The U.S. Supreme Court effectively upheld a lower court’s ruling that Apple must allow third-party iPhone app developers to point customers to their websites when making purchases. This means the company is forced to drop its “anti-steering” rule for such applications — a major change.
It’s the primary result of Apple’s long-running legal battle with Epic Games.
iPhone app ‘anti-steering’ policy is dead
The court fight between Apple and Epic Games (maker of Fortnite) kicked off in 2020, with the game developer claiming the requirement that all third-party iPhone software come through the App Store made Apple a monopolist. It lost that argument in both a California District Court and the appeals court.
But the district- and appeals-court judges did order the end of Apple’s policy that prevents developers from “steering” customers to their websites.
Apple fought that all the way to the Supreme Court, but lost. On Tuesday, the court announced that it didn’t think the Mac-maker’s appeal had enough merit to consider it, according to Bloomberg.
A hit to Apple’s bottom line
With the court’s decision, Apple finds itself out of legal options. Now the company must allow developers to notify customers that in-app purchases can be made on their websites as well as in the App Store. Apple fought the change because it will be much harder to collect a 15%-to-30% commission on purchases made on those sites.
Apple still expects developers to pay a commission, though it’s slightly lower. But it’ll be up to developers to track and send the Mac-maker the money.
That income goes into the company’s Services category, and Apple took in $85 billion from that area in its fiscal 2023. It’s possible that iPhone app developers evading the commission will cut into the Services total for 2024 — which might explain why Apple’s share price is down about 2% on Tuesday.
Developers will be able to undercut the cost of in-app purchases on their websites. But that doesn’t mean every dev will immediately start steering customers to their sites.
Most large software development companies probably will, but not all small developers have a website ready to handle financial transactions. And many small devs might find it’s a better deal to let Apple continue to handle the process.