In Epic Games v. Apple, Silicon Valley’s highest-stakes court case in a decade, the Cary, North Carolina,-based game-maker will argue that Apple unfairly uses it dominance to lock developers into using its App Store, which it says takes too hefty a slice of their profits.
Epic will attempt to make the case that the App Store represents an illegal use of Apple’s market power. Even if Apple is a legal monopoly, according to the antitrust complaint Epic filed in August, the company is using its power to dominate a secondary market: app distribution. Third-party developers are dependent on the App Store for customer transactions on more than one billion iPhones, and Apple charges them up to 30 percent of every purchase, which Epic’s complaint says is 10 times what other systems, such as Nintendo or XBox, charge on average. Epic argues that “the anti-competitive consequences of Apple’s conduct are pervasive.”
The outcome of the case could affect Apple’s control over its own system, and also could change the landscape for independent developers, distributors, and, more broadly, for anti-trust law. It could help define a “marketplace” and set boundaries for market-dominance in the digital era. Randy Picker, a professor at the University of Chicago Law School, told the Wall Street Journal: “These issues are dead critical to how the digital world we live in operates.”
Epic filed its suit last summer, after it attempted to skirt the App Store payments system, violating Apple’s rules. Apple removed Fortnite from its listings, preventing iPhone users from accessing the game. Apple also countersued, arguing that Epic is trying to break the iOS security system for its own gain, and that its App Store is fundamentally part of the iPhone and its security systems–not separate.
The case will be held in federal court in Oakland, California, and is expected to last at least three weeks. Here are answers to four of the biggest questions about the trial.
What are the logistics of the trial?
In a pre-trial hearing last week, a U.S. District judge Yvonne Gonzalez Rogers said the Oakland courthouse will open in-person, but in a limited capacity, due to Covid-19 cases dropping in the San Francisco Bay Area. She will not require vaccination certification to enter the courthouse, but will require masking. Each party is only allowed to have at most six people in court at a time due to COVID-19 restrictions. She noted that the press and the public will be able to listen to the live audio of the bench trial, which has no jury, via the U.S. District Court site. Witnesses testifying in person will be given a clear mask so that she can observe their responses, and the parties’ legal teams can wear cordless mics so they can be easily heard. Each party could submit testimony orally over 45 hours and in 100,000 written words–or the length of a long book. In total, more than 650 pages were submitted, and give an overview of how each side is approaching the case.
Who will testify?
Both Apple and Epic have filed witness lists that give a glimpse into each party’s strategy, even if they are not final. Both lists revolve around Apple and Epic executives, including Epic CEO Tim Sweeney, 50, a Silicon Valley outsider who founded his company in 1991 and is known for conservationist giving. Apple CEO Tim Cook, 60, who built his career rising through Apple’s ranks, will also testify, as will Apple senior vice president of software engineering, Craig Federighi, and App Store VP, Matt Fischer. Epic has 13 current and former Apple employees on its list, as well as Lori Wright of Microsoft, Aashish Patel of Nvidia, and Adrian Ong of Match Group–who recently was critical of Apple in a Congressional hearing–on its list of third-party witnesses. Apple similarly has 13 Epic employees on its witness list. Both parties’ expert-testimony lists are heavy on academics in the fields of computer science, technology, sociology, and marketing.
What will we learn?
Submitted court documents already reveal several fascinating details about how the companies have done business–and how their processes work. For instance, submitted depositions delve into how Apple reviews apps submitted to its App Store. Philip Shoemaker, Apple’s former technology director of app review, notes that companies went out of business when Apple changed its App recommendation engine, which he called an “arbitrary decision.”
Some testimony illuminates an imperfect review process over the years, and Shoemaker also notes an instance of the Chinese government succeeding in putting malware in the App Store.
The trial will be closely followed, and not just due to the high stakes. Unlike a lot of corporate law and tech trials in particular, this one won’t be based on hypotheticals. Testimony that’s already been submitted is heavy on narrative, including stories about the creation of the products and devices gamers and phone users love. The big issue at the center–antitrust and regulation of big tech–is one of the most important debates not just in Silicon Valley, but also in Washington.
What outcomes are possible?
The court could determine, essentially, the amount of control Apple can retain over its own devices and how they operate. It will crack open the question of whether Apple’s considered design and infrastructure–its combination of hardware and software prowess that its fans adore–lured developers and customers into a fortified castle, and then locked the gate while continuing to charge them.
Perhaps the worst-case scenario for Apple would be a decision that bars the company from requiring all developers using iOS to list and sell their apps via the App Store. Or, it could allow the App Store to continue to function, but limit some part of Apple’s dominance, perhaps allowing developers to use their own in-app payment systems.
Even if Apple wins in court, it won’t likely come away unscathed. Senator Amy Klobuchar, D-Minn., introduced a bill February 4 that’s been called the most ambitious antitrust reform in nearly half a century. And the European Union Friday issued antitrust charges over Apple forcing developers to use its payment system within their apps. Regarding music apps specifically, Margrethe Vestager, the head of competition policy in the EU, said publically: “On that market, Apple has a monopoly.”
Regardless of outcome, the trial will be a first step toward rethinking–and likely regulating–the operations of big tech companies.