Apple Fights to Delay External Payments on the App Store: A Supreme Court Battle

The protracted legal dispute between Epic Games and Apple, which has reshaped the app store landscape, is far from over. While Epic Games, the developer of Fortnite, recently reached a landmark settlement with Google on a similar front, the battle against Apple in Cupertino remains very much alive. Apple has now escalated the conflict to the U.S. Supreme Court, seeking to halt a judicial order that would force it to allow payments outside its App Store, a decision that could have profound implications for its business model.

The Origin of the Dispute: Epic Games vs. Apple

The saga began in August 2020, when Epic Games introduced a direct payment system in Fortnite, bypassing Apple's commissions. This led to Fortnite's removal from the App Store and the initiation of an antitrust lawsuit. In September 2021, a federal court in the Northern District of California issued a key ruling, requiring Apple to allow developers to include links to external payment methods outside the App Store and prohibiting the company from collecting commissions on these purchases. Apple appealed this decision, but in 2023, the Ninth Circuit Court of Appeals largely upheld the original ruling, pointing to the tech giant's anticompetitive practices and rejecting requests for a new hearing.

Apple's Motion Before the Supreme Court

Following the Ninth Circuit's affirmation, Apple has filed a motion with the U.S. Supreme Court to stay the mandate of the judicial order. This action seeks to buy time and prevent the immediate implementation of the ordered changes, which would allow developers to direct users to external payment systems. In its motion, Apple argues that the immediate enforcement of these changes would severely impact its business model, which relies heavily on the commissions it collects from transactions within the App Store. The company contends that the Ninth Circuit's decision violates a judicial order designed to prevent anticompetitive practices, and that its immediate implementation could destabilize the App Store ecosystem.

History of Appeals and Contempt Declaration

The trajectory of this case through the higher courts has been complex. After the 2021 ruling, Apple implemented a 27% tax on purchases made through external links, a move that Epic Games and others considered a violation of the spirit of the judicial order. In an attempt to escalate the case, Apple appealed to the U.S. Supreme Court, but it declined to review the case in January 2024. Shortly thereafter, the company was sanctioned for failing to comply with the 2021 judicial order by imposing the aforementioned tax. The Ninth Circuit Court of Appeals affirmed that Apple had violated the essence of the order and declared it in civil contempt, underscoring the seriousness of the legal situation for the company.

The App Store Business Model Under Scrutiny

The legal battle with Epic Games in the United States is not the only front Apple faces regarding its App Store policies. In Europe, the Digital Markets Act (DMA), which came into force in March 2024, compels Apple to allow third-party app stores and alternative payment methods in the European Union. Although distinct cases, both converge on challenging Apple's control over its ecosystem and its lucrative commissions, which can amount to up to 30% of transactions. Apple's defense focuses on the security and privacy that, according to them, their closed model guarantees users, arguing that allowing external payments would compromise the platform's integrity.

Implications and the Future of the App Store

Apple's current motion before the Supreme Court is, in essence, an attempt to buy time and prevent the Ninth Circuit's decision from taking immediate effect. Epic Games, for its part, maintains that the court's decision implies that Apple could only charge a minimal commission on external purchases, if any. The Court has already prohibited Apple from collecting commissions until a court defines an appropriate fee, adding a layer of uncertainty to the company's future revenues. The outcome of this legal battle will not only determine the future of App Store commissions in the United States but will also set a significant precedent for the regulation of digital markets globally, impacting developers and consumers alike.