In a landmark ruling, the Federal Court of Australia found that tech giants Apple and Google engaged in anti-competitive conduct within their app stores. Judge Jonathan Beach concluded that the companies abused their dominant positions in the app distribution market to suppress competition. However, he dismissed claims by Epic Games, the creator of Fortnite, that Apple and Google had engaged in “unconscionable conduct.”
Epic Games has been challenging the fee structures imposed by Apple and Google for in-app purchases.
The ruling could pave the way for Fortnite to return to the Australian market through the Epic Games Store. A Google spokesperson said in a statement that the company welcomes the court’s rejection of Epic’s demands to distribute app stores within the Google Play store and attacks on security protections. However, Google disagrees with the court’s characterization of its billing policies and practices.
Apple told ABC News that while it believes its app store remains the safest way for users to obtain apps, it disagreed with certain aspects of the court’s ruling. The legal battle continues, and it remains to be seen how these developments will impact the broader app store ecosystems and the rules governing them in other regions. Epic Games alleged that Apple’s control over in-app purchases, preventing users from downloading apps outside the app store and developers from running their own app store on iOS, was a misuse of market power.
The company also alleged Google harmed app developers and consumers in Australia by preventing choice over app distribution and in-app payments on Android devices. Apple’s iOS and App Store are completely closed and controlled by Apple. Similar rules apply on Google’s Android operating system for the Play Store, but Google also allows “side-loading” of apps and for phone manufacturers to have their own app stores.
Court rules on anti-competitive practices
Each company charges fees for transactions in their app stores. Google Play charges a 15% fee for the first US$1m earned by developers each year, increasing to 30% above that.
Apple developers pay a 15% fee if the revenue generated the previous year is lower than $1m, but pay 30% if they earn more than that. Justice Beach found that Apple had engaged in conduct likely to diminish competition over preventing side-loading of apps on iOS and by preventing developers from using alternative payment methods for digital purchases. For Google, it was found to breach the Competition and Consumer Act for the Google Play billing system and over Google’s Project Hug, which allegedly enticed developers to keep their apps in the Play Store.
Epic Games stated that its app store and Fortnite would come to iOS in Australia, but noted there were over 2,000 pages of findings to fully understand the details. Google said the court recognised the “stark difference between Android’s open platform and Apple’s closed system” but disagreed with “the court’s characterisation of our billing policies and practices, as well as its findings regarding some of our historical partnerships.”
Apple said it disagreed with the court’s ruling on some of Epic’s claims and that it “faces fierce competition in every market where we operate.”
Any potential changes to the app stores and payment systems for Apple and Google in Australia are likely to be a long way off. The full judgment will be released with redactions at a later date.
Class action cases brought by app developers against Apple and Google, focusing on whether the companies had overcharged developers given their market dominance, were successful. The amount that developers would have otherwise been charged and the relief they will see will be determined at a later hearing. “This judgment is a turning point,” said Kimi Nishimura, principal at Maurice Blackburn Lawyers, the firm representing the app developers.
“It sends a clear message that even the most powerful corporations must play by the rules and respect the rights of consumers and developers alike.”
