Apple's lucrative App Store business received a significant blow as a federal judge ruled against the company's restrictions on in-app purchases. The decision marks a major shift in the way developers can interact with their users, potentially disrupting Apple's dominance in the market.

The ruling comes after a closely watched trial between Epic Games and Apple, with Judge Yvonne Gonzalez Rogers issuing an injunction that prohibits Apple from prohibiting developers from providing links or other communications that direct users away from Apple in-app purchasing. This move raises the possibility of developers directing their users to subscribe to or purchase digital content directly, rather than through Apple's App Store.

The impact of this decision could be significant, as it addresses a longstanding developer complaint and may hurt Apple's App Store sales. In 2020, the App Store grossed an estimated $64 billion in revenue. Apple's stock dropped over 3% in trading after the ruling.

This development concludes the first part of the battle between Epic Games and Apple over the company's App Store policies. While Apple won on nine out of ten counts, it was found to engage in anticompetitive conduct under California law, leading to changes in its App Store policies.

The judge concluded that Apple's anti-steering provisions hide critical information from consumers and illegally stifle consumer choice. When combined with Apple's incipient antitrust violations, these provisions are anticompetitive and warrant a nationwide remedy.

However, the judge did not find Apple to be a monopolist, stating that "success is not illegal." The trial took place in Oakland, California, in May, featuring both company CEOs testifying in open court. Both sides expect the decision to be appealed regardless of its outcome.

In response to the ruling, Epic Games CEO Tim Sweeney criticized the decision on Twitter, stating that it isn't a win for developers or consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.

Since the trial ended but before the decision was handed down, Apple has made several changes to mollify critics, including relaxing some rules about emailing customers to encourage them to make off-app purchases and allowing some links in apps.

The ruling also addresses Epic Games' most popular game, Fortnite, which makes money when players buy V-bucks or in-game currency. Epic wasn't seeking money from Apple; instead, it wanted to be allowed to install its own app store on iPhones, bypassing Apple's cut and imposing its own fees on games it distributed.

The public clash between the two companies started in earnest in August 2020, when Epic implemented a plan called "Project Liberty" to challenge Apple. Epic 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.

As a result, Apple removed Fortnite from the App Store, and Epic filed a lawsuit that culminated in May's trial. The judge ruled that Epic Games will have to pay Apple damages because it breached its contract, paying Apple 30% of all revenue it collected from Fortnite on iPhones and iPads through direct payments.

The decision marks a significant shift in the way developers can interact with their users, potentially disrupting Apple's dominance in the market.