Is Apple in violation of the order to enable more iPhone payment options?

OAKLAND, California — A federal judge questioned Wednesday whether Apple has created a series of annoying obstacles to discourage the use of alternative payment options in iPhone apps, despite a court order seeking to give consumers more ways to pay for digital services.

The verbal exchange between Judge Yvonne Gonzalez Rogers and the head of Apple’s app store kicked off a hearing focused on whether Apple is still steering U.S. consumers to its once-exclusive app payment system in defiance of an injunction aimed at promoting more choices that could help reduce price decline. Prices.

Gonzalez Rogers’ order requires Apple to allow app developers to display links to other options besides the company’s own payment system in the US. Apple makes billions of dollars annually from that scheme, which charges a commission ranging from 15% to 30% on digital transactions made within the most popular iPhone apps.

Apple’s app store and its commission system are also the target of another antitrust lawsuit recently filed by the U.S. Department of Justice, which alleges that the iPhone forecloses competition in a variety of ways, stifling competition and innovation.

Gonzalez Rogers often sounded frustrated and skeptical as she intervened occasionally during the four hours of testimony by Matthew Fischer, the Apple executive in charge of the iPhone App Store.

The tone of the judge’s questions shows that she is concerned. Apple’s efforts to comply with its order are primarily intended to protect the company’s profits, rather than making it easier for iPhone users to switch to other in-app payment options like they referred to.

Gonzalez Rogers was particularly noted when she questioned Fischer about whether Apple had deliberately made it more cumbersome and confusing for consumers to make digital purchases through alternative services.

“Other than suppressing competition, I see no other answer,” the judge said as she tried to parse the rationale behind Apple’s design of alternative payment options for iPhone apps.

Fischer argued that Apple is complying with the judge’s order while still trying to protect iPhone users from bad actors on the Internet and allowing the Cupertino, California-based company to earn returns on its investments in the app store and other mobile software.

To that end, Apple has introduced a new commission structure ranging from 12% to 27% on digital transactions initiated from an app and completed through an alternative payment option. After Gonzalez Rogers said it sounded like Apple was still collecting a “windfall,” Fischer said the company expected the effective commission rate on digital transactions processed through alternative payment options to be around 18%.

“We’re running a business,” Fischer said.

Apple spent more than two years trying to overturn the order that Gonzalez Rogers issued as part of a broader antitrust battle that the company won. The order requiring Apple to allow links to alternative app payments went into effect in January after the US Supreme Court declined to review the case.

But Fischer announced Wednesday that Apple has so far only received and approved requests from 38 apps to display links to alternative payment systems — a fraction of the roughly 2 million iPhone apps available in the US. Fischer could not specify how many of those apps participate in digital transactions when requested by Gonzalez Rogers, who ordered Apple to provide the number as the proceedings progress this month.

Video game Epic Games cites muted interest in requesting in-app links to alternative payment options as evidence that Apple was still rigging the system to its advantage.

Epic, maker of the popular video game Fortnite, is trying to force Apple to make more sweeping changes to enable alternative payment options after the company unsuccessfully convinced Gonzalez Rogers that the iPhone App Store was in a price-gouging monopoly during a 2021 trial period changed. .

The effort is backed by Facebook and Instagram owner Meta Platforms, Elon Musk’s short messaging service X, music streaming service Spotify and longtime Apple rival Microsoft.

Apple’s current alternative payment formula “is guaranteed to continue collecting excessive commissions from developers” while also keeping consumers from sending consumers to other places where they could buy the same digital services for lower prices, Epic claimed in documents ahead of the hearing Wednesday.

In its own briefing ahead of the hearing, Apple accused Epic of trying to get Gonzalez Rogers to micromanage his company in ways designed to boost the video game maker’s profits.

“Epic has repeatedly made clear that it wants access to and use of Apple’s tools and technologies without having to pay for them,” Apple argued.

The court hearings are expected to resume on Friday, when another Apple executive, Phil Schiller, is expected to testify. Gonzalez Rogers hopes to complete the hearings by May 17, but told attorneys Wednesday it could take longer.