Apple is not an illegal monopoly but has engaged in illegal anti-competitive conduct, a California federal judge ruled Friday in the high-profile case brought by Epic Games.
Judge Yvonne Gonzalez Rogers, an Obama appointee, ruled that “the court does not find that it is impossible,” but rather that Epic failed to demonstrate that Apple is “an illegal monopolist.”
“Nonetheless, the trial did show that Apple is engaging in anti-competitive conduct under California's competition laws,” the judge said in the decision.
Gonzalez Rogers also issued an injunction “permanently” restraining Apple from prohibiting developers from including external links directing customers to options to make purchases outside of the in-app payment system.
Epic, the developer behind the popular Fortnite game, alleged Apple’s App Store rules are anti-competitive. The company said Apple limited developers' ability to direct consumers to alternative payment methods, collecting up to 30 percent commission fees.
Epic sued Apple after the tech giant kicked Fortnite out of its App Store in August 2020 when the game developer tried to circumvent Apple’s commission fees.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,” 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. We remain committed to ensuring the App Store is a safe and trusted marketplace that supports a thriving developer community and more than 2.1 million U.S. jobs, and where the rules apply equally to everyone,” the company added.
Despite Gonzalez Rogers siding with Apple in its defense against allegations of being a monopolist, she ruled that the tech giant is engaging in anti-competitive behavior through enforcement of anti-steering restrictions.
The injunction to force Apple to allow developers to direct customers to optional payment methods is a “measured remedy” to increase competition, transparency and consumer choice, she wrote.
Apple, however, is allowed to largely keep its App Store policies in place — including collecting commission fees and keeping the App Store as the sole download method on iPhones and iPads.
Epic is also ordered to pay Apple an amount equal to the 3 percent of the roughly $12 million in revenue Epic Games collected from users in the Fortnite app through direct payments.
Just a couple of weeks before the ruling was issued, Apple announced a set of changes to its App Store including allowing developers to communicate with customers about alternative payment methods. The announcement was made as part of a settlement deal Apple reached with app developers in a separate case targeting the tech giant’s market power.
More recently, the tech giant announced last week that apps for media and streaming content would be allowed to link to their own websites for users to manage subscription payments in an update that closed the Japan Fair Trade Commission's investigation.
Although Apple was successful in defending its practices in Epic’s case, the company is facing further regulation of its App Store from lawmakers on both sides of the aisle in Washington.
Bipartisan House lawmakers and senators have released bills aimed at increasing competition in the app market, including ending requirements for developers to use payment systems run by the Apple and Google stores.
Top Democrats on the House and Senate antitrust panels said the ruling shows the need for revamped federal antitrust laws.
“This ruling reaffirms what we heard in our Senate hearing last spring: app stores raise serious competition concerns. While the ruling addresses some of those concerns, much more must be done. We need to pass federal legislation on app store conduct to protect consumers, promote competition, and foster innovation,” Sen. Amy KlobucharAmy KlobucharThe Hill's 12:30 Report: Biden renominates Powell as Fed chair Senate Democrats look to fix ugly polling numbers The Hill's Morning Report - Presented by ExxonMobil - Gosar censured as GOP drama heightens MORE (D-Minn.) said in a statement.
“Today’s decision is even further evidence that Congress must enact rules of the road to ensure free and fair competition online. While this decision includes some relief for consumers, app developers, startups, and other innovators, it is clear that courts continue to narrowly interpret the antitrust laws in favor of monopolies and against consumers, workers, and small businesses,” House Judiciary Chairman Jerry NadlerJerrold (Jerry) Lewis NadlerUnrequited rage: The demand for mob justice in the Rittenhouse trial Overnight Energy & Environment — Presented by American Clean Power — Democrats prepare to grill oil execs Merkley, Warren and Markey sound alarm over 'dirty' hydrogen provision in climate deal MORE (D-N.Y.) and antitrust subcommittee Chair David CicillineDavid CicillineHouse votes to censure Gosar and boot him from committees House to vote Wednesday to censure Gosar, remove him from committees Gosar faces increasing odds of censure on House floor MORE (D-R.I.) said in a joint statement.
Some GOP lawmakers also praised the ruling, with Rep. Ken BuckKenneth (Ken) Robert BuckSununu exit underscores uncertain GOP path to gain Senate majority Matt Stoller: Amazon's Bezos likely lied under oath before Congress Hillicon Valley — Presented by Xerox — Agencies sound alarm over ransomware targeting agriculture groups MORE (R-Colo.) and Sen. Marsha BlackburnMarsha BlackburnChina draws scrutiny over case of tennis star Peng Shuai Sunday shows preview: Boosters open to all US adults; House Dems pass spending plan on to Senate Photos of the Week: President Biden, Kenosha protests and a pardon for Peanut Butter MORE (R-Tenn.) calling it "a small step in the right direction."
"That app developers can communicate directly and not forced to use Apple and Google’s in-app purchasing is a welcome outcome. However, Apple and Google still have monopoly power over app developers,” the two lawmakers said in a joint statement.
“This ruling underscores why legislative action, like our bipartisan and bicameral legislation, is needed to increase competition in the app store market,” they added.
Chamber of Progress, an industry group that names Apple and Google among its corporate partners, touted Gonzalez Rogers’s ruling as a warning to lawmakers to hold off on revamping antitrust laws.
“Antitrust law should focus on protecting consumers, but this case has always been about Epic Games trying to save a few million dollars. The judge’s rejection of most of Epic’s arguments should give policymakers pause in legislating to help some companies’ bottom line,” Chamber of Progress CEO Adam Kovacevich said in a statement.
A spokesperson for the Coalition for App Fairness, a group that names Epic Games as a founding member, did not immediately respond to a request for comment.
The coalition in recent weeks has hit back at Apple over its announced App Store changes, casting it as an “attempt to protect their App Store monopoly.”
Updated at 4:26 p.m.