Markus Schreiber / AP
A federal judge order Apple on Friday to open the tightly controlled App Store and allow people to use payment methods other than Apple’s own processor, which typically charges a 30% commission on app purchases.
US District Judge Yvonne Gonzalez Rogers’ ruling is the largest strike yet against the system that includes Apple’s commission, what critics call “the Apple tax.” That could force the tech giant to revamp its entire business model for apps on iPhone and iPad.
That said, the judge didn’t force Apple to lower its 30% commission on its own payment processor, as Epic had hoped. Instead, the judge said customers should simply have more payment options per app.
Gonzalez Rogers said Apple is breaking the law by preventing consumers from accessing other payment methods. She wrote that Apple’s policies “hide critical information from consumers and illegally stifle consumer choice.” Along with what she called the tech giant’s “nascent antitrust violations”, she ordered Apple to make changes within 90 days.
But it didn’t go as far as Fortnite maker Epic Games, which sued Apple, had hoped to loosen Apple’s grip on much of the $ 100 billion mobile gaming economy.
Additionally, Gonzalez Rogers ordered Epic to pay Apple $ 3.6 million for violating App Store policies last year. Epic had introduced its own payment method within Fortnite. Apple kicked it out of the App Store, starting the legal battle.
“Today’s decision is not a victory for developers or for consumers”, Tim Sweeney, CEO of Epic Games tweeted, adding that his company was fighting for “fair competition between integrated payment methods and app stores.”
Apple said the move largely favors the company.
In a statement, Apple seized part of Gonzalez Rogers’ 185-page decision. It had said that the “relevant market” in the case was digital mobile game transactions. And in this market, she concluded, Apple has no monopoly power, given the many other competitors, noting that “success is not illegal.”
“Apple faces stiff 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,” said a spokesperson for Apple.
A spokesperson for Epic said the company is appealing the decision. Apple said it was “considering all legal options.”
Apple made concessions to app developers ahead of the decision
Apple recently extended an olive branch to some developers, including Netflix and Spotify, allowing them to send messages to customers directing them to payment processors outside of the App Store. Apple hasn’t applied the new rule to mobile games, the company’s most lucrative app segment.
Gonzalez Rogers’ decision forces Apple to go much further by allowing developers, directly in their applications, to direct customers to alternative payment methods. She said Apple needs to make this change for all of the millions of apps available in the App Store.
The move comes after a three-week trial that resulted in Apple CEO Tim Cook appearing on the witness stand. Cook defended the 30% commission that Apple typically charges app makers every time someone purchases an app through Apple’s App Store or when someone buys something in an app downloaded on an iPhone. .
At the most dramatic moment in the lawsuit, Gonzales Rogers broke into Cook on Apple’s commission rate, opening a series of questions that seemed to follow Epic’s perspective that Apple’s closed download and payment processing system. Apple in the App Store has eliminated the competition and led to higher prices and less choice for consumers.
“If there was real competition, that number would move. And it isn’t,” Gonzales Rogers said of Apple’s 30% cut.
Apple said the revenue from these fees is used to protect the privacy and security of applications. Google charges developers the same fee rate for app purchases on the company’s Android devices. In response to the pressure, Apple and Google have lowered the commission to 15% for some small developers, although most of the money generated for tech giants comes from fees levied on large app developers.
Big tech companies face multiple antitrust lawsuits
Courts have become a key battleground between tech giants and their detractors, as lawmakers and regulators in Washington debate how to control the industry. The Department of Justice and State Attorneys General are would have investigated whether Apple’s App Store commission violates US competition laws. And in Europe, regulators have launched an investigation into whether the iPhone’s rock-solid hold on the mobile economy violates European law.
Sweeney, the maverick CEO of Epic Games, launched an all-out campaign against Apple after provoking the tech giant by offering Fortnite gamers a way to purchase gaming items outside of the App Store .
In response to violating its rules, Apple kicked Fortnite from the App Store. This led to Epic continuing and launching a public relations campaign aimed at garnering support for its crusade against Apple. Sweeney has long claimed that he is not acting just for the benefit of his nearly $ 30 billion video game empire, but for developers around the world who feel pressed by Apple.
“Not everyone has a great incentive to challenge Apple and Google’s 30% because they want to be the next bastard to charge 30%,” Sweeney told NPR last year.
Editor’s Note: Apple is one of the financial backers of NPR.