Judge Challenges Apple, Orders It to Ease Control Over the App Store

A federal judge ruled on Wednesday that Apple must ease its control over the App Store and cease collecting fees for app sales. This decision wraps up a five-year antitrust lawsuit initiated by Epic Games, aimed at redefining Apple’s substantial influence within the digital economy.

Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California criticized Apple for trying to obstruct the previous court ruling and indicated that the company should refrain from appealing further. She specifically condemned Apple CEO Tim Cook and other executives for providing false testimony.

In a prior ruling, Judge Gonzalez Rogers instructed Apple to allow apps to process payments directly, enabling them to provide external links to users and circumvent the 30% fee levied by Apple, potentially resulting in lower costs for consumers.

However, on Wednesday, Judge Gonzalez Rogers asserted that Apple had established a new framework that would mandate external sales apps to pay a 27% commission to the company. Apple also implemented a pop-up notification that warned customers against making payments outside the App Store, suggesting that such transactions might be insecure.

“Apple has attempted to protect billions in revenue by directly opposing this court’s injunction,” Judge Gonzalez Rogers stated.

In response, she indicated that Apple would no longer be able to collect commissions from transactions made outside of the App Store. She also mentioned that she could impose restrictions on developers from creating buttons or links for payments outside the store, and could not issue warnings that deter users from making purchases. Furthermore, Judge Gonzalez Rogers urged federal attorneys to investigate possible criminal actions within the Northern District of California.

This ruling marks a significant shift in the app economy, potentially decreasing costs for Apple while increasing earnings for developers. The App Store, a core element of Apple’s business model, remains a primary venue for downloading mobile games and various applications.

“This opens up opportunities for developers to negotiate better deals, resulting in advantages for consumers as well,” stated Epic CEO Tim Sweeney. “Today is a momentous occasion for everyone involved.”

Apple may contest the ruling. The company has not yet commented, and its stock fell by 1.5% in after-hours trading.

Epic, the developer of Fortnite, filed an antitrust lawsuit against Apple in 2020. Apple was accused of coercing app developers into using its payment system for App Store access, which is the sole channel for distributing apps on iPhones. This policy enabled Apple to garner as much as 30% from numerous transactions.

The App Store contributes significantly to Apple’s annual service revenue, which is nearly $100 billion.

In a ruling two years later, Judge Gonzalez Rogers stopped short of declaring Apple a monopoly in the mobile gaming sector, thus protecting the company from the most severe consequences of the lawsuit. However, she did find that Apple violated California’s unfair competition laws by hindering developers from providing users with alternative payment methods.

Last year, Epic contended that Apple was not adhering to the ruling due to the implementation of new fees and regulations for developers. The judge mandated that Apple submit documentation clarifying the reasoning behind its revised system.

Internal documents from Apple revealed attempts to obstruct alternative payment options while preserving as many of the traditional 30% fees as possible. During a meeting in July 2023, Phil Schiller, who managed the App Store, asserted that Apple would not charge commission, while Apple’s finance chief, Luca Maestri, defended the newly established 27% fee. Reports indicated that Cook supported Maestri’s position.

Cook also instructed that a “fear” notification be displayed, stating that “Apple privacy and security standards do not apply to purchases made via the web” when a user clicks an external payment link.

“Apple clearly understood its actions and consistently chose the most anti-competitive options,” Judge Gonzalez Rogers remarked.

She accused Apple executives of “lying under oath,” further asserting that “Cook made misguided choices.”