Almost three years after the Epic vs. Apple the lawsuit has reached a conclusion, Apple is finally following a court order to let app developers link to third-party payment methods. But its solution faces backlash.
Apple is giving developers the green light to send app users outside the built-in iOS payment system for the first time, following instructions from a 2021 California court ruling. Under the terms of the order, Apple cannot prevent developers from linking , buttons, and other calls to action that direct users to third-party payment methods. In a document outlining the changes, Apple says it has “fully complied with the order” – but has it?
While the new system technically allows developers to avoid Apple’s up to 30 percent fees for in-app purchases, it’s a hollow victory. Under the new policy, Apple will charge up to 27 percent commission on every purchase. Additionally, Apple’s compliance plan introduces other barriers for developers that could prevent users from making purchases on a third-party site. It’s a move that Epic CEO Tim Sweeney has called “bad faith” compliance, promising legal action in response.
The order does not mention Apple can not collect a commission on purchases made on third-party websites, and Apple takes full advantage of that. (Judge Yvonne Gonzalez Rogers also mentioned the possibility that Apple would seek a commission in a footnote to her ruling.) Last week’s compliance order states that Apple will apply the 27 percent commission to transactions that “occur on the website within seven days from a developer after a user taps through an external purchase link.” Apple makes a few exceptions: The company charges members of its Small Business Program a discounted 12 percent fee, while transactions that automatically renew in the second year or later will also be charged a 12 percent fee .
Apple is going to “poison the only victory Epic won in their lawsuit so badly that no one would ever think of taking advantage of it.”
That 27 percent rate is lower than the 30 percent commission Apple receives from App Store transactions, and the 12 percent rate is lower than the normal 15 percent commission for the Small Business Program. But developers will have to use a third-party payment processor, which typically requires an out-of-pocket fee of about 3 percent, so they’re unlikely to save any money. In the meantime, the process creates additional burdens. Users must scroll through a new warning screen every time they select an external payment link, stating that Apple is not responsible for “the privacy or security of Internet purchases” and that they “will not be able to access their app.” Save an account, saved payment methods or manage refund requests via the website.”
Apple also doesn’t allow links on pages that are part of “an in-app flow to merchandise” and payments must link to a web page open in the device’s default browser. This could not only make it more difficult for users to find alternative payment options, but it could also discourage users from completing the transaction. As Sweeney noted, this process could force users to log back into the developer’s website, where they would have to “search all over again for the digital item they wanted to purchase.” Developers who link with third-party payment processors must provide Apple with transaction reports every 15 days (even if no transactions have taken place), and Apple says it has the right to review this data to ensure “the appropriate commission is paid to Apple paid”. .” If Apple doesn’t receive its commission on time, the company will charge developers a late fee with interest.
Daniel McCuaig, a partner at Cohen Milstein and a former trial attorney in the Justice Department’s antitrust division, thinks it is “unlikely” that the “court will ultimately bless Apple’s 27 percent tax.” “Apple only charges 30 percent when it handles the processing, and the order says they have to have other people do that,” McCuaig says. The edge. “It doesn’t say you get to keep your entire profit margin if you let other people do it… That’s Apple trying to keep every competitor’s margin small and eliminate the possibility of real competition in the processing market.”
Yet Apple already applies similar rules in the Netherlands, where the country’s regulator forced Apple to have Dutch dating apps link to alternative payment options by 2022. The only difference is that Apple actually lets dating app developers in the country add third-party payment processors inside also their apps. Additionally, the company still charges the same commission of up to 27 percent and requires an (arguably less scary) warning screen when a user clicks on an alternative payment option.
Although the Dutch regulator did not appear to object to these changes at the time, Bloomberg received a confidential ruling in October 2023 showing that the agency is not happy with Apple’s 27 percent tax on dating apps. Apple could also be forced to open its walled garden to allow third-party payment options under the European Union’s Digital Markets Act (DMA), which aims to curb anti-competitive practices among companies acting as “digital gatekeepers” are considered to be addressed. Spotify already has plans to introduce its own payment system on its app in Europe, but its implementation all depends on how Apple complies with the new rules. Apple will also likely impose a commission on developers in Europe, with a report from The Wall Street Journal This suggests that Apple is already planning new fees and restrictions for apps that want to allow sideloading.
Here in the US, Epic Games isn’t the only developer frustrated by Apple’s move. Nick Farina, an iOS developer who co-founded a payment app called Kuto, calls Apple’s 27 percent tax a “farce.” “This new policy from Apple is not serious and will not be applied by anyone,” says Farina The edge. “Processing your own payments costs you at least 3 percent (as Apple well knows), so you have to give them another 30 percent, plus do a lot of development work and special administration, and then report to them at your own expense. Meanwhile, David Heinemeier Hansson, the creator of Ruby on Rails, has shouted Apple on Xsaying that by charging a 27 percent commission, Apple will “poison the only victory Epic has won in their lawsuit so badly that no one would ever think of taking advantage of it.”
The next step, according to McCuaig, would be for Epic to file a contempt complaint against Apple in a district court. There, Epic will have to prove that Apple is not complying with the terms of the order, potentially opening the door to a new legal battle after the Supreme Court declined to hear the general case on January 16.
If Epic decides to challenge Apple’s compliance plan in court, Apple will impose a burden on developers And users certainly don’t help Apple with that is not trying to stifle competition – even if it meets the court’s minimum requirements. “At the 30,000-meter level you have to let third parties do the payment processing; I think it looks like they are,” McCuaig said. “If you dig deeper, everything they do makes it impossible for third parties to achieve commercial success in offering payment processing.”