Judge Yvonne Gonzalez Rogers made a decision on Friday in a closely monitored process between Apple and Epic Games.
Rogers issued an injunction stating that Apple will no longer be allowed to prohibit developers from posting links or other communications that distract users from Apple in-app purchases, which account for 15% to 30% of gross sales.
The injunction addresses a longstanding developer complaint and raises the possibility that developers could direct their users to their website to subscribe to or purchase digital content, which is hurting sales on Apple’s App Store.
Apple shares fell 2% in trading on Friday.
The decision closes the first part of the battle between the two companies over Apple’s App Store guidelines and whether they will stifle competition. Apple won 9 out of 10 but has been anti-competitive under California law and will be forced to change its App Store policies and relax its control over in-app purchases. The injunction comes into force in December.
“The court concludes that Apple’s anti-steering regulations hide critical information from consumers and illegally stifle consumer choice,” wrote Rogers. “In conjunction with Apple’s incipient antitrust violations, these anti-steering regulations are anticompetitive and a state-wide remedy to remove these regulations is warranted.”
However, Rogers said that Apple is not a monopoly and that “success is not illegal”.
“Given the court record, the court cannot conclusively determine that Apple is a federal or state antitrust monopoly,” wrote Rogers.
The trial took place in Oakland, California, in May and included the testimony of both company bosses in court. People familiar with the process previously told CNBC that both sides expected the decision to be appealed, regardless of what it was.
“Today the court confirmed what we knew all along: The App Store does not violate antitrust law. As the court recognized, ‘success is not illegal’,” Apple said in a statement. “‘Apple faces fierce competition in every segment we do, and we believe customers and developers choose us because our products and services are the best in the world.”
Since the end of the process, but before the decision was made, Apple has made several changes to appease critics, some as part of comparisons with other app developers, including relaxing some rules for emailing customers to them Encourage purchases outside of the app and allow some links in apps.
Rogers wrote in the ruling that she disagreed with both Apple and Epic Games over shaping the market that Apple supposedly dominates. Rogers stated that these were “digital mobile game transactions,” not all iPhone apps as Epic Games claimed, nor all video games as Apple claimed.
Battle for Fortnite
Epic Games is among the most prominent companies challenging Apple’s control of its iPhone App Store, which has strict rules about what is and isn’t allowed, and requires many software developers to use the in-app payment system, which is between Aug. % and 30. takes% of every transaction.
Epic’s most popular game is Fortnite, which makes money when players buy V-Bucks, or in-game currency to buy costumes and other cosmetic changes.
Epic wasn’t looking for money from Apple – instead, it wanted to install its own app store on iPhones to bypass Apple’s cut and collect its own fees for the games it distributes. Tim Sweeney, CEO of Epic Games, had already resisted Apple’s in-app purchase rules in 2015, according to court files and exhibits.
Apple CEO Tim Cook is cross-examined by Gary Bornstein when he was heard in federal court in Oakland, Calif., Jan. 21 during weeks of antitrust proceedings.
Vicki Behringer | Reuters
However, the public clash between the two companies began in earnest in August 2020 when Epic implemented a plan called “Project Liberty” against Apple to challenge Apple, according to court records.
Epic Games has updated Fortnite on its servers to lower the price of its in-game currency by 20% if players bought directly from the company, circumventing Apple’s acquisition and violating Apple’s rules, users of its in-app payments distract.
Apple removed Fortnite from the App Store, meaning new users couldn’t download it and at some point it stopped working on iPhones because the app couldn’t be updated. As planned, Epic then filed a lawsuit that culminated in the May trial.
Epic Games will also have to pay Apple damages for breaching its contract, Rogers ruled. Epic pays Apple 30% of all revenue it has made from iOS Fortnite through direct payments.
At the trial, Apple CEO Tim Cook testified on a recent day and was questioned by Judge Rogers about his restrictions on directing purchases from judges outside of the app, which eventually became the subject of Friday’s injunction.
“It seems to me that you are not feeling any pressure or competition to actually change the way you act to address developer concerns,” Rogers said at the time.
Epic Games also sued Google over its control over the Play Store for Android phones. This case is not yet on trial.