Epic vs Apple Ruling: Both Companies Loose But Developers Win
September 13, 2021
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by Stephen Kanyi

Apple and Epic finally got a ruling on the yearlong case.

California Judge Gonzalez handed down a 37-page ruling detailing the ruling in one of the most-watched trials in the tech community. It was largely a win for Apple as it was found not guilty in nine out of ten accounts. Apple even claimed the ruling was a “huge win” for the company.

For Epic, theirs was not a good day as the Judge ruled against most of their cases. Saying ‘Success is not illegal’ the Judge will allow Apple to keep the App Store as the default payment system for in-store apps on iOS. They will also get to keep their 30% cut on all the purchases made on those apps. This cut was the main bone of contention in the case.

A closer look at the ruling however reveals that it was not quite the win that Apple was looking for. The judge issued an injunction that will see remove its ant-steering rules. This means that developers will no longer be banned from telling their users about alternative means of payment to Apple’s in-app system. This last ruling may lay the bedrock for a future antitrust case against the smartphone manufacturer.

On Claiming Monopoly

The bedrock of any antitrust case is to prove monopolistic behaviour. According to Gonzalez, Epic failed to prove that was the case for Apple in the mobile gaming market. While the ruling estimates Apple shares of the market at about 55% with “extraordinarily high-profit margins,” (all signs of monopoly power) the judge ruled that these alone were not enough to classify Apple as a monopoly.

“..these factors alone do not show antitrust conduct. Success is not illegal,” Rogers concludes. This was even despite Epic’s argument that Apple’s message app iMessage, intentionally forces users into iOS.

Her notes on this ruling however reveal that the antitrust claim was not too far off.

“The evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share,” she writes. “Apple is only saved by the fact that its share is not higher, that competitors from related submarkets are making inroads into the mobile gaming submarket, and, perhaps, because [Epic] did not focus on this topic.”

Most of the 10 claims Epic made against Apple depended on proving Apple had an unfair monopoly under California’s antitrust-focused Cartwright Act or the federal Sherman Antitrust Act. And although Rogers made some scathing remarks about Apple’s control of the market, she dismissed nearly all of Epic’s claims.

Harsh Words for Apple

Despite the ruling, the judge did not hold back in criticizing Apple over its market control and customer service.

She for instance notes that only “legal action seems to motivate Apple to reconsider pricing and reduce rates.”

She also points out that Apple has not been doing enough in “mediating disputes between a developer and its customer,” while also noting that Apple’s, now well documented, slow rate of innovation has in part been due to its “low investment in the App Store.”

She also calls out lack of competition as a major issue saying:

The point is not that … Apple provides bad services. It does not. The point is that a third-party app store could put pressure on Apple to innovate by providing features that Apple has neglected.”

What Does this Mean for Developers?

Putting aside the two companies, many developers were satisfied with the injunction which will now allow them to use Third-Party Payment systems on their apps. Ideally, this is a straightforward ruling with clear instructions, in practice, however, this rule is a little complicated to implement as explained by The Verge’s Nilay Patel.

He for instance details the difficulty in distinguishing between a “button” and an “external link”.

What does it mean for a button in an app to “direct a customer to purchasing mechanisms”? Is it a checkout button? Can Amazon add a cart, a checkout button, and payments to the Kindle app now? The court isn’t stupid — it specified buttons and external links, which means they are presumed to be distinct. So, a button can’t just be an external link that kicks you to Safari.”

This situation is perhaps a representation of the bigger problem of using legal terms in defining technical terminology. It was for instance funny to see Fortnite CEO Tim Sweeney and Apple app review head Trystan Kosmynka struggle to define what a game is.

He goes to note that while the court may have provided a way for developers to escape the 30% cut, Apple can find alternative ways to get their cut without contravening the injunction. It is up to the court to prevent this from happening.

For now, developers can take this as a win and try to make the best out of it before Apple figures out other ways of imposing the ‘Apple Tax.’

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