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What Changes After Epic vs Apple

What Changes After Epic vs Apple
By Newsletter • Issue #30 • View online
On Friday, Judge Yvonne Gonzales Rodgers issued her long-awaited ruling in the antitrust case/breach of contract case between Epic Games, the maker of Fortnite, and Apple. In it, Apple won on almost every count, while Judge Gonzales Rodgers issued a permanent injunction against Apple’s anti-steering rules. Here’s what it all means:

Credit: Shutterstock
Credit: Shutterstock
That injunction is probably the most meaningful piece of the overall outcome. In it, Judge Gonzales Rodgers simply drew a line through the final sentence in Apple’s App Store Review Guideline, 3.1.1, which deals with in-app payments (IAP).
More specifically, the order says:
1. Apple Inc. and its officers, agents, servants, employees, and any person in active concert or participation with them (“Apple”), are hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app. 
There has been quite a conversation on Twitter about what constitutes a button. While I think there’s some awkward construction in the sentence due to the fact that the Judge simply used Apple’s language and said “you can’t say this anymore,” I think it’s actually pretty clear.
The Judge’s intent is to fix the worst thing about the App Store while leaving the rest of Apple’s walled garden in place.
In-App vs Outside Transactions
Nothing here relates to the actual mechanism of making an in-app purchase. It simply precludes Apple from stopping developers telling users that other options (outside the app) exists, and providing a link to those options. If they want the seamless conversion of having customers buy things from within their apps, they’ll have to keep using Apple’s system.
It doesn’t mean that the Kindle app can add a button below every book that takes a user to an outside webview to order the book. It means that the Kindle app can add a link or a button on the home screen that says “visit the Kindle store to purchase and download your favorite books.”
It actually isn’t even that complicated, and common sense (as well as other parts of the ruling) make it clear that the Judge isn’t interested in a wholesale change to Apple’s IAP. Even though she makes clear that 30% isn’t some sacred number in terms of what Apple should be allowed to collect, she also goes out of her way to state that Apple is entitled to a commission and that IAP is appropriate as a way to ensure it is able to collect that commission.
It’s also helpful, I think, to clarify in your mind that the judge is both protecting Apple’s right to control purchases that happen within an app, while also making it far easier for developers to provide a way for their customers to make those purchases outside of the app. Previously, Apple’s position has been that it controls in-app purchases AND that developers couldn’t talk about, or link to any alternative.
That’s the key part that has changed.
Yes, I think that developers will absolutely push this to its logical limit, requiring the court to make decisions about what follows the injunction. And, it will be the court that decides. It’s no longer up to Apple to interpret its own rules. In fact, for all intents and purposes, this isn’t even one of Apple’s rules anymore. The judge lifted that sentence from Apple’s guidelines entirely.
Apple and Epic’s Appeals
Some have suggested that Apple will appeal and ask for a stay of the injunction. I think that’s a terrible idea. Epic has already appealed, which makes sense considering it lost on every other count, and the anti-steering provision is easily the least important to its future business plans.
Epic doesn’t care about adding a link to a V-Bucks store where it doesn’t have to pay Apple’s commission. It doesn’t even care about the fact this solves most of the problems a lot of developers have with Apple’s store. Instead, it wants to be the store so it can charge other developers a commission of its own.
Epic’s CEO said as much in a series of Tweets on Friday:
Tim Sweeney
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.
Tim Sweeney
Thanks to everyone who put so much time and effort into the battle over fair competition on digital platforms, and thanks especially to the court for managing a very complex case on a speedy timeline. We will fight on.
Apple’s Gift
Apple, though, should not appeal. It should consider this ruling a gift since it leaves its lucrative App Store business model almost entirely in place, and corrects what everyone else agrees is its most egregious flaw–that developers were prohibited from even mentioning that alternative ways exist to sign up for their app or service.
There’s no question Apple would eventually be forced to make the change, most likely through legislation targeting big tech more generally, and Google and Apple’s duopoly over mobile operating systems more specifically. If Apple chooses to swallow this small defeat, it could go a long way towards staving off more aggressive efforts to upend app distribution on the App Store.
So far, Apple seems to view this as a win. Katie Adams, the company’s General Counsel said the company is “very pleased with the Court’s ruling and we consider this a huge win for Apple. This decision validates that Apple’s ‘success is not illegal,’ as the judge said.”
I wrote, on Friday, that Apple should have never pushed the issue this far, that it should have made changes on its own, long before it was forced to do so by a court, or legislation:
The thing is, it shouldn’t have required a lawsuit for Apple to see that its rules were costing it far more than whatever it might lose in commissions. In terms of developer relations, user experience, and public sentiment (three things the company says it cares about deeply), this was a very bad look that could have been entirely avoided.
Imagine if Apple had, as Phil Schiller suggested years ago, lowered its commission, say to 15 percent. Or imagine if it had truly decided to operate the App Store as a revenue-neutral business, lowering the commission rate as the volume of transactions increased so that it covered expenses. 
Imagine if Apple had decided that developers could implement alternative payment methods, provided they offered the same level of security and privacy as Apple’s IAP. I don’t think there’s any question that a lot of–if not most–people would continue to choose Apple’s version. 
It’s so well integrated and people trust that if they make a payment using Apple’s IAP, they’re not going to have their credit card information stolen. Never mind that if you’re already paying through Apple, most people won’t bother to go through the hassle of changing how they pay for common services. 
Honestly, I don’t think much will change. Most people will probably keep using Apple’s IAP for most transactions. I think the obvious exception will be that apps like Spotify and Netflix will add a link (or a button) to a sign-up page on their website.
Most apps, however, are not Spotify or Netflix. Most apps don’t have the same level of trust those companies enjoy.
That is, to say, Apple will continue making piles of cash from the App Store. It will likely keep charging the same commissions for the foreseeable future, and will make very small changes only when its hand is forced.
A few other articles:
Apple can no longer force developers to use in-app purchasing, judge rules in Epic Games case
Epic has appealed Friday’s ruling in the Epic v. Apple case - The Verge
Apple Won Its Case With Epic Games. Why It Wasn't Worth It |
No, Facebook Isn't Reading Your Private WhatsApp Messages. The Problem Is Much Worse |
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