Apple submits off-App Store commission proposal

Apple has formally submitted its proposed fee structure for purchases made outside its App Store, marking a major step in the long-running legal battle with Epic Games. The proposal, filed with the U.S. District Court, outlines the commissions Apple believes it should be allowed to charge developers when users are directed to external payment methods. This development follows a series of legal maneuvers, including a request to pause proceedings that was denied by the Supreme Court.

The submission comes after Judge Yvonne Gonzalez Rogers issued an injunction requiring Apple to permit developers to include links and buttons that direct users to alternative purchasing methods. Apple had been charging a 27% commission on such off-App Store purchases, which the court found could violate the injunction. The company sought to pause the fee-setting proceedings while it asked the Supreme Court to review whether it could be held in contempt for that charge. However, the Supreme Court declined to halt the lower-court proceedings, forcing Apple to put forward its proposed rates.

The proposed commission rates

Under Apple's proposal, developers would pay a commission on linked-out purchases based on their App Store category and program participation. The proposed rates are as follows:

• 15% for standard apps, which are subject to the normal 30% in-app purchase commission.
• 10% for the Video Partner Program, the News Partner Program, the Mini Apps Partner Program, and subscription renewals.
• 5% for apps enrolled in the Small Business Program.

Apple argues that these rates are designed to balance the need for fair compensation with the court's repeated emphasis on fostering competitive pressure on its own in-app purchase system. In its filing, Apple stated that "fact and expert evidence with respect to these proposed commission rates are concurrently submitted." The company further explained that "based on expert analysis, it appears that large numbers of U.S. developers collectively accounting for the lion's share of App Store revenue will be able to link out profitably at the proffered rates, resulting in substantial competitive pressure on IAP, a goal this Court has repeatedly emphasized."

Apple also highlighted that these rates would allow it to recover some compensation for the value its intellectual property-protected tools, technologies, and services provide to developers, which both the District Court and the Ninth Circuit have acknowledged as legitimate and procompetitive.

Comparisons to other app stores

In its filing, Apple took care to compare its proposed linked-out commissions to those charged by rival app stores. The company pointed out that the Google Play Store charges linked-out rates of 20% as a standard rate, 15% for program participants, and 10% for subscriptions. Apple noted that Epic had previously agreed to those rates in its dealings with Google. Similarly, Apple referenced Samsung Galaxy Store and Amazon's Android App Marketplace as examples of competing platforms that impose commission structures on external transactions.

This comparative approach is intended to demonstrate that Apple's proposed fees are reasonable and within industry norms. Apple said the rates would subject developers to competitive pressure while preserving Apple's ability to earn revenue from the services it provides. The company added that the Ninth Circuit had reversed the District Court's outright ban on commissions for linked-out purchases, noting that such commissions are problematic only if they are effectively prohibitive.

Apple's continued objections

Despite submitting the proposal, Apple reiterated its belief that the rate-determination proceedings should have been paused while its case is pending before the Supreme Court. The company stated that it only filed the proposal to comply with Judge Gonzalez Rogers's instructions. Apple has maintained throughout the process that the Supreme Court's eventual decision could influence the outcome of the fee-setting proceedings, making it premature to set rates before that review concludes.

The company's argument before the lower court and the Supreme Court was that the contempt question—whether Apple's 27% commission violated the injunction—could directly affect the appropriate fee structure for the future. With the Supreme Court's denial of the pause request, Apple must proceed with the litigation while simultaneously preparing its Supreme Court brief, which is due by September 14.

Epic responds

Epic Games was quick to react to Apple's proposal. In a statement published on X (formerly Twitter), Epic's Newsroom account highlighted a key admission it believes Apple made in the filing. The statement read:

"Apple's filing is in, and Apple admitted that under the Ninth Circuit's definition of 'necessary costs' they would charge 0% for purchases made via linkouts to the web. Apple proposed linkout fees of 15% for standard apps and 5% for Small Business Program apps. Epic believes…"

The statement was truncated in the original post, but it clearly signals Epic's opposition to the proposed structure. Epic has long argued that Apple should not be allowed to charge any commission on purchases made outside its payment system, citing the Ninth Circuit's definition of allowable costs. The company sees Apple's proposal as contradicting the legal standard set by the appeals court.

Epic will now have the opportunity to formally respond to Apple's proffer, setting the stage for further arguments before Judge Gonzalez Rogers. The fee-setting proceedings are expected to determine not only the specific commission rates but also the broader parameters of how Apple can regulate external payment links.

Context of the Epic v. Apple case

The dispute between Epic Games and Apple dates back to 2020, when Epic introduced a direct payment system in Fortnite, bypassing Apple's in-app purchase mechanism. Apple removed Fortnite from the App Store, prompting Epic to file an antitrust lawsuit alleging that Apple's control over the iOS app ecosystem was monopolistic. The trial in 2021 resulted in a mixed verdict. The court ruled that Apple was not a monopolist under federal antitrust law, but it did find that Apple's anti-steering provisions violated California's Unfair Competition Law.

Judge Gonzalez Rogers subsequently issued an injunction requiring Apple to allow developers to include external purchase links. Apple appealed, and the Ninth Circuit largely upheld the injunction but struck down the outright prohibition on charging commissions for linked-out purchases. The appeals court held that Apple could charge a commission, provided the fee was not effectively prohibitive. This led to the current remand proceedings to determine what commission, if any, is appropriate.

Apple's proposed rates are now the centerpiece of that remand process. The company claims that its expert analysis shows that the rates are low enough to allow most developers to profitably direct users to external payment methods, while still giving Apple compensation for its platform investments. The court will need to assess whether the rates meet the legal standard established by the Ninth Circuit, and whether they are set at a level that permits genuine competition.

The outcome of these proceedings will have significant implications for the broader app economy. Developers across the industry are watching closely, as the decision could reshape how app stores operate and how commissions are charged for off-platform transactions. Apple's proposal, if accepted, would mark a departure from its traditional uniform commission structure, introducing a tiered system that varies based on app type and program participation.

In the meantime, Apple continues to prepare its Supreme Court brief, which is expected to address the contempt finding related to the 27% commission it charged during the appeals process. That separate proceeding could further complicate the timeline for resolving the fee-setting question. Legal analysts suggest that the Supreme Court's eventual ruling could clarify the limits of Apple's ability to charge any commission, potentially rendering the current proposal moot or requiring further adjustments.

For now, the ball is in Epic's court. The company will have a chance to file a response to Apple's proposal, and Judge Gonzalez Rogers will likely hold hearings to evaluate the evidence and expert testimony. Both sides remain far apart, and the final rates are far from certain. Apple's proposed 15% top rate is higher than Epic has argued is permissible, but lower than the 27% Apple previously attempted to charge. Whether the court finds this figure acceptable will depend on the economic evidence and the legal standards applied.

The dispute has already moved through multiple courts and produced significant legal precedent. The upcoming proceedings will add another chapter to the ongoing battle between one of the world's largest technology companies and one of its most prominent developers. As the case continues, app developers and consumers alike will be affected by the eventual resolution of this landmark antitrust dispute.

Source:9to5Mac News