Apple may not force software companies that offer apps in its App Store to use Apple’s own payment system. That was decided by a US judge on Friday. The verdict could have major consequences for the digital economy.
App developers now have the option to get out of the commission that Apple normally charges for every purchase in its digital store. If you want to sell an app in the Apple App Store, you must pay 30 percent to the technology company. That is an extremely lucrative business model, not only for Apple but also for Google.
Apple last year had an estimated $64 billion in revenue from its App Store sales. Google does not report figures, but it is estimated to have earned $38.6 billion in 2020 from its Play Store. Most of the revenue comes from games and their manufacturers. All providers in the app stores have to pay this commission, from Spotify and Netflix to newspaper publishers. Apple came to the publishers, who have long complained about the fee, last month to meet. Anyone who also offers their news via the online service Apple News only has to pay 15 percent on subscriptions taken out via Apps that are delivered via the App Store.
Friday’s lawsuit was filed by games manufacturer Epic Games. That is the creator of the popular game Fortnite, which is played by approximately 400 million players worldwide. Last year, Epic Games offered players of its Fortnite version for Apple’s iPhone the opportunity to purchase all kinds of virtual goods in the game – outside the App Store checkout. For example, players buy better weapons for their avatars or better gear while all proceeds go to Epic Games. The games company earned an estimated $5.1 billion in 2020 from Fortnite.
Apple responded by banning the Fortnite app from its App Store. Epic Games then went to court. The games company also sued Google for a similar problem in the Play Store.
A California judge has now ruled that Apple is violating unfair competition laws. The company should offer alternative means of payment; not just the App Store’s own cash register. Apple is expected to appeal the verdict.
Also in South Korea, an important market for mobile games, Epic Games faces Apple and Google. The Asian country recently became the first country to end the dominant position of Apple and Google in payments on their mobile platforms. A company like Epic Games would be allowed to charge customers in Fortnite directly after the introduction of a new law, thus bypassing Apple and Google. The law has been passed and is expected to come into effect from September 15th
In Europe, both the European Commission and national regulators are investigating app stores. In the Netherlands, the Netherlands Authority for Consumers and Markets (ACM) is investigating whether Apple is abusing its dominant position. The ACM also looks at the conditions that Apple uses for the App Store for app providers. ACM expects to complete the investigation later this year. It is unknown when the European investigation will be completed.