On Monday, Epic Games and Apple began their high-profile trial, which is expected to last at least two weeks and has the potential to transform not only the iPhone maker’s app ecosystem but also the wider app economy worth hundreds of billions of dollars.
The lawsuit revolves around Fortnite, Epic’s massively successful video game, which was kicked out of Apple’s App Store last summer for breaking Apple’s guidelines on digital payments and creating its scheme. Apple (AAPL) takes 30% of many in-app transactions made on iOS devices and does not accept alternative payment methods. Epic filed a lawsuit against Apple after Fortnite was removed from the App Store.
On the first day, Epic and its first witness, Tim Sweeney, the company’s CEO, tried to prove that Apple’s App Store and refusal to allow other app stores on its site was anti-competitive. The company claims that Apple’s tight control of its iOS ecosystem dubbed a “walled garden,” amounts to a monopoly, and is urging the iPhone maker to allow alternative app stores, as well as potential applications, on its devices.
During his testimony, Sweeney said, “Epic is solely seeking changes to Apple’s future behaviour” and not any financial damages.
Apple claims that allowing non-restricted apps on its devices would jeopardize the ecosystem’s protection and privacy, both of which it has highlighted as selling points. It also claims that since it is operating in a large video game industry, of which it is just a small part, it does not have a monopoly and therefore cannot misuse its status.
Most of the day’s activities revolved around both firms attempting to establish their businesses. Fortnite, according to Sweeney, is a “metaverse” and a “social experience” — a virtual environment that includes movies, TV shows, and concerts in addition to gaming.
Any future antitrust case requires a clear definition of the market. Under US rule, having a monopoly is not illegal; it is only illegal to attempt to maintain a monopoly at the detriment of competition. Apple is attempting to prove that the iOS operating system competes with several other systems and hence does not violate antitrust laws.
Apple, according to Epic, uses iOS to lock users and developers into a restrictive environment, after which it charges them exorbitant fees for additional transactions. Katherine Forrest, an Epic lawyer, once compared Apple to a car dealership that charges customers every time they fill up their gas tanks.
Apple responded to allegations of anti-competitive conduct by concentrating on the gaming industry, claiming that Fortnite is available on a variety of other platforms, including personal computers, Google’s Android operating system, and even Epic’s own online game store, as well as popular video game consoles including Sony’s PlayStation, Microsoft’s Xbox, and Nintendo’s Switch. Apple argued that users on both of those platforms would play Fortnite against each other and buy in-app purchases on one platform to use on another.
“Epic is asking for government intervention to take away a choice that consumers currently have,” Karen Dunn, a lawyer for Apple, said during her opening statement.
During his cross-examination of Sweeney, another Apple lawyer, Richard Doren, pointed out that Epic pays the console platforms a similar 30% fee, even though certain platforms don’t accept external applications or alternative payment methods. Sweeney claimed that consoles have a different business model than Apple’s lucrative app store because they lose money on hardware sales and make up for it with apps.
Apple CEO Tim Cook, as well as members from Facebook (FB) and Microsoft (MSFT), are scheduled to testify in the coming days (MSFT).
The judge’s decision — and the ensuing appeals — will have far-reaching consequences not only for Apple and its iOS ecosystem but also for other app stores and the broader app industry, which has expanded to hundreds of billions of dollars and provides millions of jobs. It’s a case that has the potential to either change the way many in-app purchases operate or cement the influence that tech platforms wield over the laws of an increasingly digital world.
