By Christopher M. Wyant & Ruby A. Nagamine, National Law Review
On 10 September 2021, the Northern District of California issued a highly anticipated decision in the Epic Games, Inc. v. Apple Inc. antitrust dispute. The case centered on whether Apple’s operation of its App Store violates U.S. and California antitrust laws and California Unfair Competition Law. The result was mixed. The court found that Apple was not in violation of antitrust laws, but it did find Apple had violated California’s Unfair Competition Law. The court ordered Apple to allow apps to link to payment mechanisms outside of Apple’s in-app payment system (where Apple collects a 30% commission on every sale). The court’s injunction leaves room for interpretation, and the true impact of the decision will depend in part on how Apple and app developers implement the court’s injunction, if and when it goes into effect.
Since unveiling the iPhone in 2007, Apple has maintained tight control over its mobile operating system, known as iOS. The only way to install software (apps) onto iOS devices is through the App Store. Apple does not allow other app stores or the installation of software from the Internet on its devices. This closed system is sometimes referred to as a “walled garden.” To use the App Store, developers must sign a Developer Product Licensing Agreement (DPLA), which requires developers to use Apple’s in-app payment system for all app transactions and pay a 30% commission to Apple on all app sales and in-app purchases.2 Stated differently, if a developer wants to distribute its app to iOS users, its only option is to use the App Store and pay a 30% commission to Apple every timer a user pays to download the app, sign up for a subscription, or make an in-app purchase.3 Developers must also agree to Apple’s anti-steering provisions, which prohibit developers from (i) providing buttons or links within an app to outside payment systems, (ii) contacting customers acquired through iOS to encourage use of outside payment systems, or (iii) informing customers of Apple’s 30% commission.