Tag: Trial

Company Check – Apple Faces Possible Criminal Contempt Conviction

Posted on by Paul Stradling

Apple has been referred for possible criminal contempt by a US judge who found it wilfully defied a court order to open its App Store to greater competition, escalating its long-running legal battle with Epic Games and raising the stakes for one of the world’s most powerful tech firms.

Dramatic

The ruling marks a dramatic twist in the long-running legal saga between Apple and Fortnite developer Epic Games and could actually lead to some serious legal consequences for one of the world’s most valuable companies.

Deliberate Defiance?

The latest judgement, delivered last week by US District Judge Yvonne Gonzalez Rogers, accuses Apple of “insubordination” and “egregious misconduct” in its handling of a 2021 injunction that required it to allow app developers to direct users to external payment systems.

That original injunction followed a partial victory by Epic Games, which sued Apple over its tight control of in-app purchases and up-to-30 per cent commission fees. While the judge rejected broader monopoly claims at the time, she ruled that Apple could no longer prevent developers from linking users to alternative ways to pay, a move that would cut into Apple’s multi-billion dollar revenue stream from the App Store.

However, according to last week’s court filing, it seems that Apple effectively ignored that order. For example, not only did it introduce new barriers, including a controversial 27 per cent commission on off-app purchases, but it also implemented what the judge called “scare screens” designed to discourage users from straying outside Apple’s walled garden.

Internal Pushback and False Testimony Allegation

In perhaps the most damning section of her ruling, Judge Gonzalez Rogers said Apple’s internal documents showed senior leaders knowingly avoided compliance.

She noted that Apple CEO Tim Cook had rejected advice from App Store architect Phil Schiller to follow the injunction, instead siding with CFO Luca Maestri, who advocated keeping revenue protections in place. The judge wrote bluntly: “Cook chose poorly.”

The ruling also accused Apple’s vice-president of finance, Alex Roman, of lying under oath during the proceedings. “He outright lied,” she wrote, further reinforcing the seriousness of the contempt findings.

Decision Time

The matter has now been referred to the US Attorney for the Northern District of California, who will decide whether to pursue criminal contempt proceedings, a rare and serious step that could lead to fines for the company and potentially even jail time for individuals if charges are brought and proven.

Epic Offers a Truce

Epic Games CEO Tim Sweeney welcomed the decision as a major milestone in the fight against what he calls Apple’s “junk fees”. He announced that Fortnite would return to the US iOS App Store this week, three years after being pulled amid the legal fallout.

Sweeney also made a surprising peace offer via social media, suggesting Epic would end all related litigation if Apple agreed to apply the new, frictionless payment rules globally. “Game over for the Apple Tax,” he wrote, referencing similar regulatory moves already under way in Europe under the Digital Markets Act.

Apple Pushes Back and Plans Appeal

In a brief statement, Apple said it “strongly disagrees” with the ruling and will appeal to the 9th US Circuit Court of Appeals. The company is expected to seek a pause on the order while the appeal plays out, although analysts say the appeal may be difficult to win given the weight of evidence already compiled.

Apple also maintains that its updated policies are in line with the injunction. However, the judge ruled that the company’s so-called compliance measures were designed not to enable competition, but to preserve its existing revenue model through subtle deterrents.

What This Could Mean for Apple (and Developers)

The implications of all this could be wide-reaching and, if federal prosecutors do pursue a criminal contempt case, it would mark a highly unusual escalation in a corporate antitrust battle. It could also embolden regulators in other countries, including the UK and EU, where scrutiny of Big Tech practices is intensifying.

For developers, the ruling could finally force Apple to relax some of the strict controls it has long imposed over in-app payments, which is a development that many have lobbied for in recent years. For example, Apple’s 15-30 per cent cut has been criticised as excessive, particularly by smaller app makers who say it squeezes margins and limits innovation.

Meanwhile, investors will be watching closely. While Apple’s stock has remained resilient so far, any criminal findings or further disruption to its lucrative App Store ecosystem could cast a longer-term shadow over one of its most profitable divisions.

What Does This Mean For Your Business?

The decision to refer Apple for possible criminal contempt doesn’t mean charges are guaranteed, but it’s a real escalation that could have serious ripple effects. The US Department of Justice will now decide whether to pursue a prosecution, weighing the judge’s findings against internal documents and court testimony that paint a picture of calculated resistance. Even if no charges follow, the ruling sets the precedent that major tech firms can no longer really expect leniency if they appear to sidestep the spirit of antitrust decisions.

For Apple, the stakes are not only legal. The reputational damage from being publicly rebuked by a federal judge, and having a senior executive accused of lying under oath, may affect how regulators, developers, and consumers perceive the company. In an era of heightened scrutiny, where Europe’s Digital Markets Act and the UK’s Digital Markets, Competition and Consumers Bill aim to rein in tech monopolies, this case may offer lawmakers fresh justification for tougher rules.

Developers worldwide are also, no doubt, watching closely, particularly those who have long criticised Apple’s App Store fees and restrictions. If the outcome leads to genuine, enforceable change, e.g. lower commissions or real freedom to use alternative payment systems, it could shift the balance of power. For UK businesses building or operating apps, any move towards greater flexibility would be welcome, especially in sectors where margins are tight and growth depends on reaching users without excessive overheads.

Broadly speaking, this saga reinforces how global platforms are being forced to justify longstanding business models under legal pressure. The Epic v. Apple dispute may have started in the US, but its consequences are global, and for regulators, developers and digital firms in the UK and beyond, it’s another sign that the era of unchecked platform dominance may finally be nearing its end.

Tech News : Trial To Break Up Zuckerberg’s Empire

Posted on by Paul Stradling

In a landmark antitrust trial now under way in Washington, the US government is trying to force Meta to divest Instagram and WhatsApp, arguing that its dominance of personal social networking is illegal and harmful to competition.

Meta in the Dock as Trial Gets Under Way

One of the most significant antitrust battles in US tech history is now under way as Meta (the parent company of Facebook, Instagram and WhatsApp) is facing off against the Federal Trade Commission (FTC) in a legal showdown that could reshape not just its business but the entire social media landscape.

At the heart of the trial is the FTC’s demand that Meta be forced to unwind its acquisitions of Instagram and WhatsApp. These were deals that were made over a decade ago and which the Commission now argues were part of a deliberate strategy to eliminate competition. The outcome could see CEO Mark Zuckerberg ordered to break up the very empire he spent years building.

The trial (which started last week and is taking place in a federal court in Washington) is expected to last around eight weeks and is being presided over by Judge James Boasberg. While he previously described the FTC’s case as presenting “hard questions”, he has allowed it to proceed, suggesting at least some of the regulator’s arguments have merit.

A ‘Buy or Bury’ Strategy?

According to the FTC, Meta holds an illegal monopoly over what it calls the “personal social networking” market, i.e. a space defined by platforms where users connect and share with family and friends. While TikTok, YouTube, and X (formerly Twitter) dominate the entertainment and interest-based content space, the FTC argues that they are not substitutes for Facebook, Instagram or WhatsApp.

As the FTC’s lawyer, Daniel Matheson, said in his opening statement: “They decided that competition was too hard and it would be easier to buy out their rivals than to compete with them”. Mr Matheson pointed to internal emails from Zuckerberg in 2012 describing Instagram as “very disruptive” to Facebook and suggesting that “what we’re really buying is time”.

The FTC essentially contends that these acquisitions allowed Meta to cement its dominance and avoid the natural evolution of competition. As highlighted by Vanderbilt Law professor Rebecca Haw Allensworth: “The argument is the acquisition of Instagram was a way of neutralising this rising competitive threat to Facebook,” and that “He said it’s better to buy than to compete—it’s hard to get more literal than that.”

The Commission also claims Meta used its dominant position to reduce quality for users (with more ads, and fewer privacy protections) knowing that people had few realistic alternatives to switch to.

Meta Says It’s Built a Better Experience

Meta has pushed back hard in its defence. It says the FTC’s definition of the market is flawed, outdated, and ignores the huge competition it now faces. In court, Meta lawyer Mark Hansen argued that while Facebook and Instagram once dominated social interaction, that era has passed. “When TikTok went down, people went on Instagram,” Hansen noted, claiming this is evidence of genuine substitution and healthy competition. Meta insists it doesn’t hold a monopoly, and cites strong rival platforms like TikTok, YouTube, Snapchat and even iMessage.

The company also highlights that its acquisitions helped Instagram and WhatsApp thrive. For example, Instagram now has more than 150 million users in the US, up from 30 million when Meta bought it for $1 billion in 2012. Also, WhatsApp, acquired in 2014 for $19 billion, has become one of the most used messaging platforms in the world.

“Any way you look at it, the consumers have been the big winners,” said Hansen. He pointed out that the platforms remain free to use and have never raised prices (which is typically a key indicator in monopoly cases).

Zuckerberg’s Memos

Despite Meta’s arguments, the FTC appears to be leaning heavily on Zuckerberg’s own words from more than a decade ago as part of its case. The FTC argues that it seems as though internal emails and memos appear to paint a picture of a leader worried about disruption and eager to eliminate threats early.

For example, in one 2012 exchange, Zuckerberg wrote that Instagram posed “a competitive threat” and that “buying them would neutralise that.” More recently, a 2018 memo revealed during the trial showed him considering the “extreme step” of spinning off Instagram to reduce regulatory scrutiny, though he ultimately opted for tighter app integration instead.

While such documents may show strategic foresight, they also appear to be fuelling the FTC’s central claim that Meta’s approach to competition is to “buy or bury”, and not to innovate and compete.

Politics and Power

The timing of the trial also appears to be politically charged. For example, although the case was first filed during Donald Trump’s previous term as president, it’s now being prosecuted under his second administration, with Trump ally Andrew Ferguson serving as FTC Chair.

Zuckerberg (who, with other major U.S. tech leaders, was invited to President Trump’s inauguration) has reportedly lobbied Trump directly to settle the matter, even making a number of moves that appear to court favour, such as donating $1 million to Trump’s inauguration fund and settling a lawsuit over Trump’s account suspensions with a $25 million payment.

However, recent reports suggest political pressure may be mounting behind the scenes. Two FTC commissioners, Rebecca Kelly Slaughter and Alvaro Bedoya, were removed by Trump earlier this year, prompting legal action and accusations of interference.

“If they don’t want to do a favour for his political allies, they’re on the chopping block as well,” Slaughter said in a recent interview, warning of a chilling effect on independent regulatory bodies.

What’s at Stake for Meta and the Industry?

The implications of the case are pretty significant. If the FTC wins, Meta could be forced to spin off both Instagram and WhatsApp, a move that would strike at the heart of its business model.

Research from eMarketer suggests that Instagram alone accounts for nearly 50 per cent of Meta’s US advertising revenue. As Jasmine Enberg, principal analyst at eMarketer said: “Meta in many ways needs Instagram to keep up engagement and continue attracting advertisers”. She also pointed to Facebook’s waning popularity among younger users, predicting a 2 per cent decline in the 18-24 age bracket this year.

A forced breakup would not only hit Meta financially but could set a powerful precedent for other Big Tech firms. Google is already facing its own antitrust challenges, and a win here for the FTC could embolden further action against dominant players in the digital economy.

It would also raise serious questions for businesses that rely on Meta’s ad ecosystem. For example, a breakup might lead to fragmented platforms, potentially reducing the efficiency of ad targeting and raising costs for advertisers.

Good News for Some

However, for smaller competitors and newer entrants, a win for the FTC could be a long-awaited boost as it could open up a market that many believe has been closed off by scale, data advantages and aggressive acquisitions.

What Does This Mean for Your Business?

While the final verdict is still weeks away, this trial is already casting a long shadow over the tech industry, regulators, and digital marketers alike. If the FTC succeeds in forcing Meta to break up, it would mark the most aggressive antitrust intervention in Big Tech since Microsoft’s legal battles in the early 2000s. However, unlike the desktop software era, the personal social networking space is notoriously fluid, and the lines between services are far more blurred. That makes this case especially tricky to call.

For Meta, the stakes appear to be existential. Losing Instagram and WhatsApp wouldn’t just mean waving goodbye to two of its most valuable assets, but it could also destabilise the core business that still leans heavily on advertising revenue from those platforms. Instagram alone is now the jewel in Meta’s crown, driving both user engagement and brand loyalty, particularly among younger demographics that are drifting away from Facebook. A forced divestiture would be a massive blow, not only financially but strategically, as Meta tries to maintain relevance in a landscape dominated by short-form video and mobile-first experiences.

For regulators, a win would be hugely symbolic. It would signal that acquisitions (however old) are still fair game for scrutiny if they’re found to have harmed competition. That could embolden antitrust agencies in the US, UK and beyond to look more closely at how market dominance is maintained in the digital age, not just how it’s acquired. UK regulators, such as the CMA, are already showing increased willingness to scrutinise tech deals. If Meta is forced to unwind these acquisitions, it could strengthen the hand of those arguing for a tougher approach to platform power globally.

For UK businesses, particularly those that rely on Meta’s ad tools to reach customers, the effects could be mixed. On one hand, a breakup might reduce the sophistication of cross-platform targeting and analytics, leading to higher ad costs or lower returns. On the other, increased competition in the social media space could create more choice, better service, and possibly lower pricing in the long term. Advertisers might have to adapt, but some may welcome the chance to diversify away from a single dominant ecosystem.

Consumers, too, are watching with interest. While the services themselves are unlikely to disappear, their experience could shift depending on the outcome. If spun off, Instagram and WhatsApp might pursue different strategies, perhaps with more emphasis on privacy, less cross-platform data sharing, or even new features aimed at differentiating themselves in a newly competitive market.

As for the wider tech industry, the message is that past deals aren’t necessarily safe, especially if they’ve helped a company solidify control over a market. Whether the FTC can actually prove that Meta’s dominance has harmed consumers remains to be seen, but the case has already revived debates over how we define competition in the digital age, and how much power is too much.