Apple Can’t Delay Costly Court-Ordered App Store Change
(Bloomberg) -- Apple Inc. failed to persuade a federal judge to push back a December deadline to change the lucrative business model for its App Store while the iPhone maker’s legal fight with Epic Games Inc. is appealed.
Unless the iPhone maker wins a reprieve from an appeals court, it will soon have to start allowing developers to steer customers to payment methods outside the App Store, an overhaul the judge ordered in September that could cost the tech giant a few billion dollars annually.
Apple asked U.S. District Judge Yvonne Gonzales Rogers to put on hold a part of the injunction that said the company must undo its rule forbidding developers from using web links or other means within apps to inform consumers about payment methods outside the App Store.
“Apple’s motion is based on a selective reading of this court’s findings and ignores all of the findings which supported the injunction,” Rogers said in an order Tuesday. “The motion is fundamentally flawed.”
Apple said it will ask the federal appeals court in San Francisco to put Gonzales Rogers’s order on hold.
“Apple believes no additional business changes should be required to take effect until all appeals in this case are resolved,” the company said in a statement.
Epic didn’t immediately respond to a request for comment on the ruling.
While Apple largely won its showdown with Epic, the world’s most valuable technology company isn’t out of danger from challenges to its role as a gatekeeper to the digital economy. The iPhone maker continues to face a plethora of antitrust lawsuits in and outside the U.S seeking to open up the App Store to competition, monopolization enforcement investigations brought by federal and state agencies, and legislative bids to restrict its business practices.
Bloomberg Intelligence has said that pressure on Apple to lower its App Store commissions on developers, which currently run as high as 30%, could squeeze revenue by $2 billion to $4 billion in a worst-case scenario.
In her Sept. 10 ruling, Rogers gave Apple 90 days to change its rules that prohibit mobile-app developers from informing their customers about payment options on the web beyond the App Store through ways such as emails.
Apple argued “there’s no reason to expend resources” on App Store changes while it appeals the one element of the judge’s ruling that it lost following a three-week trial in May in Oakland, California. It could take the U.S. Court of Appeals in San Francisco more than a year to render a decision.
Epic opposed putting the ruling on hold, arguing “there is no reason to expect that Apple will cease its longstanding unfair conduct.”
Meanwhile, the maker of the popular Fortnite game is appealing the portions of Rogers’ decision that went against it. Epic’s chief executive officer, Tim Sweeney, has said its appeal could take five years to be resolved, a time span that might include a trip to the U.S. Supreme Court.
In the September ruling, Rogers vindicated Apple over Epic’s claims that App Store policies violate federal antitrust law because they hurt developers and consumers while enriching the technology giant. But she held that Apple had violated California’s unfair competition laws with it’s so-called anti-steering policy.
Before the ruling, Apple announced two App Store changes, similar to the court’s injunction, in settlements with small U.S. developers and the Japan Federal Trade Commission.
Apple is letting developers directly communicate with users about alternative payment methods, and next year it will begin allowing so-called “reader” apps -- those that deal with media like video, photos, and news -- to point users to the web to subscribe, bypassing Apple’s fees. The company highlighted those changes in its filing last month urging Rogers to grant its stay request.
Epic Games Inc. v. Apple Inc., 4:20-cv-05640, U.S. District Court, Northern District of California (Oakland).
©2021 Bloomberg L.P.