Apple is facing mounting pressure from app developers and regulators over its App Store policies, which have been challenged as anti-competitive and unfair. A federal judge recently ruled that Apple must allow developers to offer alternative payment methods to users outside of the App Store, which could threaten Apple’s lucrative 30% commission fee on in-app purchases. Apple also agreed to pay $100 million to settle a class-action lawsuit with small developers who accused it of abusing its market power and imposing unreasonable terms and conditions.
The judge’s ruling came as a result of a high-profile lawsuit filed by Epic Games, the maker of the popular game Fortnite, which sued Apple last year after it removed Fortnite from the App Store for bypassing Apple’s payment system. Epic Games argued that Apple’s App Store practices violated antitrust laws and harmed consumers and developers by creating a monopoly and stifling innovation. Apple defended its App Store policies as necessary to ensure quality, security, and privacy for its users and developers.
The judge did not find that Apple was a monopolist, but did conclude that Apple engaged in anti-competitive conduct that harmed consumers by preventing them from choosing cheaper payment options. The judge ordered Apple to stop prohibiting developers from communicating with users about alternative payment methods within 90 days. The ruling could have significant implications for Apple’s App Store revenue, which amounted to $64 billion in 2020, according to estimates.
Apple also faced a separate lawsuit from a group of small developers who claimed that Apple’s App Store policies were unfair and arbitrary. The developers alleged that Apple charged excessive fees, rejected apps for capricious reasons, and favored its own apps over competitors’. Apple agreed to settle the lawsuit by paying $100 million to a fund for small developers and making some changes to its App Store policies, such as allowing developers to appeal app rejections and use email to communicate with users about payment methods.
Apple said it was “very pleased” with the settlement, which it said would help make the App Store “an even better business opportunity for developers”. However, some critics said the settlement did not go far enough to address the underlying issues of Apple’s App Store dominance and control. The settlement is still subject to court approval.