Bench Trial Underway
In a US court bench trial, Epic Accuses Apple of Monopolistic Practices.
“Fortnite” maker Epic Games Inc. deliberately violated Apple Inc.’s AAPL app-marketplace rules to show the power that Apple wields and how the tech giant takes an unfair share of money from software developers, the videogame company’s chief executive testified in a trial Monday.
“Apple was making more profit from selling developer apps in the App Store than developers,” said Tim Sweeney, whose company’s global hit videogame “Fortnite” was removed from Apple’s app platform last August.
The statements from Mr. Sweeney, a 50-year-old programmer who founded Epic in 1991, in an Oakland, Calif., courtroom came on the first day of a planned three-week bench trial, one that could help reshape the multibillion-dollar market for distributing apps on mobile devices.
Mr. Sweeney, who donned a blue suit instead of his usual attire of cargo pants and a T-shirt, had been plotting the moment for months. His closely held company in August inserted its own, unauthorized payment system into the versions of “Fortnite” on the app stores that Apple and Alphabet Inc.’s Google control, as a way to circumvent the 30% fee the companies collect from in-app purchases.
EU Goes After Apple
Epic isn’t Apple’s only problem when it comes to defending its App Store business model. The EU Charged Apple with Antitrust Violations last Friday.
The iPhone maker was charged Friday by the European Union with antitrust violations for allegedly abusing its control over the distribution of music-streaming apps. Apple still has a chance to argue its case before the EU’s regulatory commission before it renders its decision.
Both the Epic Case and EU probe are targeting elements key to the App Store model, such as the company’s tight control of which apps can be installed on its devices, and its requirement that transactions on those apps run through its own system. Lawmakers and regulators on this side of the pond also have their eye on the issue.
Epic Battle
Politico reports the Fight to Dethrone Apple Debuts in a California Courtroom.
Epic Games, the maker of the popular video game Fortnite, has captured the attention of regulators in Washington and Brussels with an antitrust lawsuit that could upend how the iPhone-maker does business. The federal civil trial in Oakland, Calif., focuses on Apple’s control over its App Store — the only way app developers can reach the world’s 1.5 billion iPhone or iPad users.
In an opening statement, Epic lawyer Katherine Forrest argued that Apple wanted to make sure its App Store was more closed-off than, for instance, computer software, where users can easily download programs onto PCs and Macs.
“If Epic is able to score a victory, then that will also majorly liberate the internet economy,” said Andy Yen, CEO of Protonmail, an email app that has tangled with Apple over its App Store rules and is backing Epic. “It will make it possible for a lot more companies to innovate and grow in the space. You’re basically taking the entire mobile space and making it competitive again.”
Filings in the case have already generated some embarrassing revelations for Apple — such as sworn testimony from Phillip Shoemaker, its former director of App Store review, where he said the company “used the App Store ‘as a weapon against competitors’ and ‘has rejected or delayed competing apps on pretextual grounds.’” Utah Sen. Mike Lee, the top Republican on the Senate Judiciary antitrust panel, quoted from that document during the April hearing while asking Apple about its policies.
Who Should Win?
A reader who wishes to remain anonymous emailed what a compelling line of thought (emphasis mine).
I tend to take the hard line view that unless a company’s dominance is materially bad for the public good that the free market should be left to do its thing. The government shouldn’t be regulating speech on digital platforms like Facebook. They shouldn’t be trying to break up retailers like Amazon.
Google and Apple have dominant digital ecosystems not because they are the only game in town, but because of decades of expertly cultivating the customer experience. Microsoft and others have had the chance to compete on the mobile front with all the resources you could ask for, and failed because they didn’t create a competitive experience.
Most of the revenue these other companies are complaining about with the 30% cut wouldn’t even exist if Google and Apple hadn’t pioneered the mobile experience. No one is forcing them to be on those platforms or to have transaction options in their apps.
It’s like complaining that a physical retailer is making money by selling your products in its store. They built it, they’ve got the customers and give your app visibility.
If I were a developer I’d likely think 30% is a steep cut. But I don’t think that rises to the level of justifying federal involvement.
Who Will Win?
In the US it’s difficult to say.
I have no particular insight other than antitrust cases are very difficult to win, and the result, no matter what, will be contested.
The EU nannycrats are more likely than US courts to rule against Apple.
In Praise of Google, Apple, Amazon
The EU would have killed Google, Apple, and Amazon long ago.
Excellent companies thrive in the US and not the EU for that reason. Google which started as a search engine has compelling phone technology, amazing navigation aids, Google Earth, and it led the charge on self-driving cars.
The EU would have busted them apart before they even got going.
I like my reader’s line of thought: Microsoft and others have had the chance to compete on the mobile front with all the resources you could ask for, and failed because they didn’t create a competitive experience. …. It’s like complaining that a physical retailer is making money by selling your products in its store.
Consumers immensely benefitted from technology by Apple, Google, and Amazon. Anyone who says otherwise is mistaken.
Meanwhile, France still wants to save the family bookstore from the alleged predatory practices of Amazon.
Question of the Day
Ignoring charges in the EU for the moment, who will and should prevail in the US?
— Mike “Mish” Shedlock (@MishGEA) May 4, 2021
Mish
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Seems kind of the same as the way the Studios also owned the cinemas before that was deemed anti-competitive. Whichever companies get in at the start of a new paradigm shift tend to become monopolies and then their power has to be curtailed for the benefit of customers.
I reloaded the fun trade in GLD. I was so busy at work on Monday I missed the last up-leg. Looks like today’s action is a typical correction. The uptrend is intact.
This week in tech. Is a good podcast for information about tech industry and its issues.
I sort of hate the way Apple and Google dominate the world, but there isn’t anything I can do about it, and I don’t look for any government to do more than give lip service to the problems with that. Maybe level a huge fine, which they will pay with their endless moutons of cash.
In general, monopolies have been on the rise now for a generation, and I don’t see it changing anytime soon.
For a very long time I held out on getting an iPhone, but I have one now, and I suppose I’m a loyal subject. I’ve preferred Mac computers for many years now. The one I’m typing on now is my 3rd MacBook. I literally wear them out, although I have a good Mac mechanic, whom I’m proud to say is now my patient. I hope Apple doesn’t put him out of business. They are definitely making his job harder. They want to keep EVERYTHING in-house, even repairs.
I only use PC’s to run the businesses, because most business software used to be written for PC.
“mountains of cash”
I held out getting a iPhone or Apple in general because I hated their “only cool people use Apple” advertising at the time, that and I didn’t see the value added. Long ago Apple through their Macintosh introduced me to the joys of playing Asteroid at work instead of working but the company switched to windows because it was so much better for the type of stuff we did. I am an agnostic when it comes to phones, computers and all the electronic stuff in general. All I want them to do is to work and be interconnectable.
It’s not cool people who Apple is designed for. It’s meant for the technological dummies / masses who need something simple to use.
I bought my 80 year old parents a Mac because it’s a walled garden and simple to use because they are tech dummies who don’t want to know much about the tech and need it to be simple to use with low chances of making a big mistake (virus, erasing something important etc).
In other words, buying Apple is like buying an automatic car. Most people just need an automatic car. But for car enthusiasts, a stick shift is mandatory and they want to be tinkering around with the car (that’s what Android in Phones and Linux in PC’s are for).
I must admit I do like customizing my stuff.
After I typed my exquisitely well-constructed and pertinent first post I realized that I didn’t answer Mish’s question in the title whether Apple should win or not. Since I don’t use Apple I could say not my problem but I will comment anyway.
From what I understand a problem is that developers are unhappy at the 30% take off the top but that is not the real problem and that the real beef is that Apple and other platform operators because of their total domination of the market can have a “take it or leave it” power which they use to create competitors to the developers apps using data they possess because they control the platform and know what apps work and why. The correct way of looking at it was put forward succulently like this.
” If a mall owner were to rent a store to a retailer and then use the store’s blueprints to build a clone business, made more effective by sales data obtained through retailer surveillance and made more appealing by changes in building architecture and rules that don’t apply to the mall owner, the retailer would be howling about unfair competition.”
The problem is not fees but abuse of dominate position according to this argument.
Is it picky to complain about people saying “dominate” when they mean dominant? I seem to see it a lot.
My mistake. It’s French spelling creeping silently in.
“L’abus de position dominante” is the French term. I will have to be more careful.
I thought it might be some kind of secret code for D/s people.
I will have to whip myself back to checking my spelling before posting. If I don’t it might provoke some punishing replies.
The goal of any company is to become a monopoly. If you can’t become one a duopoly will do nicely. Let’s go for only two banks, only two insurance companies, only two car manufacturers, only two media groups, only two places that host websites, and only two political parties. Duopolies are most efficient at giving customer satisfaction and everything else because they got there didn’t they so they must be good, right? With Google the customer is not us. It’s the companies that advertise on Google’s services and they are not too happy not having a choice and especially not being able to monitor the effectiveness of their advertising dollar because Google won’t provide them the data. The anti-competitive pressure is coming from that side and they are allying with politicians on both sides of the pond. All, I mean all of Google’s operating profits come from their services that get their revenue from large advertisers. Apple’s clients are the end user and they take care of them. Google’s clients are the big advertisers and Google hasn’t been taking care of them lately. They are acting like a true monopoly.
Google didn’t invent the self-driving car. They bought companies that were working on them. Same for Apple and most other large tech companies. After their own start-up period they grow by buying technology companies for stock. In the period where Apple and Google started the technology was new and up for grabs. After they reached critical size Apple and Google was able to buy specific technologies through acquisitions using stock. The model in Silicon Valley then became not to become a dominate player but to become attractive to the big boys so you will be bought out. The big companies also used that model to squash competition. Innovation suffers. As Elon Mush said there are only sequoias in Silicon Valley now with no young trees growing underneath.
France wanting to save the family bookstore was the meme fifteen years ago and I haven’t seen it since. It is way outdated. May I suggest just saying that the EU has overzealous anti-competition laws and they apply them vigorously which is counter-productive and prevents small tech companies from getting bigger? That I would agree to.
The argument that these companies are there because they’re out competed is nonsense. They’re there because of network effects, which all manner of things contribute to, often just luck and timing. Once there they’re become rentiers.
I dunno who will win but this is better than insurrection.
Size buys political influence.
Amazon got away with not paying taxes forever.
They make a habit of cannibilizing the business of vendors on their platforms.
None of this is competition or good for competition.
Competition has everything to do with scale. Just as there’s no reasons to have banks that can’t fail, there’s no reason why any business cannot support at least 0 competitors.
taxes = state sales taxes
0 competitors = 20 competitors
Tech companies do not thrive in the US. They are all swallowed up by the monopolies and it affects investment decisions because the big 4 can simply observe the commercially successful ideas of others before rolling them over.
Tech is inherently monopolistic unfortunately.
In Tech there is only competition on the basis of open standards.
Software companies have been trying to achieve vendor lock in with proprietary standards and formats like forever.
Progress happens as soon as there are open standards and open competition.
I don’t quite agree with your readers line of thought.
An equivalent line of thought would be that GM, Ford and other auto makers only sold parts for their cars through the GM/Ford store and they marked up 3rd party parts and generated tons of extra revenue on those 3rd party parts.
Instead we have places like Pep Boys / Auto Zone etc where we can buy both genuine Ford/GM parts and 3rd party parts at whatever price those companies chose to pay so that we are not beholden to a GM / Ford store for our car parts.
It would be best for consumers if Epic wins and can use whatever payment system they want for their game (they could even offer more than 1 choice). If Apples payment system is on par with PayPal or other 3rd party pay systems then people will use Apple. Otherwise they won’t.
And there in lies the point Mish missed. It’s not that apple owns the store and gets to make money from it; apple owns the whole neighbourhood and you are fenced in from leaving to buy goods from any another store. They’re setup is more akin to the “Company Store”.
The free market solution is epic games makes their own store and people can choose whom to buy from.
This hints towards the fundamental evil that is growing in modern technology: it is not your device. It is their device and they just allow you to use it for a time. Apple is the most egregious sinner in this department, but google isn’t innocent by any means; neither is epic games btw.
For once we agree! Love it. All about choice.
Mish is not wrong that “Consumers immensely benefitted from technology by Apple, Google, and Amazon.” But the point is, could we have not benefitted more, were there more competition?
I would say the difference is cars are a necessity and games are not.
Cars are not a necessity. Many get by just fine without them.
Yeah, because every application on the supercomputer I have in my pocket is a game…
Apple will ultimately win because the Biden administration is on its side. The DONORcrat Party is beholden to the Si Valley tech giants and the party’s professional class voters pride themselves on being tech savvy, and they will influence the decision ultimately.
This is better than insurrection !