Epic vs. Apple Takes a Twist As 35 US States and Department of Justice Weigh in to Back 'Fortnite' Maker

[MacRumors]

Apple is stifling competition with its monopoly on app distribution through the App Store, attorneys general for 35 states told a California appeals court on Thursday.

The joint statement was submitted into the appeals process that is ongoing following the judge's decision in the Epic v. Apple lawsuit, with the attorneys general siding with the "Fortnite" video game maker on the issue, reports Reuters.

"Apple's conduct has harmed and is harming mobile app-developers and millions of citizens," the states said.

"Meanwhile, Apple continues to monopolize app distribution and in-app payment solutions for iPhones, stifle competition, and amass supracompetitive profits within the almost trillion-dollar-a-year smartphone industry."

According to the Financial Times [paywalled], the US Department of Justice also challenged last year's ruling, saying in its own submission that the court had "committed several legal errors that could imperil effective antitrust enforcement, especially in the digital economy."

The DoJ said the court had interpreted the Sherman Act, an 1890 law prohibiting anti-competitive behavior, "narrowly and wrongly, in ways that would leave many anti-competitive agreements and practices outside their protections."

The judge's decision in the Oakland, California case mostly ruled against Epic last year, although both Apple and ‌Epic Games‌ have decided to appeal the original ruling as neither company was satisfied with the outcome. ‌Epic Games‌ wanted the court to force Apple to support third-party App Stores, which did not happen.

U.S. District Judge Yvonne Gonzalez Rogers ruled that the 15% to 30% commission that Apple charges some app makers through its in-app payment system did not violate antitrust law.

Along with the states, professors and activist groups also weighed in through court filings that described legal arguments in support of Epic, according to Reuters.

The states said in their filing that the lower court erred when it decided that a key antitrust law did not apply to non-negotiable contracts Apple makes developers sign, a claim Epic also made when it first filed its appeal earlier this month.

"Paradoxically, firms with enough market power to unilaterally impose contracts would be protected from antitrust scrutiny — precisely the firms whose activities give the most cause for antitrust concern," they said in the joint statement.

Apple, which is expected to reply in March, said on Thursday it was confident Epic's challenge would fail, and that it remained "committed to ensuring the App Store is a safe and trusted marketplace for consumers and a great opportunity for developers."

Article Link: Epic vs. Apple Takes a Twist As 35 US States and Department of Justice Weigh in to Back 'Fortnite' Maker

 

[macar00n]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

 

[PlayUltimate]

Not a lawyer, but didn't the contract exist prior to Apple having "monopolistic" power. Would a contract that was formed prior to having that type of "control" be now made invalid due to having that "control"? Especially if the terms had not changed to substantially to take advantage of that control. If I recall when the App Store was created (2008), Apple had a 19.2% smart phone market share. Since Apple's growth took place organically without changing the the contract terms, does the changing marketpower require a change in a static contract?

 

[yabeweb]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

According to people Apple should only sell inside it's company.

Should stop selling to China because they copy everything, should get out of India market because of work condition ... then there was EU for their warranty policies then there was Russia because they steal data... you understand that if they withdrew from any market they have some issue with it will be the end of Apple.

If Apple did what you suggest it would only lose money.

It's a corporation, not a 2-year-old picking up its ball and leaving going home.

 

[BootsWalking]

Whatever your opinion on this matter may be, it's clear Apple will be forced to alter its App Store policy in a meaningful way. There are just too many government bodies pushing this for Apple to maintain the status quo. It's only a matter of when not if. Apple must know this too and has decided on a delaying strategy to squeeze out profits from the current structure for as long as possible.

 

[videosoul]

I’m no expert, but this just sounds like they don’t like one company getting too rich. Surely that could be fixed other ways (taxes? forcing changes to fee structures?) without breaking up the security and homogeneity the App Store offers?

Breaking up the App Store might be good economically, but I feel it’s terrible in terms of security and consistency and reliability.

Then again, the App Store isn’t perfect. There’s a lot of crap on there if you scroll further down the lists.

Maybe this could actually help make the App Store become more niche: the best if the best, and whittle out the crap?

 

[senttoschool]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

I see your point but the Netflix argument isn't valid. Netflix isn't a platform.

 

[DelayedGratificationGene]

Why is this even news anymore? It’s just political grandstanding nonsense that has no merit. The media needs to stop giving these clueless annoying politicians a microphone then they will stop. Psst…btw Epic, Apple is STILL lawfully and rightfully going to collect its commissions. You do understand this right?

 

[senttoschool]

Just the other day, I was using a friend's Oppo phone.

I tried to help my friend recover some deleted data. Naturally, I went to the Oppo/Android app store to look for "data recovery" apps. My god. What a freaking mess. Every app on there was a scam. None of them did anything except play endless ads and then scan existing data. All the reviews, sometimes 40,000+ reviews were fake.

I get the argument for 3rd party app stores. But the average consumer is going to be duped so easily by low quality app stores and apps.

 

[BootsWalking]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

Is that what happened for the Android App Store, where Google charges similar commissions but where side loading has always been possible? Or how about the Mac App Store?

 

[eilavid]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

App companies won't pull out of the App Store: you can sideload apps on Android but everything is still in the Google Play store. Don't be stupid, Apple will never pull out of any market, because that will hurt their bottom line big time.

 

[Shirasaki]

I hope Apple withdraws from states that do this until their technologically inept dinosaur legislators are forced to backpedal due to public backlash. If sideloading were allowed, immediately every garbage company/institution will withdraw from the app store and force you to sideload their app as the only way to get it. It'll be like when Netflix, a single beautiful cable TV replacement, was cut up into 100 individual annoying services because a bunch of companies got greedy.

Yet, Apple keeps selling in those markets that supports sideloading.
Also, the scenario you so loudly theoretically can exist, but if market has taught us anything, it is that it's organic enough that overwhelming consensus rarely happens if at all.
Apple better mind control every single customer at that point I suppose.

 

[MysticCow]

Which states? I smell something POLITICAL instead of actually looking into antitrust procedures...

 

[I7guy]

So 35 states "weigh in", but would that change the legal merits of the appeals process?

 

[kiv.atso]

So anti-virus apps will become a necessity with shady 3rd party app stores.

There will be no reason to use iOS over Android anymore.

 

[DelayedGratificationGene]

These politicians are meddling in a product that is secure, private, reliable and cherished by both users and developers. Politicians, please stop wasting taxpayer time and money and focus on more important matters.

 

[kiv.atso]

It would be good to have an option of blocking traffic from apps installed from 3rd party App Stores to keep the device safe.

It should be enabled by default. And when disabled it should be clear that users accept it at their own risk.

 

[Shalev]

like many non-tech personals they just don't have the ability to grasp Apple vision of a secure, privacy robust technological future.

 

[Steve121178]

These politicians are meddling in a product that is secure, private, reliable and cherished by both users and developers. Politicians, please stop wasting taxpayer time and money and focus on more important matters.

It's inevitable that big changes will be forced on Apple.

I just wont use a particular app if I am forced to use another payment method. I also assume Apple will need to charge developers a significant fee as they can't expect to use Apple's infrastructure for free. Perhaps the end of free apps as why should Apple soak up the costs of each and every developer?

 

[robertcoogan]

Okay...so they're also going to "go after" the other companies that do the same thing, right?

 

[I7guy]

There must be a reason, it's been very difficult to "break up" Apple. Not because they are huge, keep many lawyers and lobbyists fed, but because they inherently have a legal business model. It will take an act of congress by politicians who should be focused on the country to make this "break up" happen.

 

[ghostface147]

What are the states really going to do? Nothing. They won’t block sales in their states.

 

[orthorim]

Not a lawyer, but didn't the contract exist prior to Apple having "monopolistic" power. Would a contract that was formed prior to having that type of "control" be now made invalid due to having that "control"? Especially if the terms had not changed to substantially to take advantage of that control. If I recall when the App Store was created (2008), Apple had a 19.2% smart phone market share. Since Apple's growth took place organically without changing the the contract terms, does the changing marketpower require a change in a static contract?

Then let me explain, it's simple, Apple is now a monopoly or monopoly-like, and now it needs to share with others. It's too big and has too much influence. This is to the detriment of the population.

It's like copyright laws (well - as intended anyway) - you get your exclusive rights for 20, 25 years, then it needs to be considered public. If something experiences amazing success during that time, the creator and original holder will benefit greatly, but at some point, it is in the public interest to release their works into the wilds.

This is not to take anything from anyone, but the system was designed like this to both benfit society at large, and to give enough benefits to individuals to create new things. I think it's very much fair like that.

Of course in reality copyright law, like most other laws, have been made into a farce, where Disney extends its mickey mouse copyright forever and ever through various tricks and bribes, same for other big brands.

At this point Apple must be considered a quasi monopoly in phones - just like Microsoft once was (and still is in PC operating systems).

It is therefore in the interest of society at large to let other people build on top of the platform. 3rd party app stores are more or less a no brainer.

For example, if I want to create software that runs on people's phones, but the one company that makes half of all phones does not let me, but they also legally and technically prohibit me then that's anti-competitive behavior.

Take the example of Cydia - it is a working app store; why should Apple be allowed to use all sorts of technical tricks to lock them out? I don't think Apple needs to go out of its way to support them - but going out of their way to remove all competition when you are a monopoly is not acceptable.

That's like Microsoft wiping out the competition with Word, by adding intentional incompatibilities with 3rd party apps into the code.

 

[GMShadow]

Epic using some of that Tencent blood money to make campaign contributions.

 

[spyguy10709]

I’m no expert, but this just sounds like they don’t like one company getting too rich. Surely that could be fixed other ways (taxes? forcing changes to fee structures?) without breaking up the security and homogeneity the App Store offers?

Breaking up the App Store might be good economically, but I feel it’s terrible in terms of security and consistency and reliability.

Then again, the App Store isn’t perfect. There’s a lot of crap on there if you scroll further down the lists.

Maybe this could actually help make the App Store become more niche: the best if the best, and whittle out the crap?

It's not about "getting too rich" - antitrust is about control, not money or even market share or "monopoly" - there's no law that says that a company is somehow not allowed to be the only one which provides a specific good or service.

When companies use their monopoly - or specifically abuse their monopoly - that is what attracts antitrust action.

Looking at the original "trustbusters" - Teddy Roosevelt and the "Square Deal", even the re-regulation of the Bell Telephone system and long distance calling in 1982 - the government recognized there were areas of the free market that, left to their own devices - stop acting like a market because one company or interest controls it all.

I believe the crux of the 35 state's attorneys general and Epic's position in this case is that, in their view, it would be in the national interest if there was competition for digital payments and services on the iOS platform.

I also believe the number of parties interested in forcing Apple to host apps they object to in their App Store are an extreme minority. It would seem the majority opinion would instead be in favor disallowing Apple from preventing developers from optionally implementing third party payment providers (which generally cost 1/10th or less of the captive platform's standard 30% cut) in their apps, much like they would do on the web or within a Mac or Windows application on a full-size computer.

To be clear, this isn't the only business model that works this way. A Gillette razor or an inkjet Printer effectively work the same way, your initial purchase of the handle or the printer makes you a repeat buyer for blades or ink. The difference in those markets is, you can buy a different razor or printer quite effectively. There's a duopoly on smartphones now, both of which are imposing a high fee for other companies to sell to their users, which is really the crux of these cases.