Explainer-What's next for Apple after US court's contempt order in Epic Games case?

By Mike Scarcella

(Reuters) - Apple faces a possible criminal contempt probe after a U.S. judge said it violated an order to open its lucrative App Store to more competition and misled the court.

Here is a look at how Apple got here and what comes next in the blockbuster lawsuit brought by "Fortnite" maker Epic Games.

WHAT DID THE JUDGE SAY? 

U.S. District Judge Yvonne Gonzalez Rogers in Oakland on Wednesday ruled Apple was in “willful” violation of an injunction she issued in 2021 in an antitrust lawsuit filed by Epic Games. 

Epic sued in 2020 to loosen Apple's control over transactions in applications that use its iOS operating system and how apps are distributed to consumers. The judge’s prior order required Apple to give developers more power to steer app users to non-Apple payment options that avoid Apple's 30% commission.

Apple failed to convince the U.S. Supreme Court to overturn the injunction, and it went into effect in early 2024. The new ruling concerned whether Apple had complied with terms of the injunction.

The judge accused Apple of “insubordination” and said it had tried to cover up its decision-making process from the court. 

WHAT MUST APPLE DO NOW?

Gonzalez Rogers said Apple must end several practices that she said were designed to circumvent her injunction, including a new 27% fee it imposed on app developers when Apple customers complete an app purchase outside the App Store.

She also barred the company from using “scare screens” to deter consumers from using third-party payment options. Apple had denied violating terms of the court’s order.

WHY DID THE JUDGE MAKE A CRIMINAL CONTEMPT REFERRAL?

On top of finding Apple took steps to evade her injunction, Gonzalez Rogers referred Apple and one of its executives to federal prosecutors for a possible criminal contempt investigation.

"Apple sought to maintain a revenue stream worth billions in direct defiance of this court’s injunction," she said, finding that internal records showed "Apple knew exactly what it was doing" and that a finance executive had lied under oath.

Federal judges have authority to ask an investigative agency such as the U.S. Justice Department to probe whether companies and individuals should be prosecuted criminally for violating court orders. 

Gonzalez Rogers declined to say whether the government should bring a charge. That will be up to the U.S. attorney who oversees the San Francisco and Oakland federal prosecution teams.

Companies found to be in criminal contempt can be subject to fines, and individuals can face jail time.

CAN APPLE APPEAL? 

Yes. Apple said it disagreed with the court’s ruling and will ask the San Francisco-based 9th U.S. Circuit Court of Appeals to review the order.

Apple could ask the court to immediately pause Gonzalez Rogers’ order while it pursues its challenge. The appeal could move relatively quickly, since most of the complex antitrust issues in the case have already been resolved.

Apple might face a high bar in its appeal, given the extensive factual record developed by Epic at the lower court. Appeals courts can be deferential to trial judges under those circumstances.

After the 9th Circuit rules, either side can ask the U.S. Supreme Court to review the decision.

(Reporting by Mike Scarcella; Editing by David Bario and Rod Nickel)