Appeals court backs contempt finding against Apple, but reopens a door for iPhone app fees

A US federal appeals court has upheld a ruling that found Apple in civil contempt for defying a court order intended to loosen its control over iPhone app payments, while partially easing restrictions that would have barred the company from charging commissions on alternative payment systems.

In a unanimous decision on Thursday, a three-judge panel of the Ninth Circuit Court of Appeals largely affirmed a sharply worded contempt order issued in April by US District Judge Yvonne Gonzalez Rogers. The judge had concluded that Apple violated a critical portion of her September 2021 ruling in a long-running antitrust dispute brought by Fortnite maker Epic Games.

However, the appeals court overturned one aspect of that contempt order — a prohibition that would have prevented Apple from collecting any commission when users make in-app purchases through payment systems outside Apple’s own infrastructure. The panel ruled that an outright ban on commissions was excessive and sent the matter back to the district court to determine what would constitute a reasonable fee.

While the judges outlined broad principles for assessing a fair commission, they declined to specify a percentage or cap on the charges Apple could impose.

Neither Apple nor Epic Games responded immediately to requests for comment following the decision.

The appellate ruling nevertheless agreed that Apple undermined Judge Gonzalez Rogers’ effort to introduce meaningful competition in iPhone app payments. The original lawsuit, filed by Epic in 2020, accused Apple of operating an unlawful monopoly by forcing developers to use its proprietary payment system and extracting what Epic described as inflated fees.

The case challenged Apple’s tightly controlled ecosystem — often referred to as its “walled garden” — under which all digital purchases within iPhone apps were required to pass through Apple’s payment processor. Apple typically charged commissions of between 15 per cent and 30 per cent, a practice that has helped fuel its services business, which now generates more than $100 billion annually.

In her 2021 ruling, Gonzalez Rogers rejected Epic’s claim that Apple’s App Store constituted an illegal monopoly. However, she ordered Apple to permit developers to include links directing users to alternative payment methods.

Apple fought that requirement through multiple appeals, ultimately losing its bid when the US Supreme Court declined to intervene in January 2024. The company then introduced fees of between 12 per cent and 27 per cent on purchases completed via external payment systems — rates that critics said were high enough to deter developers from offering alternatives.

Epic subsequently accused Apple of flouting the spirit of the court’s order. After contentious hearings last year and earlier this year, Gonzalez Rogers agreed, describing Apple’s compliance efforts as largely cosmetic and branding them a “sham.”

The appeals court’s latest ruling leaves Apple facing continued judicial scrutiny while reopening a crucial question: how much control — and revenue — the company can retain even as it is forced to allow competing payment options within its App Store.