Y Combinator has filed an amicus brief in the ongoing legal battle between Apple and Epic Games, arguing that the App Store has stifled startup innovation. The brief comes during the years-long legal dispute that began when Epic Games first filed an antitrust lawsuit against Apple in 2020. The suit was a protest against Apple’s practice of taking a 30% fee for every purchase made in the App Store, including in-game purchases.
Epic claimed that Apple unlawfully banned developers from informing customers about alternative payment options outside of the App Store. A judge subsequently ordered Apple to end its anti-steering policy. In response, Apple implemented a program that allowed developers to link to alternative payment methods, but the App Store would still collect a 27% fee on those transactions.
In a further complaint, Epic accused Apple of violating the court injunction against anti-steering. In April, the judge agreed and issued an order for Apple to stop imposing restrictions on alternative payment solutions and to cease collecting fees from such methods. Apple is now appealing that ruling.
Y Combinator, a backer of Epic Games, has filed its amicus brief in support of Epic and is asking the court to deny Apple’s appeal. In its filing, Y Combinator stated that the venture capital community has long been hesitant to fund app-based businesses because of the financial burden imposed by the Apple Tax. It argued that a 30% revenue share can easily determine whether a company can afford to scale, hire new employees, and reinvest in its product, or if it will perpetually struggle to stay afloat.
With the current ruling that Apple must allow developers to transparently offer alternative payment options, the startup investor wrote that for the first time in nearly two decades, it can seriously consider investing in innovative businesses that were previously impossible due to the Apple Tax. The filing described the Apple Tax as a profound and often insurmountable barrier to entry that stifles competition and innovation at its source. Y Combinator urges the court to deny Apple’s appeal and allow the anti-steering rule to stand. The next argument in the case is set to take place on October 21.