US appeals court backs Apple contempt ruling, allows iPhone app store fees

A federal appeals court on Thursday backed a ruling that held Apple in civil contempt for brazenly defying an order designed to open its iPhone app store to other payment systems besides its own, but the decision also reopened a door for the company to collect commission from the rival options.

The unanimous decision by a three-judge panel for the Ninth Circuit Court of Appeals mostly validated a scalding contempt order issued in April by US District Judge Yvonne Gonzalez Rogers for violating a key part of her September 2021 findings in a legal battle instigated by video game maker Epic Games.

But the Ninth Circuit's 54-page decision overturned one key part of Gonzalez Rogers' civil contempt crackdown that prohibited Apple from collecting commissions when consumers make an e-commerce purchase within an iPhone app through a payment systems that operate outside of Apple's control.

The appeals judges decided the ban that would have prevented Apple from imposing fees on rival payment options was too severe and ordered Gonzalez Rogers to reopen the case to determine a fair commission rate that the Cupertino, California, company, can charge. The ruling provided some general guidelines for how Gonzalez Rogers might determine a fair commission on external payment systems, but did not make any suggestions about what the percentage might be.

Neither Apple nor Epic immediately responded for requests for comment late Thursday.

But the appeals decision agreed Apple had made a mockery of Gonzalez Rogers' attempt to create more payment competition in the iPhone app store as part of a case that began in 2020. That's when Epic, the maker of the Fortnite video game, filed a lawsuit alleging Apple had set up a price-gouging system within the iPhone app store that had turned into an illegal monopoly.

Epic's case targeted Apple's iron-clad control over all its devices and software, an approach that has become known as the company's "walled garden."  As part of the strategy, Apple required all in-app purchases on iPhones to be made through its own payment processing system while collecting commissions ranging from 15-30 per cent. Those commissions have become a huge moneymaker within a services division that brings in more than $100 billion in annual revenue for Apple.

Although Gonzalez Rogers rejected Epic's assertion that the iPhone app store had turned into an illegal monopoly in her 2021 decision, she ordered Apple to allow links to alternative payment options to be displayed within apps.

Apple continued to fight the alternative payment option in appeals before being rebuffed by the US Supreme Court in January 2024.

The company then announced it would charge commissions ranging from 12-27 per cent on iPhone app purchases made on alternative payment options -- rates that remained so high that few developers decided to offer other choices.

That prompted Epic to allege Apple was in contempt of court, a claim Gonzalez Rogers embraced after a series of testy court hearings last year and earlier this year that led her to conclude the company's efforts to allow alternative payment systems into the iPhone app store was little more than a "sham.