By John Gruber
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An appeals court has paused one of the most consequential parts of the Epic v. Apple ruling, placing a stay on the enforcement of the injunction issued by the lower court. As a result of the stay, Apple can maintain its IAP system as the sole source of in-app payments on iOS, despite the district court’s earlier ruling that the exclusive arrangement is illegal.
The stay, issued Wednesday afternoon, does not reverse the earlier ruling but puts enforcement on hold until the appeals court can fully hear the case, a process that will likely take months.
“Apple has demonstrated, at minimum, that its appeal raises serious questions on the merits of the district court’s determination,” the ruling reads. “Therefore, we grant Apple’s motion to stay part (i) of paragraph (1) of the permanent injunction. The stay will remain in effect until the mandate issues in this appeal.”
This isn’t quite “game over”, but I believe it’s close. Judge Yvonne Gonzalez Rogers’s injunction mandating changes to the App Store seemed to be on shaky legal footing all along. Apple’s own lawyers, for example, seem extremely confident, writing in their motion to stay the injunction:
That injunction — which Epic has no standing to enforce — will not survive appellate review. Virtually all digital transaction platforms employ similar anti-steering provisions (Ex. C), which have been recognized as procompetitive in this novel technological context.
If the appeals court had not ruled, Apple on Thursday would have had to start allowing companies to include links within their apps directing customers to outside websites where they can pay for those companies’ services or subscriptions. That would have prevented Apple from taking a cut of up to 30 percent on those transactions.
I don’t think that’s true. As noted by several commentators last week, Apple’s motion to stay made clear that they intended to collect their 15–30 percent of purchases made in-app even if forced to comply with the injunction. The injunction requires only that Apple allow other forms of payment processing, including links to the web — not that they aren’t entitled to monetize the platform by charging a mandatory commission. You might say, well, wait a minute, if apps are able to use payment processors other than Apple’s IAP, wouldn’t it be complicated and difficult to figure how to account for and collect these fees? Basically, that’s Apple’s argument. From page 14 of Apple’s motion to stay the injunction:
Finally, Epic suggests that “Apple will not receive a commission” on “transactions that happen outside the app, ... on which Apple has never charged a commission.” That is not correct. Apple has not previously charged a commission on purchases of digital content via buttons and links because such purchases have not been permitted. If the injunction were to go into effect, Apple could charge a commission on purchases made through such mechanisms. See Ex. A, at 67 (“Under all [e-commerce] models, Apple would be entitled to a commission or licensing fee, even if IAP was optional”). Apple would have to create a system and process for doing so; but because Apple could not recoup those expenditures (of time and resources) from Epic even after prevailing on appeal, the injunction would impose irreparable injury.
Basically, Apple’s argument for a stay was that — as per Gonzalez Rogers’s own ruling — they were entitled to collect a commission even on digital content purchases that didn’t use IAP, but that doing so would require significant effort, and if they eventually won on appeal — which, as stated above, they expect to — they’d have no recourse to recoup the costs of that effort. The Ninth Circuit appeals court clearly agreed.
There are a lot of people who really wanted this injunction to stick, under the premise that it would force Apple to open the App Store to third-party in-app purchasing for digital content without Apple taking any cut whatsoever, exactly as Apple has done all along for in-app purchasing of physical goods. That was never going to be the case, even if this injunction had gone into effect. What was the point of the injunction then? you might ask. Good question.