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Epic v. It will be a complicated test against Apple competition. Experts from each side will present consumer data and economic theories. Managers will iron out business practices and force them to disclose incriminating emails. Lawyers will put their turn on what all this means. But ultimately, case it is likely to come down to a simple misleading question: what is the market?
In his case, the company behind successful video games like Epic Games Fortnite, Accuses Apple of building a monopoly on iPhone and iPad games by asking it to download all apps through its App Store. The lawsuit alleges that Apple uses this monopoly to get large unfair payments to developers – up to 30 percent of all transactions – if those who have no choice but to use Apple’s payment system want to reach users. (Epic makes similar complaints about Android in a lawsuit against Google, which has no trial date yet).
In its defense, Apple makes many counter-arguments, but the most important thing is this: The App Store is not a monopoly. People can download games from anywhere else, such as Android phones, game consoles, and desktop operating systems. Epic can be targeted to attract customers on these platforms if they don’t like Apple’s terms of service.
To resolve this dispute Judge Yvonne Gonzalez Rogers, the head of the federal trial that began this week, chooses to define the relevant market. This is a key step in many antitrust cases because to prove a monopoly, it must be shown that there is a dominant market. If Rogers supports Apple’s market definition, then Apple will win. In a market that includes Android, Xbox, and laptops, there’s no way to say that Apple has a monopoly on game distribution. And if it doesn’t have a monopoly, Epic’s other accusation doesn’t matter.
This means that Epic needs to convince the court that the market needs to be more narrowly defined as an iOS app. Apple, of course, has a 100 percent market share for mobile apps on its platform. (Some owners have hacked devices to run unpunished apps, which is a process called “jailbreaking,” but that’s a small part of users.) So if Epic wins the market definition, Apple automatically proves its monopoly. That is probably the biggest legal hurdle that needs to be clarified.
It may seem strange to say that a brand can serve as a whole market, but it is anti-competitive in the antitrust law. In a major case in 1992, Kodak was sued for pushing customers to its repair services for the extraction of independent businesses that supplied repairs to Kodak copiers and equipment. Kodak argued that anyone who didn’t like it could stop buying Kodak machines. But the Supreme Court he did not agree. Sometimes, the Court notes, “a brand of a product may create a separate market.” In this case, from a customer perspective, after someone was a copier for Kodak, it didn’t matter if other brands were in the market. Kodak created an “additional market” for repairs. The key point was something called interchangeability: “Kodak equipment service and parts are not interchangeable with other manufacturers’ services and parts.”
Epic is making a similar claim about Apple: that iPhone has created a market for apps. In this marketplace, you can’t say that an iPhone game is interchangeable with an Android game, let alone an Xbox download. Some legal experts, however, are skeptical of how this argument will work. Paul Swanson, a Denver monopolies lawyer, said Kodak allowed the third-year repair market to grow before it decided to crush competitors, Apple has designed the iPhone (and iPad) as a wall garden almost from scratch: a year after that, the developers always had to go and accept the terms before they could reach the customers. Courts are often embarrassed when companies are forced to change their business models.
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