Appeals court backs contempt finding against Apple, but reopens a door for iPhone app fees

In a significant ruling on Thursday, a federal appeals court upheld a decision that found Apple in civil contempt for blatantly ignoring a directive intended to allow alternative payment systems in its iPhone app store. However, the court's ruling also opened the door for Apple to impose commissions on these rival payment options. The unanimous decision from a three-judge panel of the Ninth Circuit Court of Appeals largely supported a harsh contempt order issued in April by U.S. District Judge Yvonne Gonzalez Rogers. This order stemmed from a legal dispute initiated by Epic Games, the developer behind the popular video game Fortnite. The court found that Apple had violated a crucial aspect of Judge Gonzalez Rogers’ September 2021 ruling, which sought to foster competition by allowing links to alternative payment systems within apps. Interestingly, the Ninth Circuit's 54-page ruling overturned a key element of the contempt order that would have barred Apple from collecting fees on transactions made through these external payment systems. The judges deemed the prohibition too harsh and instructed Gonzalez Rogers to revisit the case to establish a reasonable commission rate that Apple could charge. While the ruling did not specify what that commission percentage should be, it provided some guidance for determining a fair rate. Neither Apple nor Epic Games offered immediate comments following the ruling. However, the appeals court acknowledged that Apple's actions had undermined efforts to enhance payment competition in the iPhone app store, an initiative that began in 2020 when Epic filed its lawsuit. Epic's allegations accused Apple of creating a monopolistic environment in its app store and imposing exorbitant fees on developers. Currently, Apple mandates that all in-app purchases on iPhones be processed through its payment system, which allows the company to collect commissions ranging from 15% to 30%. This practice has contributed significantly to Apple's services division, which generates over $100 billion annually. Although Judge Gonzalez Rogers previously dismissed Epic's claims of monopoly status in her 2021 ruling, she did order Apple to permit alternative payment links within apps. Apple's attempts to challenge this ruling ultimately led to a rebuff from the U.S. Supreme Court in January 2024. In response, Apple announced new commission rates between 12% and 27% for purchases made through alternative payment options, rates that many developers found prohibitively high. This ongoing legal saga highlights the tension between tech giants and regulatory efforts aimed at increasing market competition, with the latest ruling further complicating Apple's strategy in the evolving app economy.