A federal appeals court on Thursday upheld a ruling that found Apple in civil contempt for willfully ignoring an order meant to open its iPhone app store to alternative payment systems. However, the ruling also left room for Apple to potentially earn commissions from these competing systems.
The decision, delivered unanimously by a three-judge panel from the Ninth Circuit Court of Appeals, largely supported a sharp contempt order issued in April by U.S. District Judge Yvonne Gonzalez Rogers. This order was in response to Apple’s violation of a significant part of her September 2021 ruling in a legal case initiated by Epic Games, the video game developer.
In a notable turn, the Ninth Circuit’s 54-page decision reversed a crucial element of Gonzalez Rogers’ civil contempt measure, which had barred Apple from collecting commissions on purchases made via external payment systems within iPhone apps.
The appellate judges concluded that the restriction preventing Apple from charging fees on third-party payment options was excessively harsh. They instructed Gonzalez Rogers to revisit the case to establish an equitable commission rate that Apple, based in Cupertino, California, can charge. While the ruling offered broad guidelines on how to determine a fair rate, it stopped short of suggesting a specific percentage.
As of late Thursday, neither Apple nor Epic had responded to requests for comment.
Nonetheless, the appeals court agreed with Gonzalez Rogers that Apple had disregarded her efforts to foster more competition in the iPhone app store. This case dates back to 2020 when Epic, the creator of Fortnite, accused Apple of creating a price-gouging system within the app store, effectively forming an illegal monopoly.
Epic’s case targeted Apple’s iron-clad control over all its devices and software — an approach that has become known as the company’s “walled garden.”
As part of the strategy, Apple required all in-app purchases on iPhones to be made through its own payment processing system while collecting commissions ranging from 15% to 30%. Those commissions have become a huge moneymaker within a services division that brings in more than $100 billion in annual revenue for Apple.
Although Gonzalez Rogers rejected Epic’s assertion that the iPhone app store had turned into an illegal monopoly in her 2021 decision, she ordered Apple to allow links to alternative payment options to be displayed within apps.
Apple continued to fight the alternative payment option in appeals before being rebuffed by the U.S. Supreme Court i n January 2024.
The company then announced it would charge commissions ranging from 12% to 27% on iPhone app purchases made on alternative payment options — rates that remained so high that few developers decided to offer other choices.
That prompted Epic to allege Apple was in contempt of court, a claim Gonzalez Rogers embraced after a series of testy court hearings last year and earlier this year that led her to conclude the company’s efforts to allow alternative payment systems into the iPhone app store was little more than a “sham.”
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