Epic vs Apple: the (predicted) verdict has arrived



The verdict of antitrust experts is on Epic Games Inc.’s antitrust lawsuit against Apple Inc .: A split decision, with Apple gaining an advantage only because it is unlikely to be considered a monopolist.

There is a real chance, however, that when Federal Judge Yvonne Gonzalez Rogers decides on the bench trial later this summer or fall, she could try to force Apple AAPL,
to make changes to the App Store. The iPhone maker’s payment system and the 30% commission fee it charges software developers are expected targets for observers of the recent three-week trial who spoke to MarketWatch.

Throughout closing arguments on Monday, the judge said she was troubled by the monopoly forces at work in the iOS ecosystem, but acknowledged that federal courts do not run a business. The way she defines the relevant market in the historical case could lead to remedies that push for narrow and nuanced prescriptive measures, but none of the experts MarketWatch spoke to expected her to categorically state that Apple exercises illegal control over a monopoly.

“The judge will rule in favor of Apple because the law is clearly on Apple’s side,” said Carl Szabo, vice president of tech lobbying group NetChoice, whose members include parent company Google Alphabet Inc. GOOGL ,

+ 0.38%,
Amazon.com Inc. AMZN,
Facebook Inc. FB,
and Airbnb Inc. ABNB,
“And she, like the other judges, doesn’t want her decision overturned.”

Read more: What each party was able to prove in the Epic vs Apple trial

In fact, he said, Epic’s website and app store have provided evidence of ways to “get around” Apple’s in-app purchasing system, which is at the heart of Epic’s lawsuit. . Apple does not allow app makers to guide consumers to alternative payment methods that would allow them to bypass the App Store’s payment system and commission fees, as Epic has attempted to do before. that Apple is not removing its popular game “Fortnite” from the App Store.

“I tend to think the judge can support Apple’s ability to run its App Store, but find for Epic on the forced use of ApplePay,” said Ted Claypoole, an intellectual property lawyer at MarketWatch .

Prescriptive measures that could cover the 30% commission fee or seek alternatives to Apple’s payment system are more likely than a full ruling against Apple, experts said.

“[The judge’s] questions [during the case’s conclusion on Monday] showed that it was uncomfortable with the lack of competition Epic was able to introduce during the trial in terms of pricing and responsiveness to developer concerns, ”antitrust attorney Valarie Williams told MarketWatch. “I don’t know how that will translate into his final order.”

“Courts generally don’t like to regulate prices. I think it would be more likely to allow shifting to other payment methods, ”said Williams.

The decision could depend on the relevant market: Epic argued that the relevant market at the heart of this case should be narrowly defined as iOS apps. According to Ari Lightman, professor of digital media and marketing at Carnegie, Epic’s best path to legal victory could be the claim that competing platforms – especially Android phones – are not reasonably interchangeable with iOS in because of the “walled garden” built by Apple. Heinz College at Mellon University.

Conversely, Apple insists that there are many options for developers in its store – there are 1.8 million apps in 27 categories – and strong competition in the market, in the form of Google online stores, Microsoft Corp. MSFT,
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Samsung Electronics Co. Ltd. 005930,
+ 0.63%,
Sony Group Corp. SONY,
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Nintendo Co. Ltd. 7974,
+ 1.31%,
and others.

“If I decide that the relevant market is the gaming market, there is no monopoly, but there is evidence showing anti-competitive behavior,” Gonzalez Rogers replied Monday to Apple’s lawyers. “Well, if I decided the market was for mobile games, what impact would that have on your analysis?”

Gonzalez Rogers asked tough questions from both sides on the final day of trial Monday, without indicating where she was at, at one point she warned Epic.

“Your wording seems to ignore the reality that customers choose an ecosystem. There is a lot of evidence in this essay that in the device market, Apple’s business strategy is to create a particular ecosystem that is incredibly attractive to its buyers, ”she said. “If these consumers choose to enter this ecosystem, then your economic surrogates as you define them are destroying the ecosystem they have chosen to enter.”

In another exchange, she commented on Apple, “Well, Apple isn’t just being sued by Epic. He is also pursued by a class of developers. It’s not only [Epic Chief Executive Tim] Sweeney. “

Apple attorney Daniel Swanson, who handled the market definition portion of Monday’s proceedings, could only suggest that. “I’d be pretty sad,” he says. “But monopoly power would disappear. We think other devices that iPhone owners have will come into play. ”

Read more: Oracle takes third attack in Google legal battle, but the game will likely continue for software developers

Regardless of where Gonzalez Rogers lands in the landmark case when she delivers a ruling in the summer or fall, don’t expect it to end there. The case is likely to go to appellate courts for years and could ultimately end up in the United States Supreme Court, like Google GOOGL,

+ 0.38%
v. Oracle ORCL,
according to legal experts.

“As the judge pointed out, the outcome will not be decided with his decision, as the losing party will surely appeal the case to the Federal Court of Appeal,” Larry Downes, project director at the Georgetown Center for Business and Public Policy’s Evolution of Regulation and Innovation.

What the trial brought to light was the murderous treatment of developers and the profitability of the App Store – its margins are as high as 80% – which would require some form of corrective action, according to top reviewers. ferocious Apple.

“This essay is part of the global momentum to compete in the digital marketplace, and I expect it to grow,” Meghan DiMuzio, executive director of Coalition for App Fairness, a group of companies that want a “fairer deal” For the inclusion of their applications in the App Store and Google Play. Its nearly 60 members include Epic, Spotify Technology SPOT,
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Match Group Inc. MTCH,
+ 0.26%,
and Tile Inc.

“As important as Epic’s trial is, it’s just part of a larger discussion,” DiMuzio told MarketWatch.


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