Apple faces losing billions of dollars in sales after a US judge ruled that the tech titan must allow developers to bypass controversial fees on its App Store.
The company was told to lift a rule that forces apps to use Apple’s own payments system, which charges fees of up to 30pc, amid growing opposition from millions of iPhone software creators.
In a case brought by Epic Games, maker of the hit video game Fortnite, US judge Yvonne Gonzalez Rogers declared that Apple was “engaging in anticompetitive conduct” and that its rules “hide critical information from consumers and illegally stifle consumer choice”.
But in a partial victory for the company, she did not declare that Apple was a monopolist, which could have opened up the company to more drastic measures.
iPhone and iPad users are forced to use the App Store to download software such as games, work tools and streaming services on their devices.
At present, the developers of these apps have no choice but to take payment for their products over the App Store too. Apple takes a cut of between 15pc and 30pc for billions of these in-app purchases, sparking claims from critics that it is enforcing a tax on developers, who are banned from offering alternative ways to pay.
The judge’s ruling means that Apple will in future have to allow developers to direct customers to another source, such as their own website, when they want to pay. This will allow developers to dodge the company’s fees.
Apple, the world’s biggest publicly traded business with a market value of $2.5 trillion (£1.8trn), has faced heavy pressure from app developers and regulators over its rules.
The company’s shares fell by 2.7pc after the judgement, while Google’s parent company Alphabet also fell on the prospect that the search engine owner’s Play Store could face similar action. Shares in mobile game maker Zynga rose 9pc. Spotify, which has campaigned against Apple’s fees, rose 3pc.
Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers. https://t.co/cGTBxThnsP
— Tim Sweeney (@TimSweeneyEpic) September 10, 2021
Judge Gonzalez Rogers ordered Apple to cease prohibiting “external links, or other calls to action that direct customers to purchasing mechanisms in addition to in-app purchasing”.
Consumers spent an estimated $72bn through Apple’s payments system last year. Apple is estimated to have taken more than $10bn in fees that could now be at risk.
Epic sued Apple last year after being kicked off the App Store for attempting to bypass Apple’s fees.
Apple pointed to the judge’s ruling that Epic had failed to prove Apple was a monopolist, and had rejected demands such as to allow alternative app stores.
Katherine Adams, Apple’s general counsel, said it was a “resounding victory” for the company.
She said: “We are very pleased with the court’s ruling, we consider this a huge win for Apple.
“The decision validates that Apple’s success is not illegal.”
Apple did not say how it planned to respond to the order, which can be challenged, but said: “We remain committed to ensuring the App Store is a safe and trusted marketplace that supports a thriving developer community.”
Tim Sweeney, chief executive of Epic, said the decision was not a victory, since the court did not go as far as forcing Apple to make it as easy to pay with rival systems as with its own.
He said: “Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers."
Apple has 90 days to comply with or challenge the order, although the company said it would decide how to interpret it. Although it covers the US, Apple would be likely to apply any changes globally.