Apple Could Lose Billions From Walled Garden Collapse

Apple stands to lose billions of dollars in App Store revenue, after the US Supreme Court refused its request to appeal an earlier court ruling.

Fortnite developer Epic Games had taken Apple to court for ejecting it from the App Store because the game maker linked to its own payment system.

Apple’s practice wasn’t found to be breaching anti-trust law, but it wanted to appeal a 2023 District Court ruling that it was breaching California’s Unfair Competition law by forcing users to pay for apps and in-app purchases through its App Store.

With the case now finally settled, the headache for Apple is that other developers in the US may decide to copy Epic Games’ practice of offering a cheaper payment alternative to the App Store.

If that occurs, Apple stands to lose billions because it charges up to a 30 percent commission for sales through the App Store which generated US$86.8 billion in 2022, according to businessofapps.com.

Users will go elsewhere should developers offer payment alternatives with less or no commission.

In addition, other companies might set-up rival payment systems to grab a part of Apple’s lucrative revenue stream. Bloomberg reports that Microsoft is considering such a move.

Epic Games CEO Tim Sweeney applauded the move.

Tim Sweeney, CEO Epic Games.

“As of today, developers can begin exercising their court-established right to tell US customers about better prices on the web,” he says on X (Twitter). “These awful Apple-mandated confusion screens are over and done forever.”

” Regulators are taking action and policymakers around the world are passing new laws to end Apple’s illegal and anticompetitive app store practices. The European Union’s Digital Markets Act goes into effect March 7.”

Apple appears to have limited room to manoeuvre with reports suggesting that the Californian law applies across the US. It could seek to establish its App Store as a separate business in another jurisdiction where the Californian law doesn’t apply. but it’s reaction is unknown.

Google suffered a similar fate in a court ruling involving Epic Games in December last year.

More App Store headaches are ahead with the European Union examining both Apple’s App Store sales and music sales.

In 2021, it determined that Apple had “abused its dominant position” in the distribution of streamed music, according to a CNBC report.

“Our preliminary finding is that Apple exercises considerable market power in the distribution of music streaming apps to owners of Apple device,” said Margrethe Vestager, the head of competition policy in the EU, says the report. “On that market, Apple has a monopoly.”