On Monday, Apple faces one of its most serious legal threats in recent years: a lawsuit that threatens to overturn its iron grip on its app store, which generates billions of dollars each year while feeding more than 1.6 billion. of iPhones, iPads and others. devices.
Epic Games, maker of the popular Fortnite video game, is filing the case in federal court. Epic wants to tear down the app store’s so-called “walled garden”, which Apple began building 13 years ago as part of a strategy devised by co-founder Steve Jobs.
Epic accuses Apple of turning a small digital store into an illegal monopoly that squeezes mobile apps for a significant portion of its profits. Apple charges a 15% to 30% commission on in-app purchases, which include everything from digital items in games to subscriptions. Apple denies Epic’s claims.
Apple’s highly successful formula has helped make the iPhone maker one of the most profitable companies in the world, one with a market value that now exceeds $ 2.2 trillion.
Privately owned Epic is paltry by comparison, with an estimated market value of $ 30 billion. His aspirations to grow depend in part on his plan to offer an alternative app store on the iPhone.
The company also wants to get rid of Apple fees. Epic says it spent hundreds of millions of dollars on Apple before kicking Fortnite out of its app store last August, after Epic added a payment system that bypassed Apple.
Epic then sued Apple, sparking a court drama that could shed new light on Apple’s management of its app store. Both Apple CEO Tim Cook and Epic CEO Tim Sweeney will testify in federal court in Oakland, California, which will be installed to allow for social distancing and will require masks at all times.
Neither party wanted a jury trial, leaving the decision to US District Judge Yvonne González Rogers, who already appears to know that her decision will likely be appealed, given the risks of the case.
Much of the evidence will revolve around arcane but crucial arguments about market definitions.
Epic contends that 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 itself and thwart competition.
Apple claims it faces significant competition from various alternatives to video games on iPhones. For example, it points out that around 2 billion other smartphones don’t run iPhone software or work with its app store, mostly those that rely on Google’s Android system. Epic has filed a separate case against Google, accusing it of illegally stealing apps through its own app store for Android devices.
Apple will also describe Epic as a desperate company hungry for sources of income beyond old Fortnite. He claims that Epic simply wants to take advantage of an iPhone ecosystem in which Apple has invested more than $ 100 billion in the last 15 years.
Estimates of Apple’s app store revenue range from $ 15 billion to $ 18 billion annually. Apple questions those estimates, although it has not publicly disclosed its own figures. Instead, it has emphasized that it does not collect a penny from 85% of the apps in its store.
The commissions it pocketed, Apple says, are a reasonable way for the company to recoup its investment while funding an app review process that it considers essential to preserving the security of apps and their users. About 40% of the roughly 100,000 apps submitted for review each week are rejected for some kind of problem, according to Kyle Andeer, Apple’s chief compliance officer.
Epic will try to show that Apple uses the security problem to disguise its true motivation: to maintain a monopoly that makes more profits from the makers of applications that cannot afford not to be available on the iPhone.
But the smallest company may face an uphill battle. Last fall, the judge expressed some skepticism in court before denying Epic’s request to reset Fortnite on the Apple app store pending the outcome of the trial. At the time, González Rogers claimed that Epic’s claims were “bordering on antitrust law.”
The trial is expected to last most of May, and the decision will be made in the coming weeks.