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Apple appealing the Epic Games verdict means changes to App Store may take a while

The appeal was filed to overturn an injunction won by Epic Games in its lawsuit spurred by Apple’s anti-steering provisions.

Apple has filed an appeal against the ruling in the Epic Games lawsuit, potentially delaying changes to App Store guidelines for years. Although the original ruling in September was in favor of Apple for 9 out of the 10 counts, the company is going after the one injunction that would have allowed developers to avoid paying the 30 percent commission charged by Apple by linking users out to third-party payment processors for in-app purchases.

This injunction was set to go into effect on December 9, but Apple has asked the court to suspend it until the appeals filed by both Apple and Epic are resolved, which could take years. We don’t know yet if the court will accept the appeal or grant the stay.

What has Apple argued in its appeal?

  • Seeking to enhance information flow, which will solve the court’s concern: “Apple is carefully working through many complex issues across a global landscape, seeking to enhance information flow while protecting both the efficient functioning of the App Store and the security and privacy of Apple’s customers. Striking the right balance may solve the Court’s concerns making the injunction (and perhaps even Apple’s appeal itself) unnecessary,” the company said.
  • Epic was not harmed by anti-steering provisions: Referring to anti-steering guidelines that were deemed anti-competitive, Apple said that “Epic barely mentioned that claim during the trial and offered no evidence that it was harmed by the anti-steering provisions.”
  • Will cause irreparable harm to Apple and consumers: “The precipitous implementation of this aspect of the injunction would upset the careful balance between developers and customers provided by the AppStore, and would irreparably harm both Apple and consumers,” Apple said. “Absent a stay, Apple would be forced to permit developers to engage in conduct that will disrupt Apple’s lawful App Store business model. […]  Some developers (including Epic) misread the injunction to permit unconstrained in-app messaging or links. […] Apple disagrees with this broad interpretation of the injunction, but Epic’s apparent endorsement of this view threatens Apple’s ability to operate its platform,” the company said.
  • Apple’s in-app purchase requirement is pro-competitive: Apple said that it is “likely to succeed on appeal” because the Court has elsewhere recognised the procompetitive justifications for Apple’s IAP requirement and the Supreme Court has recognised the procompetitive effects of anti-steering provisions in Ohio vs AmEx case. Apple also added that Epic’s own expert witness “agreed that common practices in competitive markets are efficient.”
  • Epic will suffer no harm from stay because they do not have a developer account: Apple argued that Epic will not suffer from any harm if a stay is granted because Apple has rightfully rejected Epic’s request to reinstate its developer program account and thus it will not be able to make use of the injunction even if it wants to.
  • Apple already allows developers to communicate with users about payment options: Citing a concession that Apple made in August to settle a lawsuit, the company argued that it already allows developers to inform users through communication tools like email about payment methods available outside the in-app billing system. However, this concession does not allow in-app links or buttons to third-party payment processing systems.
  • Buttons and external links can be fraudulent: “Links and buttons to alternate payment mechanisms are fraught with risk. Users who click on a payment link embedded in an app—particularly one distributed through the curated App Store—will expect to be led to a webpage where they can securely provide their payment information, email address, or other personal information. A developer may thus try to take advantage of user trust, carefully cultivated by Apple’s safe and secure platform, and deceive users into providing their payment information to a malicious platform. […] While Apple could examine the links in the version of the app submitted for review, there is nothing stopping a developer from changing the landing point for that link or altering the content of the destination webpage,” Apple said.
  • No way to determine if users got what they paid for: “Additionally, Apple currently has no ability to determine whether a user who clicks on an external link actually received the products or features she paid for. Apple already receives hundreds of thousands of reports each day from users, and allowing links to external payment options would only increase this burden,” the company said.
  • IAP offers a number of protections to consumers: “IAP offers a number of protections for consumers, such as those against fraudulent transactions. Their effectiveness depends, in part, on information Apple receives through IAP—the more data it has, the better it can protect consumers from fraud. Deterring users from using IAP could thus adversely affect the integrity of iOS as a whole, including for those users who transact exclusively using IAP. And Apple offers a host of other user protections and benefits—such as a “content check” feature to make sure a user has not made a duplicative purchase, and an “ask to buy” feature that allow parents to approve or block a child’s in-app purchase— that are uniquely available through IAP,” the company said.
  • Implementation will take time and resources cannot be recovered if it wins appeal: “Implementation of the injunction would require substantial technical and engineering changes. Beyond the mere functionality of permitting external payment links, Apple would have to develop technical solutions to address the security and privacy vulnerabilities addressed above. Apple would have to develop new App Review processes. Apple would have to write and enforce new Guidelines. And Apple would have to engineer alternative solutions for collecting its commission—an undertaking the Court acknowledged could be costly. Once Apple invests these resources, it will not be able to recover them if the injunction ultimately is overturned on appeal (even in part).”

Meanwhile, Epic Games CEO Tim Sweeney tweeted a Fortnite reference in response to the development:

Epic lawsuit is just one of many challenges that App Store is facing

India: In India, both Google and Apple are facing regulatory scrutiny over their app stores. While the Competition Commission of India ordered a detailed investigation into Google Play Store last November, it is currently reviewing an antitrust complaint filed against Apple App Store last month.

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South Korea: A South Korean law passed in August requires Apple to allow alternative in-app purchase mechanisms.

Japan: Earlier in September Apple made a concession to settle an investigation by Japan’s Fair Trade Commission into the Apple App Store. The concession allows developers of “reader apps” like Netflix and Spotify to include an in-app link to their website for users to set up or manage an account.

Netherlands: The Dutch antitrust authority has found that Apple’s rules requiring app developers to use its own payment system are anti-competitive. While the Netherlands’ Authority for Consumers and Markets has not fined Apple, it has demanded changes in the company’s in-app payment policies.

China: China’s Supreme Court in September dismissed Apple’s plea and ruled that an antitrust lawsuit filed by a consumer against the company’s China entity can proceed. In its plea, Apple had argued that the lawsuit should not be allowed because its China entity does not deal with App Store operations. The court, however, said that Apple had potentially abused its market position and undermined competition, and hence the case can be heard.

US: On August 11, US lawmakers introduced a new bill titled Open App Markets Act that proposes:

  • Operating systems must allow third-party app stores
  • Developers must be allowed to choose their choice of in-app payment system
  • Pricing for various app stores or in-app payment systems can be determined by developers
  • Developers can freely communicate pricing offers with users
  • Google and Apple cannot use non-public data to build competing apps
  • No self-preferencing in app stores
  • Third-party developers must be provided with the same access to developer tools

EU and UK: The European Union has launched an investigation into Apple App Store following a complaint from Spotify and the United Kingdom has launched a broad investigation into Google’s and Apple’s effective duopoly over the supply of operating systems (iOS and Android), app stores (App Store and Play Store), and web browsers (Safari and Chrome). Both investigations are ongoing.

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