A federal judge ordered Apple to dismantle part of the competitive barricade guarding its closely run app store, threatening one of the iPhone maker’s. The change could potentially save app developers billions of dollars that could encourage them to lower the prices paid by consumers.
Friday’s ruling decides a legal challenge brought by Epic Games, best known as the maker of Fortnite, the popular video game played by 400 million people worldwide. Epic, based in Cary, North Carolina, is a private company.
Epic targeted commissions of up to 30% that Apple charges on digital transactions within apps. Such transactions can include everything from Netflix or Spotify subscriptions to the sale of digital item 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.
, Apple maintained there’s plenty of competition in the gaming market, citing the Nintendo Switch, Sony’s Playstation and Microsoft’s Xbox. The company made the case for itself as an innovator that has invested billions in technology and intellectual property for the benefit of consumers and app developers. Opening up its system to third-party app stores, as Epic has asked, also would harm users’ privacy and security, Apple argued.
Apple shares fell sharply immediately upon the issuance of the ruling and its stock price was down 2% Friday.
In the mixed ruling, U.S. District Judge Yvonne Gonzalez Rogers required Apple to make some changes in its app store, to allow developers to include links and buttons for non-Apple payment options directly within apps —something the iPhone maker has steadfastly resisted.
But she also upheld Apple’s right to block other stores from offering apps for its iPhone. She sided with Apple on every other key point of the case, and in particularly didn’t find the company is operating an illegal monopoly, as Epic had charged.
Gonzalez Rogers also dealt Epic a blow by ruling that the game maker breached its contract with Apple when Fortnite added a non-Apple payment system to its app. That defiance prompted Apple to13 months ago, triggering Epic’s lawsuit. She ordered Epic to pay Apple nearly $3.7 million, or 30% of the revenue it collected while violating Apple’s commissions.
Epic CEO Tim Sweeney denounced the ruling in a tweet, writing that it “isn’t a win for developers or for consumers.”
He said Fortnite will return to Apple’s app store once it can offer competitive in-app payments, adding, “We will fight on.”
A number of revelations emerged during the three-week trial, shedding light on Apple’s relationship with developers — and just how profitable the App Store is for its owner. Apple invested $1 million in 11 months to market Fortnite, but made more than $100 million from in-app purchases from the game, the company’s gaming chief, Michael Schmid, testified.
Apple said on Friday that the judge’s ruling vindicated its app-sales practices: “Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law. As the Court recognized ‘success is not illegal,'” Apple said in a statement.
Still, most see the ruling as an epic win in the battle to enforce.
“We are pleased with Judge Yvonne Gonzalez Rogers’ finding that Apple engaged in anti-competitive conduct and has permanently prohibited their anti-steering provisions,” Horacio Gutierrez, head of global affairs and chief legal officer for Spotify, said in statement Friday. “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. This task has never been more urgent.”
Last week, as part of a preliminary U.S. legal settlement, Apple agreed to allow some app developers such asto include app links to outside payment services for subscriptions. The changes will take effect globally in early 2022.
CBS News’ Dan Patterson contributed reporting.