Apple’s market dominance to be litigated in Epic trial

From the Wall Street Journal’s “Epic vs. Apple Trial Features Battle Over How to Define Digital Markets” posted Monday:

Epic says the App Store is a monopoly because Apple is the lone distributor of apps to more than one billion iPhones and controls the only payment system for digital services in those apps. That power, Epic says, lets Apple dictate anticompetitive commissions, including a slice as high as 30% of revenue and other terms that harm developers and increase prices. Epic has filed an analyst’s estimate that Apple’s operating margins for the store were as high as 80% in fiscal 2019, an estimate Apple says is wrong.

Apple offers a much broader view of the marketplace, one in which its App Store is one of many ways for Epic to distribute its games, including Sony GroupCorp.’s PlayStation, Google’s Android software, and personal computers, if the videogame maker doesn’t like Apple’s terms. In that wider market, Apple says it holds nothing close to monopoly power and is merely ensuring easy and safe use of apps for its customers…

“Market definition is Epic’s highest hurdle,” said Paul Swanson, a Denver-based antitrust lawyer at Holland & Hart LLP who is following the case.

My take: Perhaps. Epic also has to prove that it didn’t violate the terms of its App Store contract.

9 Comments

  1. Fred Stein said:
    Disclosure: I make no claim of legal competence.

    I think Apple should frame this as public safety. That word resonates better than privacy or security or curated or open v. closed.

    If Epic (or others) claim 1B iPhones constitute a monopoly which must be opened, then who ensures public safety for 1B users?

    9
    May 3, 2021
    • David Emery said:
      The interesting thing about that line of reasoning is that it could be extended to open up software vendors for all kinds of liability if their products don’t work as advertised.

      Now -I- think that would be A Good Thing! I believe software vendors should be legally liable if their products contain cyber vulnerabilities, or if they don’t work as intended. That’s the only way we’ll get real progress in shutting down the continuing stream of security holes that continue to plague our lives. Structural engineers (my father was one) have both legal liability and legal shielding if a building falls down. They’re liable if it can be shown they did not follow engineering practices (e.g. specifying the wrong materials), but if they followed the standard engineering practices and the building still falls down, that’s a valid legal defense. (My father consulted on a couple of engineering liability lawsuits, and we talked about this a lot.)

      5
      May 3, 2021
      • Gregg Thurman said:
        At the very least it would force developers to consult/contract with benign hackers to locate vulnerabilities before they became known.

        But then, MSFT might go bankrupt from that expense.

        2
        May 3, 2021
  2. It is my understanding that e-commerce constitutes somewhat less than 30% of all commerce. Maybe closer to 20%. What does the other 70 or 80% (Wal-Mart, Ford, Lidl, Sainsbury, etc.) think about a lawsuit threatening retail store P&P? We shop at certain places because we feel secure shopping there. Wal-Mart decides what goes on their shelves. Tesco takes a cut of the price you pay at register, a sizable cut in some cases. Walk into Acme, setup a display and start selling your merch, using your credit card reader. See what happens.

    4
    May 3, 2021
    • David Emery said:
      Probably not that big of a risk, because this starts with a declaration of a monopoly, and then goes to abuse of that monopoly. That’s why the ‘definition of the market’ is -the critical decision- the Judge will have to make.

      Amazon, on the other hand, should be -very scared-.

      1
      May 3, 2021
  3. Daniel Epstein said:
    Philip’s contract argument is a big problem for Epic as their public statements are defamatory which could rebound against them in court. Trying to force Apple to break the App Store for Epics own gains is a weak position if the judge finally finds the contract to be enforceable.

    5
    May 3, 2021
  4. Thomas Larkin said:
    Apple makes its money in this enterprise (app store) through license fees, in the form of a percentage of receipts; the Developer gets the ‘license’ to operate on the proprietary software platform integrated with Apple’s hardware, and to sell the app in Apple’s store.
    Epic also makes its money from license fees, including licensing of its engine and its percentage of receipts from game developers to be in an Epic store (on any platform), BUT Also, from monetizing customer data. That may be what this is really about – i.e., taking away the consumer choice not to allow sharing of their data, which Apple is now providing through app store rules. This would potentially be a hit to Epic’s revenues which, like Facebook, Epic is not being honest with consumers about. Or, Epic is just trying to insert itself into the payment stream between a group of creatives (game developers), and someone else’s storefront, while adding no value itself (leech), then, pick a fight in the hopes of getting a “rent” concession.
    Seems like an uphill battle for Epic either way.

    4
    May 3, 2021
    • David Emery said:
      Politicians can argue and resolve based on what’s “fair”. Courts have to argue and resolve based on what’s “the law.” PED says that Ben Thompson has an interesting legal analysis (presumably behind Stratechery’s paywall.) If someone could summarize those legal arguments, I’d be interested.

      1
      May 3, 2021

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