iOS alternate payments: court tells Apple not to block alternate payment messaging

By John Koetsier April 25, 2023

Apple just won another round in the antitrust case Fortnite-maker Epic brought against its App Store rules, but it didn’t get everything it wanted. The significant exception: apps should be allowed to tell users about iOS alternate payment options. This is a huge deal for games with heavy-spending “whale” players and apps with significant subscription charges.

The relevant App Store guideline

App Store guidelines currently have a stipulation against telling users about alternate ways to pay for in-app purchases. It’s in section 3.1.1 — “apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase” — and it applies to all apps except “reader” apps such as magazines, music, books, and streaming video.

Legally, this is called “anti-steering.”

As things sit legally today, that will have to be changed.

The court’s ruling on iOS alternate payments

Here’s the relevant part of the ruling by the Ninth Circuit Court of Appeals court:

“The court then applied the [Unfair Competition Law] to Apple’s anti-steering provision. The court found that Epic is sufficiently injured to seek injunctive relief because Epic is a competing games distributor and would earn additional revenue but for Apple’s restrictions. On the merits, the court applied the competitor-suit ‘tethering test’ and consumer-suit ‘balancing test’ and found the anti-steering provision to be ‘unfair’ pursuant to both. The court concluded that Epic satisfied all the requirements for injunctive relief and the nature of Epic’s injury warranted an injunction preventing Apple from enforcing the provision against any developer.”

That’s pretty clear: telling app users about other ways to pay for in-app items cannot be enforced. Which means you could provide a link to a web store to buy IAPs.

What this means for games and apps

If you’re a game publisher and you sell items for $1 to $5, not much is likely to change. But if you’re a publisher who sells in-game items for $30 or $50 or $150 — and there are many — you could now tell players that an item is $100 in-app via Apple’s purchasing methodology, or $80 online on your app’s web store.

Users save money.

Publishers potentially make more money.

Everyone wins … except Apple.

This won’t be interested for small payments. It’s extra work and hassle for players, and that’s hardly worth it to save 30 cents or a couple of dollars. It’s also guaranteed, as another step in a purchase funnel, to incur some drop-off. Some percentage of people will get distracted, think twice, have a problem with the e-commerce functionality, or otherwise fail to complete what would otherwise be a single tap-plus-confirmation purchase.

So marketers need to be cautious here.

But if you have a sufficiently compelling offer to your players — enough of a discount or benefit — it’s probably going to be worth it to try. Once they’ve set it up, it should be seamless. And surely there will be stores set up by white-label services that you can simply drag and drop into your workflow.

For non-game apps with subscriptions or large purchases, the same applies. An app with a $150 or $300 annual subscription will have plenty of incentive to set up alternate forms of payment and collect a larger percentage of users’ payments. The same caveats apply, of course.

Your user is (now) your customer

Another massive benefit: your user/player/subscriber is now your customer, not Apple’s. You now know your customers and have a one-to-one commercial relationship with them, including email address, credit card information if they choose to save that with you, and all the other benefits. Upsells become possible. Cross-promotion. A level of platform independence.

But this benefit of iOS alternate payments comes with caveats.

There’s likely some customer support to deal with. Some refund processes to figure out when a customer’s kid buys $5,000 worth of in-game goodies. Security and personal information handling considerations. Legal considerations around privacy.

The extra revenue you’re looking at acquiring could end up being very costly.

But wait, Apple could appeal

An Apple spokesperson told The Verge that “we respectfully disagree with the court’s ruling on the one remaining claim under state law and are considering further review.” So Apple has a chance to fight this issue, if it chooses, all the way up to the U.S. Supreme Court, Ars Technica says.

That’s probably unlikely.

I think Apple’s reading the tea leaves in the EU’s Digital Markets Act and the UK’s draft legislation on providing more powers for its Digital Markets Unit to stop anti-competitive behavior, which many think would include a close look at how app stores are being run by major global companies. Also, two courts now in this ongoing Epic v. Apple battle have rules that the anti-steering provision for not telling customers about alternative payment methods is illegal. Any challenge to the Supreme Court would have to overcome this weight of precedent.

Then there’s the Netherlands and Korea, and probably other countries who are trying to force Apple to open up payments.

This horse is likely out of the barn.

Move slowly on iOS alternate payments

There are definitely already games and apps that have chosen to quietly circumvent Apple’s guidelines and risk punishment. Publishers of these games will now be emboldened to continue.

For others, take a few deep breaths and wait for updated guidelines from Apple. Apple will probably take a few weeks to consider whether an appeal is likely to succeed before updating the App Store Guidelines, and it’s better to stay on the side of the angels than risk punishment.

And who knows? Maybe in a year or two there will be multiple app stores on iOS.

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