In This Article:
A federal judge found Apple (AAPL) in violation of a 2021 court order demanding the tech giant to enable broader competition for app developers and payment methods on its App Store.
Yahoo Finance senior legal correspondent Alexis Keenan explains US District Judge Yvonne Gonzalez Rogers' ruling stemming from a 2021 antitrust case brought forth against Apple by Epic Games. She goes into detail on the judge's original injunction and accusations of an Apple executive lying under oath.
Catch Yahoo Finance break down Apple's fiscal second quarter earnings results.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
Apple shares under pressure after reported second-quarter earnings and aside from trade headwinds, the company also facing a recent legal setback. Apple's App store in the hot seat for its alleged anti-competitive conduct. Yahoo finances Alexis Keenan joins us with more, and just this week, before the earnings report, there was a judge's strong words to Apple.
Very strong words. Now the judge in California district court, a federal judge, she held Apple in contempt and ordered it to comply with an injunction that she issued back in 2021, but it became effective in January because the Supreme Court on appeal from the case which stemmed from Epic Games's accusations against Apple that they were using anti-competitive tactics. The Supreme Court decided not to take up and review that case, so that put the injunction into effect, and in essence, the judge has said based on a response to epics complaints that Apple is not complying with the injunction and what the injunction said is that Apple must allow app developers to allow its customers to go outside the App store and link out to pay for in-app purchases. The judge and Epic said Apple did not do that, and so that ruling that judgment, that it actually largely favored Apple, but this part, this injunction really is a threat to Apple's App Store revenues totaling in 2024, $92 billion. Now part of that comes from those fees that Apple collects every time a customer makes an in-app purchase, 15 to 30%, depending on how large the business is. Now Apple did respond to the injunction, but the way they responded is they allowed the developers to go in and put those apps in, but then they assess a 27% fee for those out of app store purchases and the judge said, no, that does not comply with the spirit of this injunction, holding Apple in contempt saying that one of its executives lied under oath, said Tim Cook made bad decisions in ignoring this injunction, and said effective immediately, Apple will no longer be able to impede their customers in this way.
And so Alexis, so in terms of timeline with this, what happens next?
What happens next is Apple has to hop to, immediately are the judge's words. They must now have these links, and so what that does is theoretically, right? It reduces Apple's revenues in the App store. Now Apple does not give us data. They don't parse out exactly line items for how much these commissions, these 15 to 30% commissions make for the company, but we know that they're a substantial part of that revenue chunk. Uh Apple here uh not responding to Yahoo finances request for comment on this, maybe they will in the future. Um, but right now, they're going to have to get compliant with this order. It says immediate. And they're also going to have to potentially face some a criminal investigation. The judge has referred it over to California's prosecutors to look into whether they should be held in criminal contempt. This is a civil contempt. Uh, so there can be fines. There can be other consequences down the road. So certainly not a good day for Apple.
All right, Alexis. Thank you.
