A federal judge hammered Apple for violating an antitrust ruling related to App Store restrictions and took the extraordinary step of referring the matter to federal prosecutors for a criminal contempt investigation.
“Apple willfully chose not to comply with this court’s injunction,” Judge Yvonne Gonzalez Rogers said in a ruling late Wednesday that specifically chided Chief Executive Officer Tim Cook and alleged that another company executive lied under oath. “It did so with the express intent to create new anticompetitive barriers.”
The order is the latest twist in a long-running legal dispute between Apple and Epic Games, developer of the popular videogame “Fortnite.” It accused Apple of monopolistic behavior in a 2021 case related to the tight controls it imposes over app makers.
Rogers largely ruled in Apple’s favor in the 2021 case but required the iPhone maker to allow developers to offer users alternative methods for paying for services and subscriptions outside the App Store.
Apple said it would comply with the order. The company disagrees with the court’s decision and will appeal, a spokeswoman said.
Apple shares slipped in after-hours trading following the release of the judge’s new order.
“We’ve been fighting Apple for a long time,” said Epic CEO Tim Sweeney. “It’s a huge victory for developers.”
On Wednesday, the judge ordered the company to allow developers to steer users to alternate methods of paying for services or subscriptions offered in the App Store. Apple also can no longer impose fees in such scenarios or restrict the ability of software makers to offer links or otherwise communicate alternate payment options with consumers.
Apple might also face more regulatory trouble internationally because of the sharp tone and extensive evidence Judge Rogers included in the order, said Fiona M. Scott Morton, a former antitrust official in the Obama administration. “This might break the logjam that has enabled Apple to delay complying with similar requests in other jurisdictions,” she said.
Just last week the European Commission fined Apple for similar conduct.
Judge Rogers pointedly criticized Apple executives, writing that Cook ignored advice from a longtime deputy, Phil Schiller, to comply with her injunction and instead chose to listen to his finance team. “Cook chose poorly,” she wrote, adding that Apple’s Vice President of Finance Alex Roman “outright lied under oath.”
Apple generates billions of dollars in high-margin revenue each year from the fees it collects on in-app purchases. It is unclear the extent to which developers will be able to persuade iPhone users to go to their websites to make purchases instead.
IPhone users are accustomed to using the App Store to make digital purchases, and changing their behavior could prove difficult. Some analysts have estimated that many might opt to stay within the confines of the App Store, but that possibility has never really been tested because of the restrictions Apple imposed after the original 2021 ruling.
In 2021, Rogers ordered Apple to allow app developers to send customers to their own websites to get around Apple’s fees of up to 30% for in-app purchases.
Apple responded by requiring developers who do so to pay a different 27% fee if they use an alternative payment method. The judge said that fee, and other barriers the company put in place to discourage off-app purchases, “thwarted the injunction’s goals,” and continued Apple’s anticompetitive conduct solely to maintain its revenue stream.
Write to Rolfe Winkler at Rolfe.Winkler@wsj.com
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