Apple's App Store feud with Epic Games is far from over

·Reporter
·4-min read

Apple (AAPL) on Friday asked a federal judge to hold off on enforcing an order that would force it to change some of its App Store policies while the tech giant appeals the ruling. Experts say Apple will likely have its request granted at some point as it continues to fight Epic Games over its App Store policies.

“If I were a betting person I would say that they’ll get a temporary stay,” Sam Weinstein, Cardozo School of Law professor and former attorney with the U.S. Department of Justice's antitrust division, told Yahoo Finance, speculating that Apple would win a provisional stay rather than the permanent one it sought.

In deciding Apple's motion, the judge has several options, according to Weinstein. She could clarify the intent of the order and keep it in place; offer a permanent injunction pending the outcome of the appeal; or issue a temporary injunction and let the appeals court, where both Apple and Epic have filed appeals, decide on the matter.

The request comes after Judge Yvonne Gonzalez Rogers issued a mixed ruling last month in a widely watched legal dispute between Apple and "Fortnight" maker Epic Games. The video game maker filed the antitrust suit against Apple after it was removed last year from the App Store for circumventing the tech giant's 30% commission by creating an in-app payment system.

While the judge ruled Epic had failed to show Apple was an illegal monopolist, she did find the tech giant violated California's unfair competition law. She ordered Apple to change its App Store policies to allow developers to direct customers to alternate purchasing methods, including in-app purchases — likely reducing Apple's commissions.

Apple CEO Tim Cook waves from the elevator as he leaves after speaking during a weeks-long antitrust trial at federal court in Oakland, California, U.S. May 21, 2021.  REUTERS/Brittany Hosea-Small
Apple CEO Tim Cook waves from the elevator as he leaves after speaking during a weeks-long antitrust trial at federal court in Oakland, California, U.S. May 21, 2021. REUTERS/Brittany Hosea-Small

For Epic's part, it was ordered by the judge to pay Apple's 30% fee on roughly $12 million in revenue it earned from its popular game "Fortnite" between August 2020 and October 2020 when the game maker sidestepped Apple's anti-steering policy by offering payment outside of the App Store.

Experts told Yahoo Finance the appeals process could drag out for at least a year.

'Apple would be irreparably harmed'

Without a stay from either the district or appellate court, starting Dec. 9, Apple must stop blocking app developers, like Epic Games, from informing their app users about alternative purchasing methods to Apple’s purchase system. Apple must also allow developers to communicate directly with customers who voluntarily share their contact information.

While the judge’s decision in the case largely favored Apple, the ruling has fueled speculation that, if enforced, it could cause considerable financial repercussions for the company. Apple, which does not specifically report App Store revenue, said it made $53.8 billion in net "Services" sales in fiscal year 2020. The services segment includes App Store revenue, as well as revenue from Apple TV+, Apple Music+, and iCloud subscriptions.

"Fortnite" creator Epic Games' Chief Executive Tim Sweeney leaves after a weeks-long antitrust trial at federal court in Oakland, California, U.S. May 21, 2021. REUTERS/Brittany Hosea-Small
"Fortnite" creator Epic Games' Chief Executive Tim Sweeney leaves after a weeks-long antitrust trial at federal court in Oakland, California, U.S. May 21, 2021. REUTERS/Brittany Hosea-Small

“Apple would be irreparably harmed in the absence of a stay,” Apple argued in its Friday motion, which asks to table its enforcement pending the resolution of appeals from both Apple and Epic. Apple said particular harm is already ensuing under the injunction because Epic and other app developers have misinterpreted it.

Erika M. Douglas, an assistant law professor for Temple University's Beasley School of Law, told Yahoo Finance that one of Apple's strongest arguments is that it would suffer harm if the stay is denied. However, Douglas suspects Apple's request is less likely to be granted by the district court judge who put it in place.

"It makes sense if you step back and look at the legal perspective, in that if Apple has to change all its rules and allow these apps into the ecosystem, that's going to change their whole business," Douglas said. And because Epic is already banned from the App Store, she said Apple can feasibly argue the stay has little impact on Epic.

Case Western Reserve University assistant business law professor Anat Alon-Beck agreed that the ramifications of the judge or judges' decisions on the injunction could be significant. "What the court is asking Apple to do is to change their business model," Alon-Beck said.

If the 9th Circuit Court of Appeals handles the injunction request, Weinstein said, it will offer Apple and Epic clues about its eventual ruling in the broader case.

“The 9th Circuit is going to have to tell you something about what they think the merits are, both for the underlying liability determination, and for the injunction,” Weinstein said of the possible scenario.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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