A federal judge ordered Apple to dismantle part of the competitive barricade guarding its closely run app store, threatening one of the iPhone maker’s biggest moneymakers. It could potentially also save app developers billions of dollars that could encourage them to lower the prices paid by consumers.
The challenge was mounted by Epic Games, best known as the maker of Fortnite, the popular video game played by about 400 million people worldwide. The company contended that Apple has been gouging app makers by charging commissions ranging from 15% to 30% for in-app transactions because it forbids other options on its iPhone, iPad and iPod. Such transactions can include everything from Netflix or Spotify subscriptions to the sale of digital item such as songs, movies or virtual tchotchkes for video games.
When Epic tried to evade the commissions with an alternative payment system in Fortnite last August, Apple ousted it from the app store. Epic then sued Apple.
“The Court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice,” U.S. District Judge Yvonne Gonzalez Rogers wrote in the 185-page ruling. “When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”
However, Apple won on nine of 10 counts, including against claims that it was a "monopolist."
"Success is not illegal," Rogers wrote.
An appeal of the ruling by one or both companies seems likely.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law. As the Court recognized ’success is not illegal,” Apple said in a statement. “Apple faces rigorous competition in every segment in which we do business, and we believe customers and developers choose us because our products and services are the best in the world.”
Epic Games CEO Tim Sweeney criticized the ruling in a statement on Twitter, arguing the decision "isn't a win for developers or for consumers."
The ruling comes three months after the conclusion of a trial focused on one of the pillars holding up Apple’s $2 trillion empire — the so-called “walled garden” of the app store that Apple’s late co-founder Steve Jobs began to shape 20 years ago.
Since that trial ended, Apple has taken two steps to loosen some of its app store rules — one to settle a lawsuit and another to appease Japanese regulators without altering its commissions. Those concessions make it easier for many apps to prod their users to pay for digital transactions in ways that avoid triggering Apple’s fees.
Apple shares dipped sharply immediately upon the issuance of the ruling and was trading down 3% Friday. Epic, based in Cary, North Carolina, is a private company.