On Monday, Apple faces a trial that could overturn its iron grip on its app store, which brings in billions of dollars each year while powering more than 1.6 billion iPhones, iPads and other devices
SAN RAMON, Calif. – On Monday, Apple faces one of its most serious legal threats in recent years: a trial that threatens to overturn its iron grip on its app store, which brings in billions of dollars each year while feeding more 1.6 billion iPhones, iPads and other devices.
The federal court case is being filed by Epic Games, maker of the popular video game Fortnite. Epic wants to take down the so-called “walled garden” of the app store, which Apple started building 13 years ago as part of a strategy planned by co-founder Steve Jobs.
Epic accuses Apple of turning a once-tiny digital store into an illegal monopoly that squeezes mobile apps for a significant chunk of its earnings. Apple charges a 15% to 30% commission on in-app purchases, including everything from in-game digital items to subscriptions. Apple denies Epic’s accusation.
Apple’s highly successful formula helped transform the iPhone maker into one of the most profitable companies in the world, with a market value that now amounts to $ 2.2 trillion.
Privately held Epic is insignificant in comparison, with an estimated market value of $ 30 billion. His aspirations to increase size depend, in part, on his plan to offer an alternative app store on the iPhone. The North Carolina company also wants to get rid of Apple’s commissions. Epic says it disbursed hundreds of millions of dollars to Apple before Fortnite was kicked out of its app store last August, after Epic added a payment system that bypassed Apple.
Epic then sued Apple, creating a drama in the court that could shed new light on Apple’s management in its app store. Both Apple CEO Tim Cook and Epic CEO Tim Sweeney will testify in a federal court in Oakland, California, which will be created to allow social distance and will require masks at all times.
Neither side wanted a jury trial, leaving the decision to US District Judge Yvonne Gonzalez Rogers, who already seems to know that her decision is likely to be appealed, given the stakes in the case.
Much of the evidence revolves around mysterious but crucial arguments about market definitions.
Epic says the iPhone has become so ingrained in society that the device and its ecosystem have become a monopoly that Apple can exploit to unfairly enrich and prevent competition.
Apple says it faces significant competition from several alternatives to video games on iPhones. For example, he points out that about 2 billion other smartphones don’t run iPhone software or work with its app store – especially those that rely on Google’s Android system. Epic has filed a separate lawsuit against Google, accusing it of stealing apps illegally in its own app store for Android devices.
Apple will also portray Epic as a desperate company, hungry for revenue sources beyond the aging Fortnite. She says Epic just wants to take advantage of the iPhone ecosystem in which Apple has invested more than $ 100 billion over the past 15 years.
Apple app store revenue estimates range from $ 15 billion to $ 18 billion annually. Apple disputes these estimates, although it has not publicly released its own figures. Instead, she emphasized that she does not collect a penny from 85% of the apps in her store.
The commissions it pockets, says Apple, are a reasonable way for the company to recover its investment while financing an application review process that it considers essential to preserve the security of applications and their users. About 40% of the nearly 100,000 apps submitted for analysis each week are rejected for some kind of problem, according to Kyle Andeer, Apple’s director of compliance.
Epic will try to prove that Apple uses the issue of security to disguise its true motivation – to maintain a monopoly that takes more profits from application makers who can’t help but be available on the iPhone.
But the smaller company may face an uphill battle. Last fall, the judge expressed some skepticism in court before denying Epic’s request to reinstate Fortnite at the Apple app store pending the outcome of the trial. At that time, Gonzalez Rogers claimed that Epic’s claims were “on the verge of antitrust law”.
The trial is expected to last almost the entire month of May, with a decision in the following weeks.