Apple: A small win for Epic

Tuesday’s testimony put Apple’s anti-steering rules in the judicial spotlight.

From The Verge’s “Epic v. Apple keeps coming back to the gap between ignorance and inconvenience” posted Tuesday:

Last week, the judge in Epic v. Apple asked whether Epic really had an antitrust case against Apple, or whether it just wanted to help kids make impulse purchases. Judge Yvonne Gonzalez Rogers was talking about the importance of where and how people pay for their apps, and today she continued that line of questioning to the point of suggesting a kind of App Store policy change that Epic never originally put on the table.

Epic sued Apple for banning Fortnite from iOS over a direct payment system for V-Bucks, Fortnite’s in-game currency. Epic called that unfair and monopolistic. But Apple argued that it lets developers sell in-app purchases through its Safari browser, even at a discounted price — so there’s no lockout. And while Epic itself has focused on explaining why web apps aren’t a good substitute for native ones, its expert witness David Evans brought up another major issue: anti-steering rules.

Anti-steering rules (in this context) refer to rules that ban developers from pointing users outside of Apple’s ecosystem. iOS developers can’t add links or references telling people to get a better deal on their website, or send emails to accounts created through Apple…

[Economist Susan] Athey argued that “consumers do get klutzy and disconnected and sensitive to delays when trying to complete that type of activity,” and telling people to go use a web browser doesn’t solve that problem. But [Judge] Rogers could easily decide that inconvenience and enforced ignorance are separate issues, and that only the latter is a serious antitrust concern.

Getting rid of anti-steering provisions would be a comparatively small win for Epic, which wants to put full-fledged third-party App Stores on iOS. But it’s a smartphone ecosystem feature that’s often overshadowed by bigger antitrust complaints — and Epic v. Apple is putting it under the spotlight.

My take: A small win for Epic would be a big win for Apple.

See also: Apple should lift the gag order on apps — Ben Thompson

13 Comments

  1. David Emery said:
    I wouldn’t call that a “win” as much as “a very interesting comment.” What counts is what the judge puts in the decision, not comments or questions from the bench.

    8
    May 12, 2021
    • David Emery said:
      In the one lawsuit that I observed closely sitting in the courtroom (company founder vs outside investors, with a bunch of employee shareholders like me filing to “intervene”), it was pretty clear the judge did not want to actually rule. Rather, he would ask sometimes leading questions to see if he could force both sides to come to an agreement outside of court. (And that’s what happened in my case. The settlement included reimbursement for our legal fees for the ‘intervenor’ filing. “Intervenor” can be summarized as “Hey court, we have a stake in this case, too.”)

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      May 12, 2021
  2. Fred Stein said:
    From an AppleInsider commenter:

    “Anti-steering is standard throughout the e-commerce industry. Amazon, EBay, and Etsy don’t allow sellers to communicate alternate places of purchase on their sites and neither do gaming stores like Steam on PC or the Playstation Store on Sony consoles…”

    Back you Epic: Will you sue Sony, one of your investors, for anti-steering?

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    May 12, 2021
  3. Fred Stein said:
    Thanks David, for recounting your experience.

    Last week, the judge scolded both sides for wasting the court’s time. Maybe she sees this suit as a dispute over price and terms.

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    May 12, 2021
    • David Emery said:
      A story from my trial (I wasn’t in court for this, too bad!) The outside investors removed the founder from the board and CEO roles. Outside investors and founder each had 48% of the stock, the remaining 4% was split among a lot of us employees. Anyway, they put in a new CEO whose only qualification was he had an MBA. He had no understanding of the business and was a poor leader.

      Things boiled down to a proxy vote. Founder’s lawyer collected our proxies, laid them on the other side’s table, and started talking to the judge. The new CEO pushed the pile of paper off the table onto the floor. Judge said, “Sir, pick them up. Bailiff, escort this person from the court. And sir, you should be glad you’re not opening your wallet as you leave.” The other side rapidly proceeded to settle out of court!

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      May 12, 2021
      • David Emery said:
        Another story, I was in court for this. We were sitting in public seating behind the founder, who we supported over the outside investors (and the CEO mentioned above.) Our lawyer said, “Don’t say anything in court!” The other side’s lawyer was discussing the upcoming proxy vote, he said “The employees may well reconsider.” As a group, we quietly shook our heads “no.” The judge had a small smile, and our lawyer, sitting with the founder, glared at us. But our message was effectively delivered.

        1
        May 12, 2021
      • David Emery said:
        The legal dispute centered on an ambiguity in the agreement between founder and outside investors. Founder argued that, in the case of the agreement being explicitly silent about the specific situation, provisions of state law should apply. (Those provisions also made good sense to us non-lawyers.) Other side argued what most of us thought was a particularly tortured reading of the ambiguous language. When the case was finally settled, my copy of all the filings was about 7″ tall (but often a new filing would include all the attachments in the previous filings…)

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        May 12, 2021
        • David Emery said:
          (Agreement said, “Outside investors and founder will nominate and vote for board members.” Outside investors said “This requires unanimous consent among the parties, and if they can’t agree, then the board membership cannot be changed.” Founder argued “State Law (and common sense) says that, if there’s no agreement, then each party votes his number of shares on the proposed nominations.”)

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          May 12, 2021

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