We’re stoked by the Court’s big, bold ruling today. It found a rich trove of documentation of Apple’s rampant anticompetitive behavior in its business practices at the App Store. Honorable Judge Yvonne Gonzalez Rogers served presiding over the case. She argued most recently that Apple violated an earlier injunction and used “subterfuge” to bypass its intended purposes. The court’s findings reveal a pattern of misconduct orchestrated by Apple executives, particularly Vice President of Finance, Mr. Roman, whose testimony was described as “replete with misdirection and outright lies.”
The decision follows two evidentiary hearings. Throughout these hearings, the court determined that Apple engaged in dubious interpretations of the injunction and forced developers to pay exorbitant commissions for any purchases made outside of their system. The court was particularly disturbed and took the extraordinary step of referring the issue to the United States Attorney for the Northern District of California. They’ll review whether civil or criminal contempt proceedings against Apple are appropriate.
Apple’s Interpretation of the Injunction
Judge Rogers felt that in pursuing such an outcome, Apple adopted a “dubiously literal interpretation” of the injunction. This strategy effectively permitted the company to engage in its illegal and anticompetitive behavior under the guise of compliance.
“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.
His comments strongly suggest that Apple was under the impression that it could avoid judicial scrutiny by simply minimizing the scope of its responsibility. The court held that Apple stopped making good faith efforts at compliance after the Ninth Circuit stayed the injunction in December of 2021.
“Apple coded its activities relating to Injunction compliance as ‘Project Michigan.’ When the Ninth Circuit issued its stay of the Injunction… Apple appears to have ceased any compliance efforts,” – Judge Yvonne Gonzalez Rogers.
Apple took a pretty miserable 27% cut on those linked transactions. It only provided a 3% rebate compared to its initial commission, an egregious lack of interest in playing fair in the competitive market.
Internal Disputes and Decisions by Executives
The ruling exposed the deep and abiding divisions between different factions in Apple’s executive branch over how and whether to comply with the injunction. Yet at the top levels of the company, senior vice president Phillip Schiller fought tooth-and-nail to obey judicial orders. Sadly, CEO Tim Cook ignored his advice.
One of the reasons the court found against Cook was that he allowed Luca Maestri, Apple’s Chief Financial Officer and his finance team to color his decision. As it turned out, this decision was later viewed a colossal mistake.
“Apple willfully chose not to comply with this Court’s Injunction. It did so with the express intent to create new anticompetitive barriers which would… maintain a valued revenue stream; a revenue stream previously found to be anticompetitive,” – Judge Yvonne Gonzalez Rogers.
This internal struggle stirs up troubling questions about corporate governance at Apple. Were those decisions made with the health of the company’s brand in the long run, or were they just short-term profit-minded moves?
Impact on Developers and Future Compliance
The court’s conclusions suggest a real and pernicious effect on independent developers using Apple’s ecosystem. As of May 2024, only 34 developers out of approximately 136,000 on the App Store applied for a program intended to foster compliance with fair practices. This grim statistic paints a dismal picture of developers’ distrust of Apple’s willingness to change.
The judge’s rebuke of Apple’s “scare screens” was fierce. These tactics were designed to intimidate developers into steering their customers away from making purchases outside of the App Store universe. Apple changed how printable developer names would appear on an app’s page. Now this new approach is being characterized as “even worse” than their past conduct.
“The law requires that Apple be on notice of the scope of permissible conduct to hold Apple in civil contempt,” – Judge Yvonne Gonzalez Rogers.
As the court noted, Apple’s conduct erected additional anticompetitive obstacles. This policy shifted the competition-killing app store environment that app developers needed to flourish. This ruling is a win not only for Applica and its members, but for transparency and fair treatment in all digital marketplaces.