Uncertain win for Apple even in victory against Epic

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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on May 31st, 2021.

In the recently concluded trial against the gaming giant Epic, it looks promising for Apple. But even a possible win would be less significant than one might think. And Apple’s legal problems are far from over.

Wearing a white shirt, a slim gray tie, and a white face mask, one of the main characters stepped out of an elevator the other day and straight into the biggest tech lawsuit of the year. Apple CEO Tim Cook looked confident and victorious. With his fingers he made Winston Churchill’s historic V sign – “V for victory”.

However, the trial, which ended this week, was not really that simple, either for the favorites Apple or their counterpart, the gaming company Epic. Judge Yvonne Gonzales Rogers clearly signaled during the trial that she did not buy either side’s argument in full. At the end of the trial, she suggested that her upcoming verdict could make both parties dissatisfied.

In short, the case is about Epic claiming that Apple is using its power over the App Store in an unfair way. For example, developers are prevented from informing their users that their products can be purchased elsewhere than through the App store. This makes Apple make more money than they would otherwise have done.

Apple, for its part, claims that they have the right to set their own rules in a store that they own. They see the entire ecosystem with the iPhone hardware, the iOS operating system, and the App Store as one and the same experience. And to ensure that it is both secure and easy to use, Apple itself needs to dictate the terms.

The key issue in the case is the definition of the market. If you look at it as a large gaming market overall – with all consoles, mobile phones and computers included – it is difficult to claim that Apple has made any major control of the market. Epic’s game Fortnite, which Apple shut down from the App Store after breaking their rules, is still available on Xbox, Playstation and Nintendo, among others.

If, on the other hand, you see the market as software distributed to mobile phones, then Apple’s actions will be more controversial. Apple is one of many companies in the gaming market, but is basically one of only two players in the mobile market. Android, and the Google Play store, is the other. Epic has also sued Google Play for similar issues, but that process has not started yet.

All arguments aside, Epic is anything but a perfect representative of the world’s game and app developers. The company has portrayed itself as David in the fight against Goliath, but a more accurate description is rather Goliath against Goliath. Epic had sales of more than five billion dollars in 2020. Certainly significantly less than Apple, but considerably more than almost all other app developers.

Epic is also half owned by the Chinese internet giant Tencent. It would probably have been easier to get sympathy for a smaller developer affected by Apple’s strict rules, than a billion-dollar company that wants to make even more money.

Even if Epic loses this fight, they may still win in the long run. What they have succeeded in doing is shed light on these issues. It will increase the political pressure on legislation in the United States. Both Republicans and Democrats have expressed concern about the increased concentration of power among tech companies, and when this issue becomes relevant again, it may be an appropriate opportunity to implement reforms.

Apple also has legal concerns in Europe. The European Commission is looking at a similar issue regarding payments in the App Store in the music market, with Spotify as a counterpart. This will be even harder to justify for Apple, as their own service Apple Music competes directly with other music services.

The preliminary conclusion from the European Commission is that Apple has abused its dominant market position. Apple will now respond to their comments.

The lawsuit in the US between Epic and Apple is now in the hands of Judge Yvonne Gonzales Rogers. The verdict is not expected until after the summer. A sure tip is that it will be appealed – regardless of the outcome.

This column was first published in SvD Näringsliv, in Swedish, on May 31st, 2021.

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