A federal judge ordered Apple on Friday to end restrictions on app developers who direct people to payment options outside of Apple’s control, threatening to curtail a key moneymaker for the tech giant.
U.S. District Judge Yvonne Gonzalez Rogers issued a permanent injunction on Apple monopolizing payment opting in its App Store.
The legal battle stemmed from Epic Games, best known as the maker of Fortnite, trying to avoid payments through Apple, which charges commissions of up to 30% in digital transactions within apps. Such transactions can include everything from Netflix or Spotify subscriptions to the sale of digital items such as songs, movies or virtual tchotchkes for video games.
Apple shares dropped on news of the ruling and were down 3% in Friday afternoon trading, reflecting investor fears that the ruling would siphon away billions of dollars in annual revenue from the company.
The order came as part of the judge’s resolution of Epic Games v. Apple in which the game developer alleged Apple engaged in anti-competitive behavior in markets for the distribution of apps on mobile devices and the processing of payments within apps on those devices.
Judge Gonzalez Rogers agreed that Apple violated California’s Unfair Competition Law. But she also sided with Apple on its counterclaim that Epic Games had breached its contract and directed Epic Games to pay Apple 30% of the revenue it collected from people playing the “Fortnite” app on devices using Apple’s operating system.
Before the ruling, Apple had already begun making changes to its App Store business model in response to increasing regulatory pressure, legislative proposals, and ongoing litigation.
Last month, Apple said it reached an agreement in a class-action lawsuit brought by U.S. app developers and was addressing the way developers can communicate with users about payment options outside Apple’s control. Apple said it would clarify that developers can email or otherwise communicate with people using their app about payment options outside of the app running on Apple’s operating system.
Apple cast the court’s decision as a success for the future of its App Store.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law,” said an Apple spokesperson in a statement. “As the Court recognized ‘success is not illegal.’ 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.”
Epic Games CEO Tim Sweeney sounded dejected by the court’s decision in remarks made on Twitter.
“Today’s ruling isn’t a win for developers or for consumers,” said Mr. Sweeney in a tweet. “Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.”
• The article is based in part on wire service reports.