What a week! Apple has certainly had better ones. A judgement in its war with Epic Games fell squarely against Apple with big ramifications for the App Store’s business model. At least as it relates to in-app purchases. Epic, Spotify and co are delighted at the outcome. Apple CEO Tim Cook? Not so much.
Some background…
This whole saga started when Epic Games decided to pull what amounted to a publicity stunt, blatantly violating Apple’s developer guidelines with the intention of baiting Apple into enforcing those guidelines. Apple did, of course, enforce them. Epic used that enforcement as ‘evidence’ of Apple’s so-called ‘monopolistic’ behaviour and triggered litigation intended to prove that Apple is an illegal monopolist and is harming consumers. That didn’t go as well as Epic would have liked, with Apple countersuing and ultimately winning on nine out of ten disputes raised in the case. Epic even had to pay some damages to Apple.
One area that Apple lost was on so-called ‘anti-steering’ rules. For the uninitiated, that just means that Apple had rules in place that meant that developers were not allowed to communicate offers, deals, or alternative purchase methods inside apps. Meaning they couldn’t circumvent Apple’s in-app purchase system to avoid paying Apple a commission on in-app purchases. Developers that wanted to sell digital products or services in an app downloaded from the App Store would have to do so by using Apple’s in-app purchase system.
For some developers, such as Spotify, Apple’s commission was unpalatable or, as Spotify claims, commercially unviable. So they pulled the plug on offering in-app purchases altogether. Instead, users would have to head to the developer’s website, but the developer wasn’t able to communicate this in their app. The courts ruled that this was anti-competitive and that Apple would need to allow developers to display links, buttons, and steer users to their website. Apple ‘complied’, but Epic Games claimed that Apple’s compliance was malicious compliance. Epic took particular grievance with Apple collecting a 27% commission on purchases made using links to external sites within seven days of the link click.
So what’s happened this week?
Following Epic’s claim that Apple’s compliance with the ruling was malicious, there has been lots of back and forth with various appeals and injunctions. But this all came to a head this week when Judge Yvonne Gonzalez Rogers, who presided over the original litigation, ruled that Apple has indeed breached the courts order.
One, after trial, the Court found that Apple’s 30 percent commission “allowed it to reap supracompetitive operating margins” and was not tied to the value of its intellectual property, and thus, was anticompetitive. Apple’s response: charge a 27 percent commission (again tied to nothing) on off-app purchases, where it had previously charged nothing, and extend the commission for a period of seven days after the consumer linked-out of the app. Apple’s goal: maintain its anticompetitive revenue stream.
Two, the Court had prohibited Apple from denying developers the ability to communicate with, and direct consumers to, otherpurchasing mechanisms. Apple’s response: impose new barriers and new requirements to increase friction and increase breakage rates with full page “scare” screens, static URLs, and generic statements. Apple’s goal: to dissuade customer usage of alternative purchase opportunities and maintain its anticompetitive revenue stream.
In the end, Apple sought to maintain a revenue stream worth billions in direct defiance of this Court’s Injunction.
The Judge was pretty scathing about Apple and was very clear that the court would not tolerate Apple’s implementation of the judgement. Or any further delays. They made it clear that Apple must in no uncertain terms, implement some immediate remedies.
1️⃣. Apple must not collect purchases made via links to external sites or collect data associated with those clicks or purchases
2️⃣. Apple must not restrict how developers can style their communications with customers in apps
3️⃣. Apple must not limit the use of buttons, calls to action, language or the in-app purchase flow including dynamic links to sites in a ‘logged in’ state
4️⃣. Apple can not exclude certain categories of apps from being able to steer
5️⃣. Apple can not use language or scare tactics (other than neutral language) when users click on a link to an external site
The Judge went further however, claiming that Apple’s compliance was not only malicious, but that Apple’s vice president of finance, Alex Roman, gave false testimony. The Judge is referring this to the criminal courts, alleging criminal contempt. If proven guilty, Roman and by extension Apple, would have been found to have broken not only civil law but criminal law. That’s not a good look.
What happens next?
Apple intends to appeal the Judge’s decision with CEO Tim Cook stating yesterday on Apple’s quarterly earnings call “We strongly disagree with it. We’ve complied with the court’s order, and we’re going to appeal”. However that doesn’t preclude the court from proceeding with referrals to the criminal courts over alleged false testimony.
In the interim Apple has updated its developer guidelines, coming into full compliance with the courts mandated changes. The new guidelines are as follows:
3.1.1: Apps on the United States storefront are not prohibited from including buttons, external links, or other calls to action when allowing users to browse NFT collections owned by others.
3.1.1(a): On the United States storefront, there is no prohibition on an app including buttons, external links, or other calls to action, and no entitlement is required to do so.
3.1.3: The prohibition on encouraging users to use a purchasing method other than in-app purchase does not apply on the United States storefront.
3.1.3(a): The External Link Account entitlement is not required for apps on the United States storefront to include buttons, external links, or other calls to action.
Spotify has already taken advantage of the change, submitting a new version of its app through the App Store review process which has subsequently been reviewed and approved. Meaning that Spotify can now directly communicate with users in the United States and re-direct purchases for its subscriptions to the Spotify website. Epic games claims that Fortnite will return to the US App Store next week (though this makes the assumption that Apple will approve it). And went as far as to offer Apple a so called ‘peace deal’.
Where we go from here
Personally, I think Apple should take the wins from the original litigation and be satisfied. It was a pretty resounding victory, ensuring that they didn’t need to blow open the App Store, offer alternative App Stores, and risk user security and privacy. By digging their heels in, even now following a scathing ruling from the judge presiding over this case, they aren’t endearing themselves to developers and certainly not to litigators.
Tim Cook should have listened to his App Store chief Phil Schiller (former SVP of worldwide marketing).
“… I had great concerns about the collections of funds from developers,” he said, specifically “the change in the role of the App Store to now an organization that needs to collect money from developers.”
He said he was worried about how the App Store would have to go after developers who didn’t pay the commissions, making it “some kind of a collection agency” that had “rules around how we handle nonpayment and whether ultimately it means we’re going to have to do audits of developers.”
Schiller said he worried about “how all of those things change the relationship between Apple and developers in a way I thought would be detrimental.”
There’s a much bigger battle ahead for Apple with their legal case against the Justice Department. This case is a distraction from that. And with Apple’s WWDC25 conference coming up in June, they really need to endear developers again. Not put up more walls. I can understand Apple wanting to protect users, and I’m in full support of the App Store as a tool to limit malware and deliver quality user experiences. But doubling down on this approach to extracting every dollar of revenue possible from developers is going to hurt them more than it will help them. A more balanced approach is needed that protects consumers from real harm in the form of scams and malware, not just commercial harm from inflated app pricing.
glorious! Global Supply Chain Disruptions Continue to Impact Prices 2025 stunning