Cook had a simple choice to make – finance or product. This time, he got it very wrong.

There is no doubt that Tim Cook is a brilliant, astute businessman – but even the best get it wrong.

Over the past week, it is clear that Cook was in some meetings where, at best, some poor judgment was made. This is a story of greed and unswerving arrogance. If only they had towed the line a bit more, none of what we are now witnessing would have happened.

It all started five years ago with the Apple vs. Epic battle. At the heart of that court battle was anti-steering, as simple as that.

As it turned out, with the benefit of hindsight, it was also the start of what we now know to be the antitrust lobby in the tech industry. It is no coincidence that as I sit writing this, Apple, Meta and Google are all in court fighting their own battles with the U.S. Government.

But the stakes got much higher last week for Apple when an incensed Judge Yvonne Gonzalez Rogers decided that enough was enough and that she was now going to refer the case to a U.S. attorney for possible criminal contempt proceedings against both Apple and Alex Roman – Apple’s vice president of finance.

So, what’s been going on?

Going back in time

In that original court hearing in 2020, the company had effectively been accused of using the iPhone to create a monopoly by forcing developers to not only use their App Store but also giving them no option to let customers know that they could buy these apps elsewhere on the web.

Thus, the phrase anti-steering was born.

Cook & Apple had been warned that this behaviour was anti-competitive, and they had to change their ways. Although it sounds both ludicrous and funny now, there was a long debate about what a button was! That’s right – the court ruled that devs had to be allowed to place buttons on their apps to help steer customers to alternate places to buy their apps.

But Apple was taking none of it and, with extreme hubris, pushed the limits of what they said constituted a button. They were not used to being told ‘no’, and they didn’t like it one little bit!

The court understood that Apple had invested millions in developing the App Store and that it was fair that Cook and Co. were right to expect developers to pay something to be in the App Store. And developers quite like being part of the App Store as it’s great for discoverability. All they wanted was some fairness and the option to allow for a frictionless way for customers to potentially buy their apps elsewhere.

They were told to go away and look at options, and here is where it started to go wrong.

Although Apple won the big battles against Epic, and their App Store was left in place, for them, that wasn’t enough. They were intent on showing who was boss.

Malicious compliance

After a few years without much obvious action, the Judge asked them back for another hearing to find out what they had been up to.

It’s at that point that Apple offered up the sacrificial lamb in the guise of Roman in an attempt to blindside Gonzalez Rogers with jargon and waffle.

Well, whatever she heard in that hearing didn’t convince her – in short, she sniffed a rat. Now she wanted to see emails, iMessages and Slack notes to find out what had been going on a Cupertino.

Of course, they could have decided to charge developers nothing to steer customers to alternative places to buy apps. To his credit, Phil Schiller was all for it as well. He has, to this day, a long-standing relationship with the App Store and felt it wouldn’t hurt Apple in the bigger picture to be seen to be doing the right thing by the developers.

They would still keep their 30% cut, and he knew that the majority of customers, for ease, if nothing else, would continue to buy the apps in Apple’s App Store.

But Schiller’s voice wasn’t heard. Luca Maestri, Apple’s CFO and Cook both decided that more was better. They had three options available to them at this point – charge nothing, charge just a little bit, or go for the throat. Cook decided to back finances over product, and this is where, as the Judge said, “Cook chose poorly”.

In the end, Apple ended up with a fee of 27%. Why, 27% was the final figure, no one knows, but what we do know is that Judge Yvonne Gonzalez Rogers was not buying it. She recognised that by the time developers had paid Stripe their transaction fees that 27% was an untenable figure.

The problem for Roman is that the Judge has accused him of providing false testimony under oath about precisely when this 27% was decided upon. She said;

“Contemporaneous business documents reveal that, on the contrary, the main components of Apple’s plan, including the 27 per cent commission, were determined in July 2023. Neither Apple nor its counsel corrected the now obvious lies.”

Rather than trying to find new and creative ways to make the extra dollar, they had decided to take what they saw as the easy route and extract every possible dollar from devs and their apps. If they were trying to make the Judge see red, then they were going about it in the right way.

Apple not backing down

What Gonzalez Rogers had wanted to find in those emails and messages was that Apple had been genuinely trying to listen to what she had directed them to do.

Instead, what she discovered was a bullish attempt to get their way.

Apple didn’t help itself at any point. Cook had instructed App Store designers to make things ‘scary’. That was yet another flag to the Judge, and the flames only got fanned more when Apple tried to say that scary has another meaning for designers! The Judge said that it “strained common sense.”

Where she had wanted to see discreet warnings that customers were about to leave the App Store, what she got instead were full-screen, splash warnings – some might even call those full-screen warnings scary, I guess!

Where she’d wanted to find clear, obvious buttons and links that retained login credentials, she instead found the tiniest, most indiscreet and functionless buttons that were designed to be awkward to use.

Every step of the way, Apple were making one bad choice after another. By this point, they couldn’t stop themselves. They were making up their own numbers and rules, and Gonzalez Rogers was going to put a stop to it for once and for all.

Last week, Judge Yvonne Gonzalez Rogers didn’t hold back in what she had to say about Apple’s behaviour, telling them, “this is an injunction not a negotiation.”

Holding no prisoners

The Judge made it clear what she thought of Apple’s behaviour.

“The documents I saw were replete with misdirection and outright lies. Apple willfully chose not to comply with this Court’s Injunction and did so with the express intent to create new anticompetitive barriers.

That it thought this Court would tolerate such insubordination was a gross miscalculation. As always, the cover-up made it worse. For this Court, there is no second bite at the apple.”

With immediate effect, Apple has pretty much lost control of their App Store.

“To make up for all of your bad behaviour, you are no longer allowed to impose any commission or any fee on purchases that consumers make outside an app. And that means you have no reason to audit, monitor, track or require developers to report any purchases or any activities that consumers make outside the app. Apple is no longer allowed to restrict or condition developer style, language, formatting, quantity, flow or placement of links for purchases outside an app.

Apple is also prohibited from prohibiting or limiting the use of buttons or other calls to action, or otherwise conditioning the content style, language formatting, or flow replacement of these devices for purchases outside an app.

Apple’s goal was to maintain its anti-competitive revenue stream. The court prohibited Apple from denying developers the ability to communicate with and direct consumers to other purchasing mechanisms. Apple’s response was to impose new barriers and new requirements to increase friction and increase breakage rates with full-page scare screens, static URLs and generic statements.

Apple’s 30% commission allowed it to reap super competitive operating margins, that was not tied to the value of its intellectual property and was less anti-competitive. Apple’s response was to charge a 27% commission, again, tied to nothing, on off-app purchases where it had previously charged nothing and extend the commission for a period of seven days after the consumer had left the app.

The goal was to dissuade customer usage of alternative purchasing opportunities and maintain its anti-competitive revenue stream. In the end, Apple sought to maintain a revenue stream worth billions in direct defiance of the court’s injunction.”

Ouch!

Why oh why?

Apple could simply have said, ‘You could save a bit by buying this app somewhere else, but look at what we have to offer you by staying with us. We’ll protect your purchase and your privacy.’

Instead, they took the bullish and bullying approach, and it has bitten them hard.

For the first time, in a very long time, Apple is vulnerable. The core of their business model is at risk – just look at the problems they’re facing…

The tariffs could increase the cost of everything that Apple sells, and they have to work out how to best factor that in without alienating customers and affecting their bottom line. If Google loses its antitrust court remedy battle, then Apple might lose another $20 billion a year that it currently gets handed by Google to be the default search engine in Safari.

And it gets worse still. As we know, they are way behind in the AI race, which has lost them face and now they have lost crucial, stable, repeat revenue from the App Store.

The area of Apple’s business that has been growing consistently over the past few years is Services, and of those services, the App Store has historically been the jewel in the crown for Apple. It’s been their perennial cash-cow.

Apple chose not to take the words of the court seriously five years ago and almost faked compliance. Judge Yvonne Gonzalez Rogers has made it abundantly clear that in her eyes Apple were lying and not complying.

Make no mistake about it, because of the way Apple has gone about this, the App Store is about to change forever, and before too long, we could be looking at a very different Apple.

Apple has today filed a notice of appeal challenging last week’s ruling that prevents the company from charging developers fees on purchases made outside the App Store.