Apple Inc. finds itself in a bit of a pickle after a recent court ruling. The judge disclosed that the company had apparently violated a prior injunction over its App Store behavior. Epic Games successfully raised groundbreaking serious antitrust concerns in this case. In doing so, it brought to light the worst aspects of Apple’s treatment of its developer ecosystem and app economy taxes. The reality, even by May 2024, is something very different—Apple does claim about 136,000 developers supporting their App Store. Yet very few of them have signed on for the Link Entitlement program, which would allow them to route customers to third-party payment options.
The court’s findings indicate that Apple chose the “most anticompetitive option” in how it presented developer information, opting to include developers’ names rather than the app names themselves. This decision is an affront to Apple’s oft-stated principles that all developers should have a fair shot. The corporation has additionally enacted a whopping 27 percent commission on connected buys accomplished by January 16, 2024.
Developer Participation and Apple’s Fee Structure
Even with a much deeper developer pool, only 34 of the nearly 136,000 developers applied for the Link Entitlement program. Alarmingly, 17 of those developers had never previously provided in-app purchases. This anemic participation rate indicates there’s a widespread hesitance from developers to take part in Apple’s new program. Apple mentioned that developers required additional time to complete the implementation of the Link Entitlement. Finally, they cautioned that adoption rates might be extremely inconsistent and difficult to anticipate.
During the court proceedings, Apple conceded it didn’t have any guidance whatsoever on how the linked-out purchases should be charged the fee. This uncertainty will last through January 16, 2024. This uncertainty only compounds the chilling effect and confusing picture developers face if they look to new payment options.
“Apple’s response to the Injunction strains credulity. After two sets of evidentiary hearings, the truth emerged. Apple, despite knowing its obligations thereunder, thwarted the Injunction’s goals, and continued its anticompetitive conduct solely to maintain its revenue stream.” – Judge Yvonne Gonzalez Rogers
Allegations of Misdirection and Willful Noncompliance
The court’s ruling was particularly critical of Apple’s leadership and decision-making processes. The testimony of Mr. Roman, Apple’s Vice President of Finance, was described as “replete with misdirection and outright lies.” Judge Yvonne Gonzalez Rogers emphasized the seriousness of Apple’s actions, stating that the company willfully chose not to comply with the court’s injunction.
From the judge’s opinion, Apple purposefully erected new walls that kept its practice that produced their high margin revenue—once found anticompetitive—alive. Internally, Phillip Schiller had advocated for compliance with the injunction. Tim Cook allegedly ignored his advice and allowed Chief Financial Officer Luca Maestri and his team to convince him otherwise.
“Apple willfully chose not to comply with this Court’s Injunction. It did so with the express intent to create new anticompetitive barriers.” – Judge Yvonne Gonzalez Rogers
The court mentioned Apple’s use of “scare screens,” warnings designed to dissuade customers from exploring outside payment options, further complicating matters for developers attempting to navigate Apple’s ecosystem.
Legal Consequences and Future Implications
Based on these findings, Judge Gonzalez Rogers determined Apple to be in civil contempt. He further explained the sanctions and relief Apple should face for failing to comply. The court has accordingly referred the matter to the United States Attorney for the Northern District of California. Finally, they’ll decide whether criminal contempt proceedings against Apple would be appropriate.
“The Court HOLDS Apple in civil contempt. Sanctions and relief with respect to Apple’s noncompliance are set forth.” – Judge Yvonne Gonzalez Rogers
In particular, the judge emphasized that time is of the essence. He cautioned that there would be no “do-overs” for anyone who willfully tramples on court orders. She also pointed out the various ways that Apple stalled the process. This strategy was a key driver of the company’s rising profits.
“Apple engaged in tactics to delay the proceedings. The Court later concluded that delay equaled profits.” – Judge Yvonne Gonzalez Rogers
Leave a Reply