Epic Games v. Apple: the fight for the future of the App Store

After years of back-and-forth battling between Fortnite publisher Epic Games and Apple, the gaming company filed a writ of certiorari asking the US Supreme Court to review a lower court ruling in their antitrust case. Epic has argued that Apple unfairly monopolizes the mobile app space with iOS and its in-app purchasing system, thereby making billions on commissions.

Epic is asking the Supreme Court to review its case by way of clarifying points of antitrust law that the Ninth Circuit Court of Appeals relied on in making its ruling in April. On Thursday, Reuters reported Apple has filed an argument (PDF) asking the Supreme Court to throw out the order from the lower courts that requires changes to its App Store rules.

The Supreme Court has rejected Fortnite publisher Epic’s request to make Apple loosen its App Store rules as a legal battle progresses. As first reported by Bloomberg and Reuters, Justice Elena Kagan declined to vacate a stay on a lower court order about Apple’s anti-steering rules, which limit how iOS app developers can direct users to alternate payment methods. Kagan did not issue an explanation for the decision, but Epic’s petition was noted as denied on the Supreme Court’s website.

The district court order was one of Epic’s limited wins in a high-profile antitrust case over iOS App Store in-app purchase fees. A judge determined that Apple had violated California’s Unfair Competition Law by preventing developers from using links to direct users to payment methods outside the App Store.

On Monday, Apple was granted a motion putting a hold on the appeals court ruling that would push the company to undo its “anti-steering” rules and let outside developers link to third-party payment mechanisms. The mandate is stayed for 90 days so Apple can file its request that the Supreme Court take up the case.

Apple’s anti-steering rules limit how developers can direct users to subscription or in-app purchase payments outside Apple’s App Store ecosystem, where it takes a cut of revenue. A district court found that Apple had not generally violated antitrust law with its “walled garden” approach to iOS, but it ordered it to drop rules against letting developers include “calls to action” for outside payment methods.

An appeals court has upheld the status quo in Epic’s antitrust lawsuit against Apple, affirming a decision that was largely a victory for Apple. In a ruling delivered on Monday, the Ninth Circuit Court of Appeals found that Apple’s closed App Store and security restrictions didn’t violate antitrust law but that Apple couldn’t maintain anti-steering rules that prevent users from learning about alternate payment options.

Apple spokesperson Marni Goldberg provided The Verge with the following statement:

Epic Games may have largely lost its major lawsuit against Apple, but it’s not going out without a fight — and it has some major support in its corner. Soon after the Epic Games v. Apple ruling was issued, Epic appealed, and on January 27th, a large number of organizations filed amicus briefs in support of Epic’s battle, including a coalition of 35 state attorneys general, Microsoft, and the Electronic Frontier Foundation (EFF).

During the fight, Epic was trying to make the case that Apple has a monopoly over iOS apps, and was asking for changes that would effectively force Apple to take a smaller percentage of all the transactions that go through that store. If Epic were successful in pushing Apple to accept alternate payment processors, for instance, it could dramatically change how Apple, the most profitable company in the world, operates its highly lucrative App Store. In the original case, the judge ultimately ruled in favor of Apple in nine of ten counts Epic brought against it, but both Epic and Apple appealed the parts that they lost.

Epic Games has filed its opening brief to the Ninth Circuit Court of Appeals, seeking to overturn the previous ruling that Apple’s control over the iOS App Store does not qualify as a monopoly. The company first gave notice of it appeal in September, but Thursday’s filing is the first time it has laid out its argument at length.

“Epic proved at trial that Apple retrains trade...by contractually requiring developers to exclusively use Apple’s App Store to distribute apps and Apple’s IAP for payments for digital content within apps,” the filing reads. “If not overturned, [the district court] decision would upend established principles of antitrust law and...undermine sound antitrust policy.”

An appeals court has paused one of the most consequential parts of the Epic v. Apple ruling, placing a stay on the enforcement of the injunction issued by the lower court. As a result of the stay, Apple can maintain its IAP system as the sole source of in-app payments on iOS, despite the district court’s earlier ruling that the exclusive arrangement is illegal.

The stay, issued Wednesday afternoon, does not reverse the earlier ruling but puts enforcement on hold until the appeals court can fully hear the case, a process that will likely take months.

Epic v. Apple judge Yvonne Gonzalez Rogers says Apple must comply with an order to let developers add links and buttons to external payment options, denying the company’s motion for a stay. “Apple’s motion is based on a selective reading of this Court’s findings and ignores all of the findings which supported the injunction,” her new order reads.

Judge Gonzalez Rogers issued her order after a Tuesday hearing concerning the blockbuster antitrust lawsuit, which Fortnite publisher Epic Games filed in 2020 and which went to trial this year. During the hearing, Apple said it needed more time to rewrite its anti-steering policies — rules that bar app developers from linking to payment methods besides the iOS App Store.

With potentially billions of dollars and some control over the App Store at stake, Apple has filed for an appeal of the ruling in its major trial against Epic. While Apple largely won that case (the company went so far as to call the ruling a “resounding victory”) with Judge Gonzalez Rogers ruling in favor of Apple in nine of the ten claims Epic brought against the company, it did lose in one important way: the judge found that Apple violated California’s anti-steering rules, and demanded that Apple let developers link to outside payment systems. That policy would have taken over in December, but it may be pushed out beyond that — and it seems that’s the point.

As part of the appeal, Apple is asking for a stay to prevent the company from having to implement the new anti-steering rules, arguing that it “will allow Apple to protect consumers and safeguard its platform while the company works through the complex and rapidly evolving legal, technological, and economic issues.” And the company’s arguments there are pretty revealing if we’re reading the document right.

Fortnite will not be returning to the iOS App Store anytime soon, according to a series of emails published on Twitter on Wednesday by Epic Games CEO Tim Sweeney.

Epic’s iOS developer account had been suspended as a result of the company’s intentional violations of the App Store guidelines in August 2020, which set the stage for the companies’ court battle. But in the wake of the ruling earlier this month, the state of Epic’s iOS apps — particularly Fortnite — has been unclear.

Apple CEO Tim Cook told employees that he was “looking forward to moving forward” after a verdict in the Epic v. Apple antitrust case. In an all-hands meeting with employees, Cook echoed the line Apple has taken publicly on the case, celebrating the company’s legal wins and downplaying its loss on an unfair competition claim.

“If you sort of back up and remember what the App Store is about, the App Store was built to be a trusted place for users so they could go explore and discover apps. It was meant to be a great business opportunity for developers,” Cook told employees, according to a recording of the meeting obtained by The Verge. “Epic came along and wanted basically to be handled in a special way. Our rules are that we treat everyone the same. They ask us repeatedly to treat them different, we said no, and they sued us on 10 different items. The court ruled nine of those in favor of Apple and one in favor of Epic. Most importantly, they ruled that Apple is not a monopoly, which we’ve always known. Apple is in a fiercely competitive market.”

On September 10th, a verdict finally arrived in Epic v. Apple, and it has left the App Store model in a precarious state. Epic wanted to do away with the system entirely, breaking Apple’s control over software distribution on iOS — but the ruling stopped well short of that. Instead, we got an ambiguously worded injunction that seems to open the door to developers skirting Apple’s commission system — or at least making it easier to use non-Apple payment methods outside their apps.

In the immediate aftermath of the ruling, Apple pushed to cast it as a victory — and Epic seemed sure it had lost. It’s understandable: until we see how Apple reacts and how the court looks on Epic’s recent appeal, it’s hard to know for sure what the injunction will actually mean. The ruling could be a significant leak in Apple’s carefully controlled ecosystem. But for that to happen, Epic and its allies will need a lot to break in their favor, both inside the courtroom and out. There are still lots of places for Apple to fight, and lots of ways to pare back developers’ small glimmer of a victory.

On Friday, a California judge ruled on the influential Epic v. Apple lawsuit, and both sides lost. Judge Yvonne Gonzalez Rogers concluded that Apple wasn’t unfairly monopolizing the mobile app space with iOS or its in-app purchasing system, and she ordered Epic to pay damages for violating its developer agreement with Fortnite. At the same time, she ordered Apple to remove its anti-steering rules — policies banning developers from telling users about alternatives to Apple’s in-app purchase system.

For readers outside those two companies, though, Judge Gonzalez Rogers’ opinion has a lot to offer. Rogers clearly considers much of Epic and Apple’s behavior silly and many of both companies’ arguments bad. But she seriously examines all these arguments and lays out a blueprint for further legal arguments about mobile platforms, app monopolies, and modern antitrust law.

It was May 11th, the seventh day of the Epic v. Apple trial, that Judge Yvonne Gonzalez Rogers hit upon a compromise neither company had asked for. She asked Epic’s economist, David Evans, if it would be sufficient to kill Apple’s anti-steering rules — the ones Apple uses to keep developers from even telling you that there’s a perfectly good external website where you can purchase your subscription instead of inside the app itself.

On May 24th, the final day of the trial, Judge Gonzalez Rogers hinted she was still leaning toward that exact sort of compromise, one that might not please either side, one that might involve Apple’s anti-steering rules.

During the Apple v. Epic trial, Apple software leader Craig Federighi argued that tight control over the App Store was necessary for securing the iPhone. But Judge Yvonne Gonzalez Rogers didn’t buy it, writing in her ruling Friday that he may have been “stretching the truth for the sake of the argument.”

Federighi cast heavy doubts about whether Apple would be able to secure iPhones without its App Review system acting as a gateway, by saying that the macOS security was basically in a bad place. Judge Gonzalez Rogers doesn’t think Federighi has the proof to back it up (you can read her quotes below in context on page 114):

Apple’s app store policies have caused controversy and consternation many times over the years, but few periods have been as active and strange as the last two weeks. For the first time, we are seeing Apple being forced to react directly to lawsuits and regulators with substantial policy changes. 

The biggest example has of course just happened today: a ruling from judge Yvonne Gonzalez Rogers in the Epic v. Apple case. Apple must now allow apps to link out to other purchasing options in addition to in-app purchases. But that follows two court case settlements and a new law in South Korea that also have implications for how Apple treats developers. The pace of change is increasing and instead of leading, Apple is reacting.

Today the judge in Epic v. Apple issued a lengthy ruling holding that Epic failed to prove that Apple has a monopoly in mobile gaming transactions. Importantly, the court also held that Apple’s rules preventing other payment options in the App Store are anti-competitive, and issued an injunction telling Apple to cut it out.

Specifically, the court said that “Apple is engaging in anticompetitive conduct,” and that “Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice.”

If you’re wondering whether Epic Games is satisfied with Judge Yvonne Gonzalez Rogers’ decision to give iPhone and iPad developers a way around Apple’s 30 percent cut, the answer is most definitely no. Epic will appeal the court’s ruling in Epic v. Apple, a spokesperson confirmed to The Verge.

It’s not hard to imagine why: Epic lost on every other count. Apple will not be forced to allow users to sideload apps, or accept other app stores, or lower its fee below 30 percent.

The ruling is in on the Epic v. Apple trial. Epic won a major concession when it comes to allowing alternative in-app purchase options, but Apple won out on basically all other counts. The question now is: where does that leave Fortnite, which has been out of the iOS App Store since it first violated Apple’s rules by offering its own payment options in August 2020?

For the moment, it sounds like the game isn’t coming back right away. The judge did not say that Apple would be required to restore the game, and neither Apple nor Epic have indicated that it’ll return any time soon.

One of the more bizarre moments of this year’s Epic v. Apple trial was when proceedings got derailed by an exchange about whether Peely the banana — a recurring Fortnite character — should be expected to wear clothes in court. Apple suggested Peely ought to wear clothes in federal court and showed him in a tuxedo; Epic argued the suit was unnecessary. And you better believe the judge’s ruling, released today, has come to a final conclusion.

The moment in question came on day six of the trial, when Apple’s attorney was cross-examining Matthew Weissinger, Epic’s VP of marketing, in order to offer a tutorial of how exactly Fortnite works. During the exchange, Apple’s attorney noted that they’d chosen to show Peely in his “Agent Peely” guise, since “We thought it better to go with the suit than the naked banana, since we are in federal court this morning.”

When you spend money in Apple’s App Store, the company generally takes a 30 percent cut — one that adds up to an estimated $19 billion per year. Apple’s currently in the fight of its life to prove to judges, government regulators, and its own developers that it deserves those dollars, but not everyone’s buying it anymore.

Over the past seven days alone, South Korea declared its disbelief on the global stage, passing a landmark bill that could keep Apple and Google from directly collecting their 30 percent cut, and may inspire other governments to do the same. Developers also expressed their rage at an Apple press release, where the company spun its agreement to settle a lawsuit for $100 million as a $100 million fund for developers — while quietly promising 30 million of those dollars to the lawyers and enacting no truly significant changes. The CEO of Hopscotch shared her story of how Apple’s App Store review team repeatedly gaslit her, insisting there was an issue with the well-liked kids coding app that didn’t actually exist. 

Elon Musk has had a busy Friday on Twitter. After flatly denying that he has ever spoken to Apple CEO Tim Cook in response to a wild story alleging he demanded to take over as the company’s CEO as part of an acquisition offer, Musk has now tweeted his support of Epic Games’ fight against Apple over App Store policies.

“Apple app store fees are a de facto global tax on the Internet,” he said. “Epic is right.”