Epic Games v. Apple: the judge makes his decision

Judge Yvonne Gonzalez Rogers issued a ruling in a closely watched trial between Apple and Epic Games on Friday.

Rogers ordered an injunction saying Apple would no longer be allowed to ban developers from providing links or other communications that distract users from Apple’s in-app purchases, which accounts for 15-30% of gross sales.

The injunction responds to a long-standing complaint from developers and suggests the possibility that developers could direct their uses to their website to subscribe or purchase digital content, thereby hurting Apple App Store sales.

Apple shares fell 2% on Friday.

The ruling concludes the first part of the battle between the two companies over Apple’s app store policies and whether they stifle competition. Apple has won 9 of 10 counts, but will be forced to change its policies on the App Store and loosen its grip on in-app purchases.

Rogers said Apple is not a monopoly and that “success is not illegal”.

“Based on the trial record, the court ultimately cannot conclude that Apple is a monopoly under federal or state antitrust laws,” Rogers wrote.

However, she found that Apple had engaged in anti-competitive behavior under California law and issued the injunction, which will take effect in 90 days.

“The Court finds that Apple’s anti-leadership provisions hide critical information from consumers and illegally stifle consumer choice,” Rogers wrote. “When coupled with Apple’s nascent antitrust violations, these anti-management provisions are anti-competitive and a nationwide remedy to eliminate these provisions is warranted.”

The trial was held in Oakland, Calif., In May, and the company’s two CEOs testified in open court. People familiar with the trial previously told CNBC that both sides expect the decision to be appealed, whatever it is.

Since the end of the trial but before the decision is rendered, Apple has made several changes to appease criticism, some as part of agreements with other app developers, including relaxing certain rules about sending emails. e-mails to customers encouraging them to make non-in-app purchases and allowing certain in-app links.

Rogers wrote in the decision that she disagreed with Apple and Epic Games on the framing of the market that Apple would dominate. Rogers discovered that these were “digital mobile game transactions”, not app control over the App Store, as Epic Games had claimed, nor all video games, like Apple’s. had claimed.

Epic Games is one of the most prominent companies to challenge Apple’s control over its iPhone App Store, which has strict rules on what is allowed and not, and requires many software developers to use in the system. in-app payment, which takes between 15% and 30% of each transaction.

Epic’s most popular game is Fortnite, which earns money when players buy V-Bucks, or in-game currency to purchase costumes and other cosmetic changes.

Epic was not looking for money from Apple. Instead, he wanted to be allowed to install his own app store on iPhones, which would allow him to bypass Apple’s cutback and impose his own fees on the games he distributed. Epic Games CEO Tim Sweeney had resented Apple’s in-app purchasing rules as early as 2015, according to court documents and exhibits.

But the public clash between the two companies began in earnest in August 2020, when Epic implemented a plan to challenge Apple called “Project Liberty,” according to court documents.

Epic Games updated Fortnite on its servers to reduce the price of its in-game currency by 20% if players buy directly from the company, bypassing Apple’s hold and violating Apple’s rules for keep users away from in-app payments.

Apple removed Fortnite from the App Store, meaning new users couldn’t download it and it would eventually stop working on iPhones because the app couldn’t be updated. As expected, Epic then filed a lawsuit which resulted in May’s trial.

Epic Games will also have to pay damages to Apple because it broke its contract, Rogers said. Epic will pay Apple 30% of all revenue it has received from iOS Fortnite through direct payments.

At the trial, Apple CEO Tim Cook testified one of the last few days and was questioned sharply by Judge Rogers about his restrictions to encourage users to make non-in-app purchases, which has ended up being the subject of Friday’s injunction.

“It doesn’t seem to me that you feel any pressure or competition to really change the way you act to address developer concerns,” Rogers said at the time.

Epic Games has also sued Google for its control of the Play Store for Android phones. This case has not yet been tried.