Judge says Apple is not following her orders about third-party app payment platforms
Back in September 2021, Judge Yvonne Gonzalez Rogers made a ruling in the epic Epic v. Apple suit. The judge issued an injunction that prevents Apple from blocking developers from posting a link or communicating to customers how they can pay for in-app transactions without having to use Apple's payment processing platform. Apple takes a cut of 15% to 30% of the value of each in-app transaction that goes through its processing platform.
Apple's Services unit, its second largest segment after the iPhone, took in an all-time record for the division during the fiscal second quarter by taking in $23.87 billion during the three months ended in March. Now, the judge is wondering whether Apple has made it too complicated by creating hurdles that developers must clear in order to communicate to App Store customers how they can pay for in-app transactions via third-party payment platforms.
According to the AP, on Wednesday, during four hours of testimony from Apple's Matthew Fischer, the executive in charge of the iPhone's App Store, Judge Gonzalez Rogers sounded frustrated. Despite feeling this way, she seemed to be concerned that Apple has been working to comply with her order in a way that increases the company's profits instead of making it easier for App Store users to pay for in-app transactions.
Judge Gonzales Rogers says Apple is still making a "windfall" even with a lower cut from transactions completed on third-party platforms
The judge asked Fischer whether Apple had purposely made it too confusing for customers to pay for apps, subscriptions, and in-app accessories via alternative platforms. Trying to figure out why Apple designed its alternative payment system the way it did, Judge Gonzalez Rodgers said, "Other than to stifle competition, I can see no other answer." Fischer testified that Apple is trying to follow the judge's order while protecting iPhone users from malicious attackers trying to get iPhone users to install malware-laden apps.
On in-app transactions completed on a third-party payment platform, Apple's commission range declines to a 12% to 27% range from the 15% to 30% it takes on payments processed using its own platform. Even with the lower commission that Apple collects on in-app transactions that are approved on third-party payment platforms, Judge Gonzalez Rogers says that Apple is collecting a windfall. Fischer says that Apple expects that on transactions verified on third-party platforms, it will snag an 18% cut of these transactions.
Perhaps this wasn't the right thing to say, and perhaps the comment looks bad for Apple, but Fischer said while testifying about Apple's cut of in-app transactions, "We are running a business." Fischer makes it sound that because Apple is running a business, it has justification to charge the rates it does for completing third-party app transactions.
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