US Courts tell Apple they cannot stop developers from using alternative payment systems

Apple has just been dealt a death blow in their court case where Epic Games, the makers of Fortnite, are suing them over some of their App Store policies and terms and conditions. A court in California, where Apple is located, has ruled that Apple cannot force developers to exclusively use their Apple Pay platform. This is because Apple’s terms violate the state’s competition laws.

The Court does not find that Apple is an antitrust monopolist in the submarket for mobile gaming transactions.However, it does find that Apple’s conduct in enforcing anti-steering restrictions is anticompetitive.

Part of the court’s ruling against Apple

What is the case all about?

So if this is your first time hearing about this court case and you are wondering what is the big deal here is a Cliff Notes version of the issue:

• Apple as you well know are a hardware and software company that makes iPads and iPhones among other gadgets
• Both iPhones and iPads come with an App Store. Users search and install apps that are from this App Store, there is practically no other easy way to install apps except via the App Store.
• In essence if you are a developer and want iPhone and iPad users to install your app you have to apply to Apple for it to be made available via this App Store. Generally sideloading is rare in the Apple world because iPhones and iPads are locked down
• Apple had rules that if you had a premium subscription service such as if you are Netflix or Spotify and wanted users to subscribe, your Apple version of the app had to use Apple Pay in order to process payments. If you did not exclusively use Apple Pay, your app could be kicked out of the App Store. This mean that your app would essentially not be available to iPad and iPhone users.
• Apple would take as much as 30% of the revenue you made through Apple Pay.
• Apple had rules preventing you from telling your customers that they could pay for premium elsewhere instead of using Apple Pay. You could not say redirect users to your website and process the payment. If you did so, Apple would kick your app out of the App Store

This court case happened because Epic Games took issue with these provisions and dragged Apple to court. The judgement, while big, surprises no one. Apple’s policy of forcing developers to use their own Apple Pay system sounded unfair, to begin with. The fact that the company also had a policy where they would, through various means, essentially make it impossible for developers to tell users that they could pay elsewhere just made it all worse for them.

I don’t think even Apple was surprised by the ruling. They probably knew deep down that this ruling was coming. Just over a week ago they made some tweaks to their terms and conditions that permitted developers to use other payment processors. They also paid off some developers in a bid to make them not join the Epic Games court case.

Now Apple has 90 days to make sure it allows developers to use other in-app payment options besides Apple Pay. This means that if you are a developer you can now use something like Google Pay’s API, Stripe, PayPal or even PayNow and Ecocash if you so wish. This is a win especially for local payment methods that have always existed in a sort of grey area. A Zimbabwean developer can now make their local app that accepts local payments with confidence without fearing it will be yanked from the App Store solely based on the fact that it doesn’t use Apple Pay.

Apple for its part doesn’t seem like is gearing to appeal this decision. Instead, they focused on the part that they are not a monopoly. Their statement completely ignores the fact that they are now no longer allowed to be the sole payments processor and focuses on that part of the judgement that suits them. That’s again not surprising. As I have said a few weeks ago Apple made some changes to their terms and conditions that essentially preempted the judgement. Probably because they had an inkling this was how it was going to go.