An appeals court decided nine of the ten cases in Epic Games’ lawsuit in Apple’s favor which is a big victory for Apple.
The decision was announced by the U.S. Ninth Circuit Court of Appeals on Monday which mostly upheld the district court’s earlier ruling.
For the background, Epic Games sued Apple after the company boosted out its popular Fortnite game from the app store over “violation of policies.”
Apple scores victory in Epic Games’ lawsuit
Epic Games put its own payment system into the app which helped users do in-app purchases outside the Apple ecosystem.
Apple charges a hefty fee – at times upto 30% on app store purchases. While the meaty fee has helped scale up the company’s services business, which generated over $78 billion in Apple’s fiscal year 2022 which ended in September, it also eats into developers’ earnings.
Meanwhile, the Court also upheld the district court’s order related to California’s Unfair Competition Law. It said in the ruling, “The district court did not clearly err in finding that Epic was injured, err as a matter of law when applying California’s flexible liability standards, or abuse its discretion when fashioning equitable relief.”
Epic Games CEO Tim Sweeney reacts to the ruling
While admitting that Apple “prevailed at the 9th Circuit Court”, Epic Games CEO Tim Sweeney said, “Though the court upheld the ruling that Apple’s restraints have ‘a substantial anticompetitive effect that harms consumers,’ they found we didn’t prove our Sherman Act case.”
He added, “Fortunately, the court’s positive decision rejecting Apple’s anti-steering provisions frees iOS developers to send consumers to the web to do business with them directly there. We’re working on next steps.”
The ruling is a major setback for developers who have long rued the app store fees. Meanwhile, as expected, Apple hailed the ruling.
Apple hails the court decision
In its statement, Apple said, “today’s decision reaffirms Apple’s resounding victory in this case, with nine of ten claims having been decided in Apple’s favor. For the second time in two years, a federal court has ruled that Apple abides by antitrust laws at the state and federal levels. The App Store continues to promote competition, drive innovation, and expand opportunity, and we’re proud of its profound contributions to both users and developers around the world.”
It however added, “We respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.”
Notably, Apple is working to allow third-party app stores in the EU in order to comply with the policies there. However, analysts don’t believe that it would lead to a major revenue hit for the company as most people might still go with the official app store.
Twitter and Meta Platforms take on App stores
Meanwhile, Twitter and Facebook – both of which have launched paid verification services – have come up with a way to bypass the app store fees. Twitter for instance charges $8 per month for its controversial blue subscription on the web.
However, the charges rise to $11 per month if one buys the subscription on Apple and Google app stores. To further entice buyers to take the subscription on the web instead of the app store, the company offers an annual subscription for $84 but its available only on the web.
Facebook too charges a higher fee on the app stores in an apparent bid to compensate for the app store fees.
AAPL to report earnings next week
Next week Apple would report its earnings for the March quarter. Analysts expect the company’s revenues to fall 4.6% YoY in the quarter – which was preceded by a 5.5% fall in the previous quarter.
The revenue decline is not surprising given the slump in PC and smartphone sales. Mac sales for instance fell 30% in the March quarter which was the worst decline among all major companies.
Global smartphone shipments also likely dropped in the quarter – as was the case in the previous quarter.
As for Apple, its Services business has been a bright spot which helps it get recurring revenues at higher margins.
It recently also launched its savings account offering a 4.15% APY which is much higher than the industry average.
During the upcoming earnings call, AAPL might also comment on the court decision in the Epic Games lawsuit.
For this week though, earnings from tech giants like Amazon, Alphabet, Meta Platforms, and Microsoft will keep investors on their toes.
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