Apple AAPL.US faces court questioning over its 27% "backlink tax": Is it a windfall or a compliance operation?

A senior Apple Inc. executive testified in court that the impact on Apple's profits was a key factor in its decision to charge developers 27% to steer customers to pay outside the App Store, even though the move could violate court orders.Apple considered a range of options in 2023 as it weighed how to allow payments outside the store while maintaining revenue, executives testified in federal court over the past two days. One involved limiting alternative payment links but not charging a commission; another involved charging 27% but with fewer restrictions. Apple ultimately chose the option with the commission and strict restrictions.U.S. District Judge Yvonne Gonzalez Rogers is determining whether Apple is complying with her 2021 order requiring Apple to give consumers more options.The lawsuit ended a long fight over Epic Games Inc.'s allegations that Apple tried to monopolize the lucrative market for mobile apps. The judge repeatedly questioned whether Apple had taken enough steps to promote competition during hearings that began last year.Apple's App Store regulator, Carson Oliver, said he and other executives weighed the judge's directive to provide "competitive pressure" on pricing against revenue considerations before launching the "links" that allow developers to collect payments outside the store.While a zero commission "was an incredibly attractive option for developers," some colleagues, including then-chief financial officer Luca Maestri, didn't want to give up the commission entirely, Oliver said.There was also debate within the store about the fee. Oliver said it would be hard to maintain the 30% standard for most in-app payments if the fee for external payments was set at 20%.Philip Schiller, a longtime Apple executive who helped develop the App Store, testified that Apple believed it was complying with the judge's order.But on Monday, he acknowledged in court that the company's decision to charge a commission carried risk that Rogers might conclude her order hadn't been followed.Epic Games argued that its external payment links were "commercially unavailable" because of the various fees and rules Apple imposed. As the hearing progressed, the maker of the popular video game Fortnite accused Apple of withholding key documents as privileged attorney-client communications.