Epic Games and Apple began their high-profile trial on Monday to launch a lawsuit that is expected to take at least two weeks and has the potential to change not only the app manufacturer’s ecosystem but also hundreds of billions of dollars in the broader app economy.
The main focus of the case is Fortnite, Epic’s extremely successful video game, which was released last summer by the Apple App Shop for violating its digital payments rules with the creation of its own framework. Apple (AAPL) gets a 30 percent cut in several in-app buys on iOS devices and does not permit alternate payment schemes. The withdrawal of Fortnite from the App Store led Epic to sue Apple.
Epic and its first witness – the company’s CEO, Tim Sweeney – tried on day one to create the anti-competitive conduct of the Apple App Store and its denial of other app stores on its website. The company submitted that Apple’s tight regulation of its iOS ecosystem—known as a walled garden—is a monopoly that calls on iPhone makers to allow alternative app stores, and possible applications, on their devices outside their own limits and what they agree to.
Sweeney said during his testimony, “Epic is just looking for improvements in Apple’s potential behaviour” and no punitive damages.
Apple claims that allowing apps on its unrestricted devices could jeopardize its ecosystem protection and privacy – features it highlighted as a sales point. It also claims that it competes in a vast market of video games, which is just a small part of which it has no monopoly and can not exploit such a role.
Most of the day was focused on both companies trying to figure out how they describe their businesses. Sweeney characterised Fortnite as a “metaverse” and “social experience,” a virtual universe that contains more than just gaming movies, TV shows and concerts.
Market definition is crucial for every possible antitrust case. A monopoly under US law is not illegal; it is only illegal to attempt to maintain a monopoly at the detriment of competition. Apple seeks to establish that its operating system, iOS, competes with many other systems and thus does not abide by antitrust legislation.
Epic claims that Apple uses iOS in a restrictive environment, and then charges users and developers heavy costs for additional transactions. An epic lawyer, Katherine Forrest, once compared Apple to a car dealer who charges consumers with the gas every time their vehicles are being filled.
Apple has reversed allegations of anti-competitive behavior by claiming that Fortnite is available on a variety of other major platforms, including personal computers, the Google Android operating system, and Epic’s own online game store, as well as prominent video game consoles such as Sony’s PlayStation, Microsoft’s Xbox, and Nintendo’s Switch. Users will play Fortnite against each other on all those platforms and largely shop on one platform to use on the other, Apple argued.
“Epic calls for government action to take away a consumer option,” Apple lawyer Karen Dunn said in her opening speech.
During his cross-examination of Sweeney, another lawyer from Apple, Richard Doren, pointed out that Epic pays a similar 30 percent console fee even though the platforms don’t accept external applications or alternative payment methods either. Sweeney claimed that consoles losing revenue and making apps up for hardware sales are different from the lucrative Apple app store.
Many other major names are expected to testify in the coming days, including Apple CEO Tim Cook and Facebook (FB), and Microsoft representatives (MSFT).
The judge’s decision—and, naturally, the lawsuits that would almost undoubtedly follow—may have a big impact not only on Apple and its iOS ecosystem but also possibly on other app stores and the overall app economy, which is growing to hundreds of milliards of dollars and providing millions of jobs. Either the way many in-app transactions operate or the power technology companies must set the rules of an increasingly digital environment could be transformed.
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