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Apple-Epic Ruling Sets Stage for Developers Suing Tech Firms

Sept. 14, 2021, 7:19 PM

A ruling curbing Apple Inc.’s App Store practices, if upheld, will result in more purchase pricing data, delivering ammunition to developers filing antitrust suits against tech giants.

U.S. District Judge Yvonne Gonzalez Rogers, ruling on an antitrust suit brought by Epic Games Inc., said Apple’s App Store doesn’t amount to an illegal monopoly of the market for mobile gaming transactions. But in a narrow injuction, the judge ordered Apple to pull its restrictions and allow developers to steer consumers to other options to pay on their own sites, sidestepping the App Store and its associated fees.

The injunction will go into effect Dec. 9 if it survives a possible appeal from Apple. Changes brought on by the ruling likely will make available real-world data on developers’ pricing, stripped of Apple’s commission—ranging from 15% to 30%. It’s also likely to spur additional competition if Apple responds with its own pricing adjustments, industry watchers say.

The effects of the order also could reveal how eagerly consumers choose to make transactions on outside websites when offered new alternatives to the App Store.

The ruling also could drive other tech companies with app purchase systems, such as Alphabet Inc.'s Google, to reconsider their options. Google updated its software last year to allow consumers to use competing app stores on Android devices, but still requires apps downloaded from the Play Store to use Google’s billing system.

Some of the larger companies—including Google and Valve Corp.—already are facing lawsuits that allege the companies’ policies restrict game developers from offering lower prices on outside websites, thus artificially inflating prices for consumers.

“This will be a natural experiment,” John Newman, an antitrust and competition law professor at the University of Miami School of Law, said of the Apple ruling. “And I suspect that if it has any downward effect on prices, it would bode well for a future challenge claiming that Apple is tying its App Store to its payment processor.”

Additional Data

Having more real-world pricing data means other developers likely will use that information to back their own lawsuits seeking to require Apple and Google to open their app platforms to outside payment options, said Eleanor Tyler, a legal analyst at Bloomberg Law.

Those legal challenges will be more viable because the new evidence—especially if prices drop all around—could further support existing allegations that Apple’s practices drive up consumer costs, she said.

Apple’s limits on payment options, which the company says are necessary to protect its intellectual property and maintain security, have made pricing data elusive.

“One can expect other plaintiffs to advance arguments in which they contend that there is no valid business justification for a given restriction imposed by Apple, and the practice can be easily eliminated without harm to consumers,” said David Reichenberg, co-chair of the Antitrust Practice Group at Cozen O’Connor.

Rogers stopped short of finding that Apple violated federal antitrust laws because Apple had valid business justifications for limiting app downloads and listed benefits to preventing other forms of payment. Apple users also trust its devices enough to continue storing sensitive data and downloading new apps, Rogers said.

“In short, this is a resounding victory and underscores the merit of our business both as an economic and competitive engine,” Apple’s senior vice president and general counsel Kate Adams said in a statement.

Complex Cases

Apple recently settled a class action brought by U.S.-based developers for $100 million without agreeing to major changes to its App Store policies. The deal didn’t curb Apple’s restrictions on its payment options.

But Rogers’ ruling now could force Apple to compete with Epic and other developers that create their own payment systems on their own platforms, practitioners said.

“The injunction may open up payment systems which gives Epic, and potentially others, inroads into a new monetization option for game platforms—that could blossom into competitors for the Apple and Google platforms,” Tyler said.

Rogers found that Apple’s anti-steering policy caused harm to developers and reasoned that prices likely would come down in the absence of such restrictions.

“In this environment, under the Judge’s reasoning, consumers would benefit because Apple would compete harder with alternative platforms,” Reichenberg said.

To contact the reporter on this story: Siri Bulusu in Washington at sbulusu@bloombergindustry.com

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com; Laura D. Francis at lfrancis@bloomberglaw.com

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