Supreme Court will weigh if Apple contempt finding in Epic case is “erroneous.”
Apple is hoping the Supreme Court will reverse a contempt finding that threatens to block the tech giant from charging high commission fees when developers divert iPhone users to non-Apple payment methods for app purchases.
The contempt finding came in a case where Epic Games accused Apple of violating a judicial order requiring changes to its App Store, which charged a 30 percent commission for using Apple payment methods and did not allow developer links to alternative payment methods.
That order required Apple to allow developers to include links to make payments outside the Apple ecosystem, but Apple did so only after requiring a 27 percent commission for allowing the link-outs. In December, Apple lost an appeal after defending its commission as reasonable. At that time, the 9th Circuit concluded that Apple violated the spirit of the order by charging fees so high that they “had a prohibitive effect” on developers who saw little benefit in updating apps to save only a small amount on fees.
With seemingly nowhere left to turn, Apple petitioned the Supreme Court to intervene in a last-ditch attempt to keep fees at an acceptable rate. In the petition, Apple argued that the 9th Circuit’s “‘spirit’-based approach sharply conflicts with the contempt standard in other circuits,” which only find contempt when companies defy explicit language in a judicial order.
“Apple clearly could not be held in civil contempt in other circuits for charging a commission that is nowhere mentioned in the underlying order,” Apple argued.
On Tuesday, the Supreme Court confirmed that justices would weigh Apple’s question “whether a court may hold a party in civil contempt based on a violation of an injunction’s ‘spirit’ where the injunction is silent as to the conduct upon which contempt is based, as the Ninth Circuit holds; or, instead, whether a court must ground a finding of civil contempt on the violation of an order that clearly and unambiguously proscribes the precise conduct at issue, as other circuits hold.”
For Apple, the stakes are “enormous.” The iPhone maker told the Supreme Court that millions of app purchases could be impacted by the outcome of the case. Also, regulators around the world are waiting to see what commission rate US courts find acceptable, Apple argued. If the “taint” of the contempt finding influences litigation over setting that rate, Apple is concerned that it will never be able to revert the rate in regions outside the US.
“The result is that, even if Apple could appeal whatever commission rate the district court sets on remand, that rate may be practically difficult—if not impossible—to change in the other jurisdictions that are closely monitoring these proceedings,” Apple argued.
As the SCOTUS review was announced, a United Kingdom competition watchdog confirmed that it’s preparing to challenge how Apple and Google set up app stores to block link-outs to alternative payment methods, The Guardian reported. The UK’s Competition and Markets Authority has argued that “consumers and app owners are being let down by Apple and Google restrictions on spending money outside their app stores,” and eliminating or lowering fees to allow more link-outs would “benefit competition,” The Guardian reported.
In Apple’s Supreme Court petition, the company claimed that the contempt finding was “erroneous” and that it’s worried that allowing it to stand would negatively influence ongoing litigation in the district court over how high Apple can go when charging a commission for link-outs.
Apple insisted in its filing that allowing the district court to establish the commission rate would be improper, urging that “if the contempt finding were reversed” by the Supreme Court, then perhaps “no modification” of Apple’s fees “would be needed if Apple proposed an acceptable commission on its own.”
Epic is preparing to fight that outcome. On X, Epic confirmed: “we’re heading to the Supreme Court where we’ll continue to fight against junk fees Apple charges on third-party payments. Lower courts have rightly found Apple’s fees to be illegal and anticompetitive and we’ll continue to defend free markets.”
According to Reuters, the Supreme Court will likely hear the case during its next term, which begins this October.
Apple’s filing said that Epic is hoping that the court fight will end with Apple charging a de minimis rate to developers who want to have more control over how transactions are completed in their apps.
In litigation that has been paused during the Supreme Court review, Epic expects to force Apple to show receipts explaining why commission rates are so high.
So far, Apple has claimed that commission fees “ensure that Apple can continue to receive compensation for use of its IP-protected tools, technologies, and services—the very things that attract developers and enable app creation.”
For example, with Epic, Apple claims that purchases like even a single “skin” that Fortnite players buy to make their characters look unique require a fee. Those commissions help Apple develop and update “the iPhone screen that displays it, the iPhone touch controls that direct the virtual character, the Apple silicon chip that processes all iOS software, the app development tools Epic used to build Fortnite for iOS, and the App Store platform that downloads, updates, and maintains the app,” their filing said.
If the Supreme Court sides with Apple and reverses the contempt finding, Apple is hoping to wriggle out of sharing “confidential business data regarding the company’s decision-making concerning the App Store, its implementation of linked-out purchases for developers, and its internal discussions regarding compliance with the injunction.”
Meanwhile, the UK is also hoping to analyze Apple’s actual costs. The CMA has suggested that Apple “could still levy fees” for allowing link-outs, “but that such charges would have to be applied fairly,” the Guardian reported. Like Epic, the Coalition for App Fairness suggested that any app store developer “charges should be justified by ‘transparent data’ from Apple and Google explaining any underlying cost to the tech companies.”
Apple did not immediately respond to Ars’ request to comment.
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