Judge Yvonne Gonzalez Rogers handed down a decision in a closely-watched trial between Apple and Epic Games on Friday.
Rogers issued an injunction that said that Apple will no longer be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing, of which it takes 15% to 30% of gross sales.
The injunction addresses a longstanding developer complaint and raises the possibility that developers could direct their uses to their website to subscribe or purchase digital content, hurting Apple’s App Store sales.
Apple stock dropped 2% in trading on Friday.
The decision concludes the first part of the battle between the two companies over Apple’s App Store policies and whether they stifle competition. Apple won on 9 of 10 counts but was found to engage in anticompetitive conduct under California law, and will be forced to change its App Store policies and loosen its grip over in-app purchases. The injunction will come into effect in December.
“The Court concludes that Apple’s anti-steering provisions hide critical information from consumers and illegally stifle consumer choice,” Rogers wrote. “When coupled with Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a nationwide remedy to eliminate those provisions is warranted.”
However, Rogers said that Apple was not a monopolist and “success is not illegal.”
“Given the trial record, the Court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws,” Rogers wrote.
The trial took place in Oakland, California in May, and included both company CEOs testifying in open court. People familiar with the trial previously told CNBC that both sides expected the decision to be appealed regardless of what it was.
“Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law. As the Court recognized ‘success is not illegal,'” Apple said in a statement. “‘ 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.”
Since the trial ended but before the decision was handed down, Apple has made several changes to mollify critics, some as part of settlements with other app developers, including relaxing some rules about emailing customers to encourage them to make off-app purchases and allowing some links in apps.
Rogers wrote in the decision that she disagreed with both Apple and Epic Games over the framing of the market Apple allegedly dominates. Rogers found that it was “digital mobile gaming transactions,” not all iPhone apps, as Epic Games had alleged, nor was it all video games, as Apple had claimed.
Battle over Fortnite
Epic Games is among the most prominent companies to challenge Apple’s control of its iPhone App Store, which has strict rules about what is allowed and not, and requires many software developers to use in in-app payment system, which takes between 15% to 30% of each transaction.
Epic’s most popular game is Fortnite, which makes money when players buy V-bucks, or the in-game currency to buy costumes and other cosmetic changes.
Epic wasn’t seeking money from Apple— instead, it wanted to be allowed to install its own app store on iPhones, which would allow it to bypass Apple’s cut, and impose its own fees on games it distributed. Epic Games CEO Tim Sweeney had chafed against Apple’s in-app purchase rules as early as 2015, according to court filings and exhibits.
Apple CEO Tim Cook is cross examined by Gary Bornstein as he testifies on the stand during a weeks-long antitrust trial at federal court in Oakland, California, U.S. May 21, 2021 in this courtroom sketch.
Vicki Behringer | Reuters
But the public clash between the two companies started in earnest in August 2020, when Epic implemented a plan to challenge Apple called “Project Liberty,” according to court filings.
Epic Games updated Fortnite on its servers to reduce the price of its in-game currency by 20% if players bought directly from the company, bypassing Apple’s take, and violating Apple’s rules on steering users away from its in-app payments.
Apple removed Fortnite from the App Store, meaning that new users could not download it and that it would eventually stop working on iPhones because the app could not be updated. As it planned, Epic then filed a lawsuit that culminated in May’s trial.
Epic Games will also have to pay Apple damages because it breached its contract, Rogers ruled. Epic will pay Apple 30% of all revenue it collected from iOS Fortnite through direct payments.
At the trial, Apple CEO Tim Cook testified on one of the last days, and faced pointed questioning from Judge Rogers over its restrictions on steering users to make purchases off-app, which ended up being the topic of Friday’s injunction.
“It doesn’t seem to me that you feel any pressure or competition to actually change the manner in which you act to address the concerns of developers,” Rogers said at the time.
Epic Games also sued Google over its control of the Play Store for Android phones. That case has not yet gone to trial.
Intuit CEO Sasan Goodarzi speaks at the opening night of the Intuit Dome in Los Angeles on Aug. 15, 2024.
Rodin Eckenroth | Filmmagic | Getty Images
Intuit shares fell 6% in extended trading Thursday after the finance software maker issued a revenue forecast for the current quarter that trailed analysts’ estimates due to some sales being delayed.
Here’s how the company performed in comparison with LSEG consensus:
Earnings per share: $2.50 adjusted vs. $2.35 expected
Revenue: $3.28 billion vs. $3.14 billion
Revenue increased 10% year over year in the quarter, which ended Oct. 31, according to a statement. Net income fell to $197 million, or 70 cents per share, from $241 million, or 85 cents per share, a year ago.
While results for the fiscal first quarter topped estimates, second-quarter guidance was light. Intuit said it anticipates a single-digit decline in revenue from the consumer segment because of promotional changes for the TurboTax desktop software in retail environments. While that will affect revenue timing, it won’t have any impact on the full 2025 fiscal year.
Intuit called for second-quarter earnings of $2.55 to $2.61 per share, with $3.81 billion to $3.85 billion in revenue. The consensus from LSEG was $3.20 per share and $3.87 billion in revenue.
For the full year, Intuit expects $19.16 to $19.36 in adjusted earnings per share on $18.16 billion to $18.35 billion in revenue. That implies revenue growth of between 12% and 13%. Analysts polled by LSEG were looking for $19.33 in adjusted earnings per share and $18.26 billion in revenue.
Revenue from Intuit’s global business solutions group came in at $2.5 billion in the first quarter. The figure was up 9% and in line with estimates, according to StreetAccount. Formerly known as the small business and self-employed segment, the group includes Mailchimp, QuickBooks, small business financing and merchant payment processing.
“We are seeing good progress serving mid-market customers in MailChimp, but are seeing higher churn from smaller customers,” Sandeep Aujla, Intuit’s finance chief, said on a conference call with analysts. “We are addressing this by making product enhancements and driving feature discoverability and adoption to improve first-time use and customer retention.”
Better outcomes are a few quarters away, Aujla said.
CreditKarma revenue came in at $524 million, above StreetAccount’s $430 million consensus.
At Thursday’s close, Intuit shares were up about 9% so far in 2024, while the S&P 500 has gained almost 25% in the same period.
On Tuesday Intuit shares slipped 5% after The Washington Post said President-elect Donald Trump’s proposed “Department of Government Efficiency” had discussed developing a mobile app for federal income tax filing. But a mobile app for submitting returns from Intuit is “already available to all Americans,” CEO Sasan Goodarzi told CNBC’s Jon Fortt.
Goodarzi said on CNBC that he’s personally communicating with leaders of the incoming presidential administration.
On the earnings call, Goodarzi sounded optimistic about the economy.
“Our belief, which is not baked into our guidance, is that we will see an improved environment as we look ahead in 2025, particularly just with some of the things that I mentioned earlier around just interest rates, jobs, the regulatory environment,” he said. “These things have a real burden on businesses. And we believe that a better future is to come.”
Bluesky has surged in popularity since the presidential election earlier this month, suddenly becoming a competitor to Elon Musk’s X and Meta’s Threads. But CEO Jay Graber has some cautionary words for potential acquirers: Bluesky is “billionaire proof.”
In an interview on Thursday with CNBC’s “Money Movers,” Graber said Bluesky’s open design is intended to give users the option of leaving the service with all of their followers, which could thwart potential acquisition efforts.
“The billionaire proof is in the way everything is designed, and so if someone bought or if the Bluesky company went down, everything is open source,” Graber said. “What happened to Twitter couldn’t happen to us in the same ways, because you would always have the option to immediately move without having to start over.”
Graber was referring to the way millions of users left Twitter, now X, after Musk purchased the company in 2022. Bluesky now has over 21 million users, still dwarfed by X and Threads, which Facebook’s parent debuted in July 2023.
X and Meta didn’t immediately respond to requests for comment.
Threads has roughly 275 million monthly users, Meta CEO Mark Zuckerberg said in October. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates 318 million monthly users as of October.
Bluesky was created in 2019 as an internal Twitter project during Jack Dorsey’s second stint as CEO, and became an independent public benefit corporation in 2022. In May of this year, Dorsey said he is no longer a member of Bluesky’s board.
“In 2019, Jack had a vision for something better for social media, and so that’s why he chose me to build this, and we’re really thankful for him for setting this up, and we’ve continued to carry this out,” said Graber, who previously founded Happening, a social network focused on events. “We’re building an open-source social network that anyone can take into their own hands and build on, and it’s something that is radically different from anything that’s been done in social media before. Nobody’s been this open, this transparent and put this much control in the users hands.”
Part of Bluesky’s business plan involves offering subscriptions that would let users access special features, Graber noted. She also said that Bluesky will add more services for third-party coders as part of the startup’s “developer ecosystem.”
Graber said Bluesky has ruled out the possibility of letting advertisers send algorithmically recommended ads to users.
“There’s a lot on the road map, and I’ll tell you what we’re not going to do for monetization,” Graber said. “We’re not going to build an algorithm that just shoves ads at you, locking users in. That’s not our model.”
Bluesky has previously experienced major growth spurts. In September, it added 2 million users following X’s suspension in Brazil over content moderation policy violations in the country and related legal matters.
In October, Bluesky announced that it raised $15 million in a funding round led by Blockchain Capital. The company has raised a total of $36 million, according to Pitchbook.
Alphabet shares slid 6% Thursday, following news that the Department of Justice is calling for Google to divest its Chrome browser to put an end to its search monopoly.
The proposed break-up would, according to the DOJ in its Wednesday filing, “permanently stop Google’s control of this critical search access point and allow rival search engines the ability to access the browser that for many users is a gateway to the internet.”
This development is the latest in a years-long, bipartisan antitrust case that found in an August ruling that the search giant held an illegal monopoly in both search and text advertising, violating Section 2 of the Sherman Act.
The potential break-up would include preventing Google from entering into exclusionary agreements with competitors like Apple and Samsung, part of a set of remedies that would last 10 years.