Judge loosens Apple’s grip on app store
SAN RAMON, Calif. — A federal judge ordered Apple to dismantle a lucrative part of the competitive barricade guarding its closely run iPhone App Store, but rejected allegations that the company has been running an illegal monopoly that stifles competition and innovation.
The ruling issued Friday continues to chip away at the so-called “walled garden” that Apple has built around its crown jewel, the iPhone, and its app store, without toppling it completely.
The 185-page decision from U.S. District Judge Yvonne Gonzalez Rogers also provided Apple with some vindication. The judge didn’t brand Apple as a monopolist or require it to allow competing stores to offer apps for iPhones, iPads and iPods.
Those were two of the biggest objectives sought by Epic Games, the maker of the popular Fortnite video game that filed what it would hoped would be a landmark antitrust case last year after brazenly defying an exclusive payment system that funnels 15-30% of all in-app digital transactions on iPhones to Apple.
Such transactions can include everything from Netflix or Spotify subscriptions to the sale of digital items such as songs, movies or virtual tchotchkes for video games. Epic cast that highly lucrative fee as a price-gouging tactic that wouldn’t be possible if competing stores were allowed to offer iPhone apps.
While parts of her decision raised questions about whether Apple’s fees were driving up prices for consumers, Gonzalez Rogers left the fee structure intact and upheld the company’s right to block other stores from offering apps for its iPhone. She sided with Apple on every other key point of the case.
But the judge did conclude Apple has been engaging in unfair competition under California law, prompting her to order the company to allow developers throughout the U.S. to insert links to other payment options besides its own within iPhone apps. That change would make it easier for app developers to avoid paying Apple’s commissions, potentially affecting billions of dollars in revenue annually.
The prospect of Apple taking a hit to its lofty profit margins rattled investors, causing the company’s stock price to fall by more than 3% in Friday’s trading. That downturn delivered an $80 billion blow to Apple’s market value.
Yet Apple did its best to frame the decision as a complete victory, even as it acknowledged it may appeal the portion of the ruling that will make it easiconsider er for app developers sidestep Apple’s commissions.
“We are very pleased with the court’s ruling, and we this a huge win for Apple,” Kate Adams, the company’s general counsel, said. “This decision validates that Apple’s ‘success is not illegal,’ as the judge said.”