The great Apple versus Epic Games trial is over — except for the verdict.
On May 24, the two sides had their closing arguments, which took the form of a question-and-answer session with Judge Yvonne Gonzalez Rogers, who will decide the case (rather than a jury). Gonzalez Rogers has been happy to poke holes in both sides’ arguments and witness testimony throughout the trial. The final day was no different, and it provided a good summary of the previous three weeks of arguments — as well as a preview of what Apple’s antitrust woes might be in the future.
Apple and its fellow Big Tech companies have come under increasing scrutiny in the United States and abroad, where they have faced numerous lawsuits from private parties like Epic as well as the government about their alleged antitrust practices. The Apple-Epic case, in particular, stands to be a preview of what’s to come. If there’s an Apple loss, Congress may decide that businesses can work things out through the court system, or in the case of an Apple victory, lawmakers may decide it’s time to step up and introduce or enforce new antitrust regulations.
Epic Games is suing Apple over its App Store, after the latter company kicked Epic’s popular Fortnite game out of the store last August. Epic tried to circumvent Apple’s rules requiring developers to use its in-app payment system (and pay Apple a 30 percent commission). Epic says Apple has given itself an unfair monopoly by only allowing apps that follow its rules and use its payment system to be on its devices. Apple says it’s only trying to create a secure environment for its users — who choose Apple devices for that reason — and the commission is necessary to recoup its costs to create and maintain the App Store.
After hearing from both sides at length over the course of the trial, Monday’s unusual debate-style closing arguments allowed Gonzalez Rogers to zero in on the topics and points she found to be the most salient for making her decision. The definition of “market” was one of the first things discussed, which is not surprising given that it’s been at the heart of the case all along.
“From the judge’s questions, it appears she is still struggling with how to define the market that the companies compete in, which is an important threshold question,” Bloomberg Intelligence senior litigation analyst Jennifer Rie told Recode.
Epic thinks the market should be the platform on which its games are played. In this definition, users have to go through the App Store and developers have to abide by its rules and fees to access those users — no one here has a choice. But if the market is considered to include all gaming platforms, then users can always choose to play Fortnite on a different system, like an Android, or Xbox, or Playstation. This has been Apple’s argument — that people have multiple platforms to play Fortnite on, and so Epic has multiple ways to sell virtual currency to them. Gonzalez Rogers has also wondered if perhaps the market in question here is mobile gaming, in which case systems like Apple and Android (and possibly Nintendo’s Switch) would be included but currently Xbox and Playstation wouldn’t.
Gonzalez Rogers also dedicated some time on the last day to ask both sides about potential remedies. Epic wants to be able to open up its own store on Apple devices so that Apple users can access its games and buy its goods without having to go through the App Store. Apple has said it doesn’t think third-party stores will have the same security (or purity) standards that Apple users have come to trust it to provide. A third-party app store, then, could put its users at risk and harm them, developers, the app ecosystem, and Apple’s brand.
Unfortunately for Epic, Gonzalez Rogers didn’t seem comfortable with the idea of making a decision that would essentially force a company to change its business model, nor did she see much by way of precedent to base such a decision on. She also expressed concern that Epic’s proposed solutions would give it access to Apple’s customers without paying Apple for that access or for its intellectual property. Again, those are payments that Apple has incorporated into its App Store business model, although Apple CEO Tim Cook said he does know how much his company makes from them in his testimony last Friday. Epic pointed out that Apple already does what it is proposing for Mac users, who aren’t forced to use the App Store. Apple said that being forced to have separate app stores would make it too much like Android phones and would take away Apple’s competitive edge over Android — many people choose Apple devices because they are considered to be more secure than Androids.
Gonzalez Rogers wasn’t uniformly on Apple’s side, however. She clearly wasn’t thrilled with the 30 percent commission Apple takes off the top, which has remained that high since the creation of the App Store with a few exceptions: subscriptions after the first year and, as of last November, small businesses are charged a lower commission of 15 percent. Gonzalez Rogers suggested this move could be the result of Apple trying to ward off criticism and lawsuits more than anything else. Apple didn’t seem to be changing anything because of competition, she noted.
“If there was real competition, that number would move,” Gonzalez Rogers said of the 30 percent take. “It hasn’t.”
She also said it seemed anticompetitive for Apple to ban apps from using language to steer users to other places they can purchase digital goods. She’s not the only one to take issue with Apple’s anti-steering policy, but that doesn’t mean she intends to rule in a way that would change it.
“It seems like she would like to ban those rules,” Rie, from Bloomberg Intelligence, said. “But that is a remedy which she can only impose if she finds that Apple has violated the law. She may be struggling with how to get there under federal law, which is defendant-friendly, but may be able to use California state laws instead.”
Gonzalez Rogers also said that while Epic has presented its case as being a fight on behalf of all developers, it’s Epic that stands to make billions more dollars if it no longer has to pay App Store commissions. Of course, that assumes that Epic wins the case and the resulting appeals from Apple, which could take years to resolve. In the meantime, Apple’s App Store practices are also being scrutinized by antitrust regulators in the US and abroad. The result of this case could influence the outcomes of the others — or how regulators decide if and when to step in — and it’s being watched closely.
Gonzalez Rogers closed by saying it will take her “a while” to render her decision — likely several months.
“It’s been tiring, but a real pleasure,” she said.