The Supreme Court this week declined to hear Apple’s appeal of an antitrust case that compels the company to allow app developers to link to external, web-based payment options. Apple was appealing a decision by the Ninth Court of Appeals in April 2023, which was brought by Apple following the original decision in the Epic v. Apple case in September 2021. I provide a history of the Epic Games v. Apple case here, but briefly:

• In August 2020, Epic launched Project Liberty, which involved the introduction of alternative payment methods to its game Fortnite on both iOS and Google. The game was quickly removed from both stores for violating platform policy because neither the App Store nor Google Play allows for alternative in-app payment methods to be utilized. Epic immediately filed antitrust lawsuits against both companies;
• The Epic Games v. Apple trial took place throughout May 2021 and was decided by Judge Yvonne Gonzalez Rogers, who sided with Apple in nine of the ten counts brought against it by Epic Games. The count in which she sided with Epic related to Apple’s restriction against linking to web-based payments from within an app; she found that this violated California’s Unfair Competition Law and issued an injunction preventing Apple from enforcing this anti-steering provision;
• Apple appealed this decision, and in April 2023, the Ninth Circuit Court of Appeals upheld it. Apple appealed this decision to the Supreme Court, which declined to hear the case on January 16th, meaning that the decision from the Ninth Court stands.

Almost immediately after the Supreme Court’s decision to not hear the case, Apple published an update to its App Store guidelines, providing new rules for including links in apps that lead to external, web-based payment options. To make use of this functionality, developers must apply for an entitlement that is bound by multiple requirements, as explained here:

• The developer must adhere to strict standards around external buttons and links, including the exclusive use of specific language templates (eg. “To get XX% off, go to www.example.com”);
• The developer must submit reporting related to web-based payments that result from in-app clicks to Apple each month;
• The developer must expose a warning modal to users, informing them that, among other things, “Apple is not responsible for the privacy or security of purchases made on the web”;
• Apple will still take a fee on any transaction made within seven days of a click on an in-app link to an external product offering. This fee will represent a 3% reduction from Apple’s standard fee on in-app purchases (see the chart below for specific fees).

If these restrictions sound familiar, it is because they are nearly identical to what Apple imposed in the Netherlands after the Dutch competition authority required Apple to allow dating apps to offer alternative in-app and off-platform payments in the Dutch App Store. In that case, the original requirements that Apple introduced were deemed to not comply with the competition authority’s ruling, and Apple was fined monthly until those requirements were altered sufficiently.

But the entitlements program that Apple ultimately settled on for dating apps in the Netherlands is the same that it has issued globally in now complying with the Epic Games v. Apple outcome (except that in the Netherlands, dating apps can offer alternative in-app payments as well as publish links to external payments). I discussed Apple’s determination to still collect a fee on payments that it doesn’t process in February 2022 in Apple to developers: Heads I win, tails you lose:

But even if the loaded language of the modal doesn’t deter users, and if off-platform transactions are completed at the same rate as on-platform transactions, developers simply can’t gain anything by implementing off-platform transactions given the 27% commission that Apple demands … Apple’s policy regarding off-platform, alternative payments is a classic “Heads I win, tails you lose” proposition. No sensible developer would undertake the effort of implementing off-platform payments given the total absence of an economic incentive. Apple’s policy towards off-platform payments is the purest example of status quo preservation through administrative obstruction.

Further, both Apple and Google collect slightly reduced fees on off-platform payments in other jurisdictions where they are mandated, as I point out in Epic v. Google and the future of alternative app payments. Dating apps in the Netherlands were not unique in being able to offer links to external payment methods before this week: a law passed in South Korea in August 2021 obligates the same there (Apple documentation for payments in South Korea here). Apple reduces its commission on alternative payments by 4% in South Korea (as does Google).

And Google, following an inquiry by the UK’s competition authority, declared in April 2023 that it would allow developers to utilize alternative in-app payments in the UK Google Play Store, reducing its fee by 4% if Google Play’s payment method is offered alongside the alternative and by 3% if not. Google has disclosed that, in complying with the EU’s DMA legislation, which goes into effect in March of this year, it will reduce its fee on alternative payments by 3%.

Apple’s policy response to the Supreme Court’s decision to not hear its appeal should not be a surprise: a 3 or 4% fee reduction is the status quo in every geography where alternative payment methods have been mandated. I make the point in The Epic v. Apple appeal decision will change very little, which was published after the Ninth Court’s decision in April 2023, that simply allowing the provision of alternative payment methods will not change the commercial dynamics of the App Store or Google Play given the ability of the platforms to continue to extract fees on them. From that piece:

If these fees are extracted on alternative payments, given the conversion friction inherent in monetizing users outside of native payment mechanisms, the economics of “by-the-book” alternative IAPs for mobile game developers will simply break. And even if the fees can’t be applied, the conversion math is difficult to settle: can most developers successfully push users to a web destination, drive sales via credit card, and then retain those users back in the app?

The economics of these fees simply render alternative options non-viable: developers assume the additional operational overhead of reporting and maintaining a separate storefront for very little incremental benefit, especially when payment processing fees are considered. The fees proposed for off-platform transactions by the platforms represent a Heads I Win, Tails You Lose proposition for developers. As a result, despite the newfound opportunity to offer links to external payments, I don’t foresee the payments calculus changing for developers on iOS.