In a highly anticipated decision, a California federal judge has handed down a nuanced ruling with respect to how Apple controls its app platform. Apple has escaped the determination that it is a monopolist, but thanks to conduct that a judge finds to be anti-competitive, Apple must now allow developers to tell consumers how to make purchases outside of apps.
The suit was brought a year ago by Epic Games upon the Fortnite maker’s attempt to bypass the 30 percent commission that Apple takes on in-app purchases. Apple fired back by booting Fortnite from its App Store, which then led to litigation. Epic claimed antitrust behavior. Apple responded that Epic had breached the terms of being in the App Store. A trial was held last May with the outcome potentially influencing the future of streaming since apps like Disney+ and HBO Max often rely on intermediaries like Roku and Amazon while selling premium access to just released movies.
In today’s ruling, U.S. District Court Judge Yvonne Gonzalez Rogers defines the market as digital mobile gaming transactions and finds that while Apple “enjoys considerable market share of over 55% and extraordinarily high profit margins, these factors alone do not show antitrust conduct.”
“Success is not illegal,” she adds. “The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market. The Court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist.”
Largely finding Apple’s big commission cut to be ok, the judge gives Apple the win on its counterclaims and rules that Epic must pay 30 percent of all Fortnite revenue it’s collected since August 2020.
But Apple doesn’t walk away from this case unscathed because Rogers does find that Apple is engaging in anticompetitive conduct under California’s competition laws.
“The Court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice,” she writes. “When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”
A permanent injunction will free some of the restrictions that Apple had placed on its developers, particularly in relation to communication on purchasing options.
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.
This article was originally published by The Hollywood Reporter.
