Apple vs. Epic Games: Appeals Court Upholds Contempt, Allows Commissions on External Payments
SAN FRANCISCO, CALIFORNIA — A federal appeals court on Thursday delivered a nuanced ruling in the ongoing legal saga between Apple and video game developer Epic Games, affirming a civil contempt finding against the tech giant for its defiant stance on App Store payment policies, while simultaneously providing a pathway for Apple to collect commissions on third-party payment systems. This decision by a three-judge panel for the Ninth Circuit Court of Appeals underscores the contentious battle over Apple’s lucrative “walled garden” approach to its digital marketplace.
The Contempt Finding: Apple’s “Brazen” Disregard
The unanimous 54-page decision largely validated a scathing contempt order issued in April by U.S. District Judge Yvonne Gonzalez Rogers. Judge Gonzalez Rogers had found Apple in “brazen civil contempt” for failing to comply with a key injunction from her September 2021 ruling. That original ruling, born from a 2020 lawsuit by Epic Games, maker of the popular Fortnite video game, had sought to dismantle Apple’s alleged monopolistic control over its iPhone App Store.
At the heart of Epic’s initial complaint was Apple’s long-standing requirement that all in-app purchases on iPhones be processed exclusively through its own payment system, from which it collected commissions ranging from 15% to 30%. These fees have been a significant driver of revenue for Apple’s services division, which now generates over $100 billion annually. While Judge Gonzalez Rogers stopped short of declaring the App Store an illegal monopoly, her 2021 injunction mandated that Apple allow app developers to include “buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchase.”
Apple’s Implementation and Developer Backlash
Apple had consistently fought this order through appeals, ultimately being rebuffed by the U.S. Supreme Court in January 2024, which allowed the injunction to take effect. However, Apple’s subsequent implementation proved highly controversial. The company announced it would permit developers to link to external payment options but would still impose commissions ranging from 12% to 27% on transactions made outside its system. This move was widely criticized by developers, including Epic Games, who argued the rates remained prohibitive, effectively rendering the alternative payment options unappealing and financially unviable.
This led Epic to seek a civil contempt charge, arguing Apple’s compliance was merely superficial. Judge Gonzalez Rogers agreed, characterizing Apple’s efforts as a “sham” after a series of intense court hearings late last year and earlier this year. The appeals court affirmed this finding, echoing the sentiment that Apple had made a “mockery” of the original order designed to foster payment competition.
A Partial Victory: Commissions on External Payments Allowed
However, in a significant partial victory for Apple, the Ninth Circuit overturned one crucial element of Judge Gonzalez Rogers’ contempt crackdown. The district judge had previously prohibited Apple from collecting any commissions when consumers made e-commerce purchases within an iPhone app through external payment systems. The appeals panel deemed this outright ban “too severe.” Consequently, they ordered Judge Gonzalez Rogers to reopen the case and determine a “fair and reasonable” commission rate that Apple can charge on transactions processed via rival payment options. While the ruling offered general guidelines for this determination, it refrained from suggesting specific percentage figures.
Neither Apple nor Epic Games has publicly commented on the latest ruling. The decision sets the stage for further legal proceedings, where Judge Gonzalez Rogers will now be tasked with the complex challenge of balancing the need for competition in the App Store with Apple’s right to be compensated for the value it provides through its platform. The ultimate outcome of this remanded case could reshape the economic landscape for app developers and consumers within the vast iPhone ecosystem, affecting billions of dollars in potential revenue and countless digital transactions worldwide.
