purchase the subscription outside the app store. I don't see how the ruling affords Apple an opportunity to prevent this.

None of this is accurate. Netflix qualifies as a reader app and hasn't allowed IAP in years.

 

[HurtinMinorKey]

Sounds like you had some predetermined conclusions here. This was a resounding win for Apple. The only change it requires is to allow a single external link for payment within an app. They still get to collect their commission.


None of this is accurate. Netflix qualifies as a reader app and hasn't allowed IAP in years.

Um, this change happened in 2022, after the 2021 district court opinion referenced above (and recently upheld). i.e., Apple read the writing on the wall with the court decision, and was trying to contain the damage. But in reality, the court's decision basically paves the way for other apps to avoid the tax. Unfortunately this will likely mostly only benefit big, established app providers (who customers use on multiple platforms), and small app providers will likely have a hard time pushing people outside of the eco system.

 

[Unregistered 4U]

Sounds like you had some predetermined conclusions here. This was a resounding win for Apple. The only change it requires is to allow a single external link for payment within an app. They still get to collect their commission.

Yeah, that Apple does not have a monopoly was the first ruling and now sets a precedent. Anyone else (including the EU) approaching this won’t be approaching it from a position of “it’s a monopoly”, it’s more from the position of “We’re going to construct a legal term that only affects you (and maybe other non-EU companies) and if you want to do business here, you’ll abide by it.”

 

[BaldiMac]

Um, this change happened in 2022, after the 2021 district court opinion referenced above (and recently upheld). i.e., Apple read the writing on the wall with the court decision, and was trying to contain the damage.

Sure. But Netflix dropped IAP in 2018.

But in reality, the court's decision basically paves the way for other apps to avoid the tax. Unfortunately this will likely mostly only benefit big, established app providers (who customers use on multiple platforms), and small app providers will likely have a hard time pushing people outside of the eco system.

Nope. The decision specifically acknowledges that Apple is entitled to continue to collect its commission when developers link to a website to process payments. And to use the entitlement, the developer will need to include IAP as an option though pricing can be different.