San Ramon, California: A federal judge has ordered Apple to dismantle part of the competitive barricade guarding its closely run app store, threatening one of the iPhone maker’s biggest moneymakers. Such a change could potentially also save app developers billions of dollars that could encourage them to lower the prices paid by consumers.
The ruling issued on Friday in the US decides an antitrust case brought by Epic Games, best known as the maker of Fortnite, the popular video game played by about 400 million people worldwide. Apple shares dropped on news of the ruling and were down by more than 2 per cent in Friday afternoon trading, reflecting investor fears that the ruling would siphon away billions of dollars in annual revenue from the company.
Apple shares dipped sharply immediately upon the issuance of the ruling.Credit:AP
The legal battle targeted commissions of up to 30 per cent 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.
Although the ruling by US District Judge Yvonne Gonzalez Rogers requires Apple to make some changes in its app store, it also upheld the company’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.
“As the Court recognised ‘success is not illegal’,” Apple said in a statement. “Apple faces rigorous 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.”
The Cupertino, California, company didn’t say whether it would appeal the injunction requiring that iPhone app developers be allowed to offer other payment options.
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 to oust Fortnite from its app store 13 months ago, triggering Epic’s lawsuit. She ordered Epic to pay Apple nearly $US3.7 million ($5.02 million), or 30 per cent of the revenue it collected while violating Apple’s commissions.
Epic, a privately held company based in Cary, North Carolina, didn’t immediately respond to a request for comment. But Epic CEO Tim Sweeney denounced the ruling in a tweet, writing that it “isn’t a win for developers or for consumers”.