Report from the Wall Street Journal
In Brief – Federal Judge Yvonne Gonzalez Rogers hammered Apple for violating her 2021 unfair competition ruling related to App Store restrictions, issued an order prohibiting Apple from charging any fees on any in-app sales made by app developers outside of Apple’s payments service, and took the extraordinary step of referring Apple’s conduct to federal prosecutors for a criminal contempt investigation. “Apple willfully chose not to comply with this court’s injunction,” Judge Yvonne Gonzalez Rogers said, specifically chiding CEO Tim Cook, and alleging misconduct by other company executives. Judge Rogers’ order is the latest in a legal dispute kicked off in 2020 when the giant game developer Epic Games sued Apple for monopolizing in-app payments on the iPhone. In 2021, Rogers found in Apple’s favor on the federal antitrust claims but ruled that the iPhone maker had violated California’s unfair competition law by prohibiting app developers from informing their users of alternative ways to buy app content outside the App Store, and issued a one-page nationwide order requiring Apple to stop those practices. Apple eventually instituted new App Store processes that extensively warned users if they pursued prompts from app developers to engage in purchases outside of Apple’s payments system, as well as charging those app developers a 27% commission, barely less than their regular 30% fee. Apple says it will comply with, and appeal, the latest order.
Context – Despite ruling that Apple did not violate federal antitrust law, Judge Rogers has been consistently skeptical that the company deserves a 30% commission rate. In a hearing last year, she called the fees a “windfall”, to which an Apple witness said, “We are running a business.” From the start, we’ve been saying that Epic’s lawsuits and other app developer complaints about in-app payments were always disingenuous. The issue was fees. App developers want much lower fees. In Europe, the DMA regulators are pressing the same issue. Rather than regulate nuanced Apple policies, Judge Rogers has ordered that they can no longer charge any fees on any purchases outside their payments system. And Apple won their antitrust case.