Apple wins reprieve in deadline to revamp app store rules
PremiumA federal appeals court on Wednesday granted Apple’s request to halt a Dec. 9 deadline to comply with the judge’s directive, which would allow app developers to steer customers to payment methods outside the company’s store.
Apple Inc. won a delay to court-mandated changes to its App Store as the company appeals the ruling, marking a victory in a legal battle with Fortnite maker Epic Games Inc.
A federal appeals court on Wednesday granted Apple’s request to halt a Dec. 9 deadline to comply with the judge’s directive, which would allow app developers to steer customers to payment methods outside the company’s store. The iPhone maker is facing a broad challenge by Epic to its domination of the $142 billion mobile-app distribution market.
Apple, the world’s most-valuable technology company, has argued to the Ninth Circuit Court of Appeals that the changes ordered by U.S. District Judge Yvonne Gonzalez Rogers “will harm customers, developers and Apple itself." Now, the overhaul she ordered in September will be paused until Apple’s appeal is resolved, which could take at least a year.
Its shares briefly reached an intraday high on the news. They were up 1.8% to $174.24 as of 3:33 p.m. in New York, bringing its year-to-date gain to 31%.
Apple said in a statement that “our concern is that these changes would have created new privacy and security risks, and disrupted the user experience customers love about the App Store." It added that it thanks the court for “granting this stay while the appeals process continues" and that it is “constantly evolving the App Store to help create an even better experience for our users and the incredibly talented community of iOS developers."
Epic declined to comment on the move.
In her ruling, Gonzalez Rogers vindicated Apple over Epic’s claims that App Store policies violate federal antitrust law because they hurt developers and consumers while enriching the technology giant. But she held that Apple had violated California’s unfair competition laws with its so-called anti-steering policy, which forbids developers from using web links or other means within apps to inform consumers about payment methods outside the App Store.
Apple told the Ninth Circuit that it had already satisfied half of the judge’s order by changing its guidelines to allow “out-of-app communications" between all developers and users. The part of the order targeted in Apple’s stay request involves in-app advertising and links.
Apple has shown “at minimum, that its appeal raises serious questions" on the lower court’s ruling that it violated California’s unfair competition law, the appeals court said in its order.
The company continues to face a plethora of antitrust lawsuits in and outside the U.S. seeking to open up the App Store to competition. Apple is contending with monopolization enforcement investigations brought by federal and state agencies, and legislative bids to restrict its business practices.
Bloomberg Intelligence has said that pressure on Apple to lower its App Store commissions on developers, which currently run as high as 30%, could squeeze revenue by $2 billion to $4 billion in a worst-case scenario.
But Apple is favored to win on appeal and a settlement is unlikely, Bloomberg Intelligence analyst Jennifer Rie said in a note. “On the merits, the law disfavors Epic’s market definition, and findings crediting Apple’s pro-competitive justifications will get deference on appeal," she said.
Epic is also appealing the portions of Gonzalez Rogers’s decision that went against it. Chief Executive Officer Tim Sweeney has said its appeal could take five years to be resolved, a time span that might include a trip to the U.S. Supreme Court.
Before Gonzalez Rogers’s ruling, Apple announced two App Store changes, similar to the court’s injunction, in settlements with small U.S. developers and the Japanese Federal Trade Commission.
Apple is letting developers directly communicate with users about alternative payment methods, and next year it will begin allowing so-called reader apps -- those that deal with media like video, photos and news -- to point users to the web to subscribe, bypassing Apple’s fees.
The case is Epic Games Inc. v. Apple Inc., 21-16695, U.S. Court Court of Appeals for the Ninth Circuit (San Francisco).
