“Game over for the Apple tax” as US court rules publishers can freely link to off-store payments

Apple must allow publishers to freely link to alternative payment systems outside the App Store without taking royalties in the US effective immediately, a US judge has ruled in a scathing assessment of the company's dealings.

A District Court found Apple in “wilful violation” of a 2021 injunction issued in the Epic Games vs. Apple case, which came into force on January 17th, 2024 after the Supreme Court declined to review the case.

It had previously found that Apple’s 30% commission was not tied to the value of its IP and was anticompetitive. Meanwhile, the court also prohibited the tech giant from denying developers the ability to communicate with, or direct consumers to, purchases outside of the store.

Effective immediately, and permanently in the US pending appeal, Apple cannot:

• Impose a commission or any fee on purchases consumers make outside of an app, nor audit or track such transactions.
• Restrict developers’ style, language, formatting, quantity, follow or placement of links for purchases outside an app. Nor can it prohibit or limit the use of such calls to action.
• Exclude certain categories of apps and developers from obtaining link access.
• Interfere with consumers’ choice to proceed in or out of an app with scare screens - it must now use “neutral messaging” to inform users they will be using a third-party site.
• Restrict a developer’s use of dynamic links.

Apple cannot delay the decision, but has said it will appeal, according to The Verge.

Apple’s defiance

Judge Yvonne Gonzalez Rogers said Apple’s response to the injunction “strains credulity” and that despite knowing its obligations, “thwarted the Injunction’s goals, and continued its anticompetitive conduct solely to maintain its revenue stream”.

It called out Apple’s attempts to evade the ruling with a 27% commission on off-app purchases “where it had previously charged nothing”. It also lambasted the firm for imposing new barriers and requirements on developers communicating directly with consumers.

“In the end, Apple sought to maintain a revenue stream worth billions in direct defiance of this Court’s Injunction,” it said.

The judge also accused Apple VP of finance Alex Roman of lying under oath. Citing internal communications at the tech giant, Apple fellow Philip Schiller had advocated Apple comply with the injunction, but that its CEO Tim Cook ignored him.

“Cook chose poorly,” the judge stated.

The court has referred the matter to the US Attorney for the Northern District of California to investigate whether criminal contempt proceedings are appropriate.

“Apple willfully chose not to comply with this Court’s Injunction. It did so with the express intent to create new anticompetitive barriers which would, by design and in effect, maintain a valued revenue stream; a revenue stream previously found to be anticompetitive. That it thought this Court would tolerate such insubordination was a gross miscalculation. As always, the cover-up made it worse. For this Court, there is no second bite at the apple.”

An Epic win

Epic Games CEO Tim Sweeney said the decision meant it was “game over” for the Apple tax. He began his assault on Apple’s fees more than four years ago after the company used its own payments system in the Fortnite app, in direct violation of Apple’s terms.

Fortnite is now set to return to the US iOS App Store next week, he said. Sweeney also touted a “peace proposal” to Apple: extend the court’s framework worldwide and it will drop current and future litigation on the matter.

“Apple’s 15-30% junk fees are now just as dead here in the United States of America as they are in Europe under the Digital Markets Act. Unlawful here, unlawful there,” said Sweeney.

The US court’s ruling comes as the European Commission dealt Apple a €500 million ($570m) fine for breaching the Digital Markets Act.

It called for the tech giant to abandon its anti-steering measures, while also issuing preliminary findings that its alternative business terms - which includes a new Core Technology Fee - failed to comply with regulations.