The Epic-Apple Lawsuit May Come With A Legal Question

The Epic v. Apple’s antitrust test can be complicated. Experts from each side will present consumer data and economic theory. Executives will be slaughtered by business ethics and forced to explain incriminating emails. Lawyers will put their own spin on what everyone means. But, in the end, the case likely to come up with a tricky simple question: What is the market?

In its lawsuit, Epic Games, the company that backs blockbuster video games wants to Fortnite, accused Apple of creating a monopoly on iPhone and iPad games by requiring all apps to be downloaded through its App Store. Apple used the monopoly, the suit alleges, to get unfairly high fees from developers – up to a 30 percent cut on all transactions – with no choice but to use Apple’s payment system if they want to reach its users. (Epic has made similar complaints about Android in a lawsuit against Google that has not yet had a trial date.)

To defend this, Apple has made several counterarguments, but the most important is this: The App Store is not a monopoly. People can download games all different in other places, such as Android phones, gaming consoles, and desktop operating systems. Epic could focus on attracting customers to those platforms if they don’t like Apple’s terms of service.

Resolving the dispute this year is how Judge Yvonne Gonzalez Rogers, who presided over the federal trial that began last week, ruled to explain the relevant market. That’s an important step in many antitrust cases, because to prove a monopoly, you have to show that there is a dominant market. If Rogers accepts what Apple’s market means, then Apple wins. In a market that includes Android, Xbox, and laptops, there’s no way to say that Apple has a monopoly on game delivery. And if it didn’t have a monopoly, Epic’s other allegations would be irrelevant.

That means Epic has to convince the judge that the market should be defined more narrowly as, simply, iOS apps. Of course, Apple has a 100 percent market share in providing mobile apps on its own platform. (Some owners hack their devices to be able to run unapproved apps, a process known as “jailbreaking,” but that’s a small fraction of users.) So if that wins. Epic on the issue of market definition, it automatically proves that Apple has a monopoly. That’s probably the most legal hurdle it needs to clear.

It may be strange to say that a brand can be counted as an entire market, but there is a pattern for this in antitrust law. In a major lawsuit in 1992, Kodak was sued for pushing customers to own repair services, shortening independent businesses that provided repairs and equipment for the Kodak copy machine. Kodak argues that anyone who doesn’t like it can stop buying a Kodak machine. But the Supreme Court disagree. Sometimes, the Court said, “a brand of a product can be a separate market.” In this case, from the customer’s point of view, if someone owns a copy of Kodak it doesn’t matter that other brands are on the market. Kodak has created an “aftermarket” for repairs. The key point is the so -called exchange: “service and parts for Kodak equipment cannot be exchanged for service and parts of other manufacturers.”

Epic makes the same claim about Apple: that the iPhone has created an aftermarket for apps. In that post market, you can’t say that an iPhone game can be replaced with an Android game, let alone an Xbox download. Some legal experts, however, are skeptical that such an argument will work. Paul Swanson, a Denver-based antitrust attorney, pointed out that Kodak allowed the third-party repair market to grow for many years before deciding to crush its competitors, while Apple was designing the iPhone ( and iPad) as a wall garden from the very beginning: Since the App Store launched in 2008, a year into the iPhone’s existence, manufacturers have always gone through it and accepted its terms before it arrives. customers. Courts tend to be shy about forcing companies to change their business models.

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