Apple loses Epic decision
Antitrust trial ruling orders changes in App Store practices
A federal judge fundamentally altered Apple’s App Store business model on Friday in a landmark ruling that accused the iPhone maker of illegal anticompetitive behavior and is likely to have ripple effects across the U.S. antitrust landscape.
In a decision on an antitrust lawsuit brought by Fortnite maker Epic Games, U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple must allow app developers to “steer” customers to alternatives to the tech giant’s payment processing service, which collects a 30% fee on most digital transactions. That was previously not allowed by the company, and marks a major victory for developers that have long complained of the tight grip the tech giant holds over its App Store on the roughly one billion iPhones currently in use.
Gonzalez Rogers also found that Apple was in violation of California state competition laws because of the way it forces developers into using Apple’s payment processing service without allowing them to tell customers there are alternatives, which are often cheaper.
She stopped short of ruling for Epic Games’s claims that Apple is a monopolist, but left the door open with the possibility that more evidence could have changed her decision.
“The court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist,” she wrote.
Epic spokeswoman Elka Looks said the company plans to appeal the ruling. Tim Sweeney, chief executive of Epic, said in a tweet that, “Today’s ruling isn’t a win for developers or for consumers.”
Apple did not respond to requests for comment.
The ruling, one of the first major legal actions taken against a tech giant in a new era of antitrust scrutiny, is sure to echo loudly both in Washington, where a legislative effort to rein in the power of Big Tech is underway, and in the courts, which are facing the biggest test of existing antitrust laws in decades. Tech giants have come under the microscope in recent years as it became clear that current antitrust law does not effectively address their power, and regulators and lawmakers have been pushing to change that.
Last October, the Justice Department sued Google over allegations it violated federal antitrust law. Just two months later, the Federal Trade Commission sued Facebook for allegedly behaving as an unlawful monopoly. Congress has also held several hearings about antitrust concerns, including demanding last year that Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai and Apple CEO Tim Cook testify to their companies’ power.
During the hearing, Cook defended Apple’s relationship with app developers.
“We do not retaliate or bully people,” he said. “It is strongly against our company culture.”
Apple’s developers in recent years have begun
speaking out against the company for policies they view as anticompetitive and unfair. While such companies as Epic, Spotify, Match Group and others have publicly locked horns with Apple, smaller developers have also spoken out. Some have joined the Coalition for App Fairness, which was set up by Epic and other large companies.
Spotify’s head of global affairs and chief legal officer Horacio Gutierrez said in an emailed statement that it was pleased with the anti-competitive findings, as well as the move to allow app developers to steer customers to other ways to pay.
“This and other developments around the world show that there is strong need and momentum for legislation to address these and many other unfair practices, which are designed to hurt competition and consumers,” he added. “This task has never been more urgent.”Vidhya Murugesan, spokeswoman for dating app developer Match Group, echoed those concerns.
“The Court got it right that Apple has abused their power and engaged in unfair behavior, but what today’s ruling also makes clear is that antiquated antitrust laws cannot solely be fixed by the courts,” she said, adding that countries need to change their laws.