Apple Inc. AAPL has come under fire due to its newly revised App Store payment policies. The modifications, which are being described as “outrageous” by critics and developers, could lead to escalating legal disputes.
What Happened: Apple has introduced a new policy that mandates developers to pay a 27% commission if they opt for an alternative payment method.
This development follows the U.S. Supreme Court’s decision to not hear appeals of an antitrust ruling related to the App Store, originating from a legal conflict between Apple and Epic Games, the creator of “Fortnite”.
On Tuesday, Tim Sweeney, Epic’s CEO, expressed his intention to contest Apple’s new policies in the Northern California District Court, terming the tech giant’s move as “bad faith.”
Music streaming service, Spotify Inc. SPOT also said that the move “is outrageous and flies in the face of the court’s efforts to enable greater competition and user choice,” reported the Wall Street Journal.
“Once again, Apple has demonstrated that they will stop at nothing to protect the profits they exact on the backs of developers and consumers under their app store monopoly,” Spotify said.
Similarly, Fiona M. Scott Morton, a former antitrust official from the Obama administration, commented, “Apple is effectively saying ‘we refuse to back down’.”
Some in the app-developer community have also opposed Apple’s new policy, asserting that the 27% commission will increase costs for developers and eventually consumers.
“It defeats the entire purpose of allowing competition in the payments space,” stated Rick VanMeter, executive director of the Coalition for App Fairness, adding,”They’re reaching beyond the App Store to web-based payments, which is new and pretty audacious.”
While Apple faces criticism, legal experts reportedly believe that the company’s policy revisions comply with the District Court’s ruling, the report noted.
“Apple is taking the smallest steps it believes it can under the court’s injunction, which is pretty limited,” stated Paul Swanson, antitrust lawyer at Holland & Hart.
Apple did not immediately respond to Benzinga’s request for comments.
Why It Matters: The controversy comes after Apple’s decision to allow U.S. developers to incorporate links to external payment platforms in their apps, a move that still required them to pay a percentage to Apple.
The decision was seen as a concession to developers, but the high commission rate has been met with resistance.
U.S. District Judge Yvonne Gonzalez Rogers, oversaw the Apple vs. Epic case. Judge Rogers previously indicated her intention to monitor Apple’s compliance with the order. According to Swanson, she retains the authority to amend her ruling if she finds Apple in violation.
Meanwhile, antitrust professor at the University of Pennsylvania Law School, Herb Hovenkamp believes it will be challenging for Epic to pursue Apple again, as the court of appeals has already rejected Epic’s claim due to Apple’s perceived lack of market power, the report noted.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.