Judge says CEO Tim Cook 'chose poorly' as Apple ignored App Store order

Yahoo

01-05-2025

A US judge ordered Apple (AAPL) to immediately decrease its App Store fees and asked for criminal prosecutors to review the company's alleged "cover-up," jeopardizing billions in revenue for the tech giant.
US District Judge Yvonne Gonzalez Rogers, in a blistering 80-page decision, said Apple circumvented her 2021 order that was first issued in an antitrust case brought by "Fortnite" developer Epic Games. That order said Apple must allow App Store developers to direct customers to app purchases outside the store.
"Effective immediately Apple will no longer impede developers' ability to communicate with users nor will they levy or impose a new commission on off-app purchases," wrote Gonzalez Rogers, a judge of the US District Court for the Northern District of California.
She accused the tech giant's vice president of finance, Alex Roman, of lying under oath during testimony before the court in February and referred the case to state criminal prosecutors to investigate whether criminal contempt proceedings would be appropriate.
Internally at Apple, the judge added, Apple fellow Phillip Schiller had advocated for Apple to comply with her 2021 injunction, but that was ignored by CEO Tim Cook.
"Cook chose poorly," Gonzalez Rogers wrote.
Her mandate raises new questions about the financial impact on a major revenue stream for Apple as the tech giant prepares to report second quarter earnings after the bell on Thursday.
The iPhone maker, which holds roughly 19% of the global smartphone market, earns fees on in-app purchases created by iOS app developers.
The Ninth Circuit said in a court document that the App Store generated an estimated $100 billion in annual revenue. As of February 2025, the store hosted roughly 2 million downloadable apps.
In 2024, according to Statista, the store earned nearly $92 billion globally, a 14% increase over 2023.
The legal drama that unfolded this week started in August 2020, when Epic first challenged Apple with a lawsuit.
It was eventually decided in part in Apple's favor, finding that the company did not hold a monopoly in the market for "digital mobile gaming transactions."
However, in a major victory for Epic — and app developers at large — the judge held that anti-steering provisions contained in the App Store's rules violated California's antitrust law.
Essentially, Gonzalez Rogers' 2021 order said Apple must allow developers to include links and buttons in their apps that can lead users to pay for in-app purchases outside the App Store.
Epic and Apple appealed the decision to California's Ninth Circuit Court of Appeals, which agreed with Gonzalez Rogers that Apple had not violated federal antitrust laws.
Although the court reached that conclusion for distinct reasons, it upheld the injunction in April 2023, holding that the anti-steering provisions violated California's Unfair Competition Law. The US Supreme Court declined to review the case in January 2024.
Apple did make changes to its App Store rules following the Supreme Court's decision not to hear the case, but Epic argued that the changes didn't comply with the order.
Apple maintained its 30% commission and 15% commission for small businesses for in-app purchases, and it implemented a new 27% commission for off-app purchases, where it previously had not levied charges. According to the court, the company also introduced a "scare screen" to dissuade customers from leaving the App Store.
Apple's goal, Gonzalez Rogers wrote, was to "maintain its anticompetitive revenue stream" and "impose new barriers" for developers.
"Apple, despite knowing its obligations ... thwarted the injunction's goals, and continued its anticompetitive conduct...." Gonzalez Rogers said. "Remarkably, Apple believed that this court would not see through its obvious cover-up."
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.