US Court Upholds Apple Contempt Ruling, Permits iPhone App Store Fees
A federal appeals court on Thursday upheld a ruling that found Apple in civil contempt for openly disregarding an order aimed at allowing its iPhone app store to accept payment systems other than its own. However, the decision also provided an opportunity for the company to continue collecting commissions from these competing options. The unanimous decision by a three-judge panel for the Ninth Circuit Court of Appeals largely upheld a scathing contempt order issued in April by US District Judge Yvonne Gonzalez Rogers for breaching a crucial aspect of her September 2021 findings in a legal dispute initiated by video game maker Epic Games. However, the Ninth Circuit’s 54-page ruling reversed a significant aspect of Gonzalez Rogers’ civil contempt enforcement, which barred Apple from collecting commissions on e-commerce purchases made within an iPhone app using payment systems not managed by Apple. The appeals judges concluded that the ban, which would have barred Apple from charging fees on competing payment options, was excessively harsh.
They instructed Gonzalez Rogers to revisit the case to establish a reasonable commission rate that the Cupertino, California, company may impose. The ruling offered general guidelines for how Gonzalez Rogers could assess a fair commission on external payment systems, yet it refrained from suggesting any specific percentage. Neither Apple nor Epic provided immediate comments in response to requests late Thursday. However, the appeals decision concurred that Apple had undermined Gonzalez Rogers’ efforts to foster greater payment competition in the iPhone app store, a case that originated in 2020. Epic, the creator of the Fortnite video game, filed a lawsuit at that time, claiming that Apple had established a price-gouging system within the iPhone app store, which had evolved into an illegal monopoly. Epic’s case focused on Apple’s stringent control over its devices and software, a strategy that has come to be referred to as the company’s “walled garden.”
As part of the strategy, Apple mandated that all in-app purchases on iPhones be processed through its own payment system, collecting commissions that range from 15 to 30 percent. The commissions have evolved into a significant source of revenue within a services division that generates over $100 billion annually for Apple. In her 2021 decision, Gonzalez Rogers dismissed Epic’s claim that the iPhone app store constituted an illegal monopoly; however, she mandated that Apple permit the display of links to alternative payment options within apps. Apple persisted in its battle against the alternative payment option through appeals, only to be turned away by the US Supreme Court in January 2024. The company subsequently declared that it would impose commissions between 12-27 percent on iPhone app purchases made through alternative payment options—rates that were so elevated that only a handful of developers opted to provide other choices.
That prompted Epic to allege that Apple was in contempt of court, a claim embraced by Gonzalez Rogers after a series of contentious court hearings last year and earlier this year. She concluded that the company’s efforts to permit alternative payment systems in the iPhone app store were little more than a “sham.”
