Apple Inc. was ordered to make a major change to the way it generates money from its App Store, in a ruling that chips away at the iPhone maker’s grip on the $100 billion market for mobile games.
By Malathi Nayak, Mark Gurman and Jef Feeley| Bloomberg Apple Inc. was ordered to make a major change to the way it generates money from its App Store, in a ruling that chips away at the iPhone maker’s grip on the $100 billion market for mobile games. A federal judge said Friday Apple must let developers of mobile applications steer consumers to outside payment methods, granting an injunction sought by Epic Games Inc. in a yearlong battle. The changes ordered by U.S. District Judge Yvonne Gonzalez Rogers come as Apple faces global pressure from regulators and litigation to open the App Store to competition. The order goes further than the modest concessions Apple has made recently and threatens to take a big bite out of the profit the App Store makes by charging a 30% commission on transactions. According to analysts, the App Store takes in more than $20 billion a year with a profit margin above 75%. Gonzalez Rogers concluded that Apple has engaged in anticompetitive conduct that harms consumers by preventing them from getting cheaper prices. But the judge didn’t find that the App Store is a monopoly and she stopped short of ordering Apple to allow for third-party app marketplaces to run on its operating system. “Given the trial record, the court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws,” she wrote. Shares fell as much as 3.5% following the ruling before paring losses to 2.3% to $150.49 1:24 p.m. in New York. The company called the ruling a vindication. “Today the court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,”’ the company said in a statement. “As the court recognized ‘success is not illegal.’” ‘Nationwide Remedy’ The judge’s finding that a “nationwide remedy is warranted is quite powerful,” even though she didn’t rule that the App Store violates federal antitrust laws, said Joshua Davis, a professor at the University of San Francisco Law School. “This is big decision and I do think it takes a big step beyond what Apple was trying to do unilaterally,” the professor said. The ruling didn’t go as far as Epic sought. The company wanted to have its own marketplace within the App Store so consumers could seamlessly buy virtual goods directly from it. Though the judge ruled that Apple must give consumers the choice to buy virtual goods on the App Store or leave its ecosystem to buy directly from developers on the web, she said Apple retained control over transactions within the App Store and could continue to charge its much-criticized 30% commission.
