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SAN RAMON, Calif. (AP) – Apple faces one of its most serious legal threats in recent years on Monday: a lawsuit that threatens to overthrow its iron control over its billion-dollar app store every year while further powering more than 1.6 billion iPhones, iPads and other devices.
The case before the Federal Court is brought by Epic Games, the creator of the famous video game Fortnite. Epic wants to overthrow the so-called “walled garden” of the App Store, which Apple began to build 13 years ago as part of a strategy orchestrated by co-founder Steve Jobs.
Epic accuses Apple of turning a once tiny digital storefront into an illegal monopoly that squeezes mobile apps for a significant chunk of their revenue. Apple takes a 15% to 30% commission on in-app purchases, including everything from digital in-game items to subscriptions. Apple denies Epic’s accusations.
Apple’s highly successful formula has helped make the iPhone maker one of the most profitable companies in the world, with a market value now exceeding $ 2.2 trillion.
Private company Epic is small by comparison, with an estimated market value of $ 30 billion. Its aspirations to become bigger are partly based on its plan to offer an alternative application store on the iPhone. The North Carolina-based company also wants to free itself from Apple’s commissions. Epic says it paid Apple hundreds of millions of dollars before Fortnite was kicked out of its App Store last August, after Epic added a payment system that bypassed Apple.
Epic then sued Apple, sparking audience drama that could shed new light on Apple’s management of its App Store. Apple CEO Tim Cook and Epic CEO Tim Sweeney will testify in a federal courtroom in Oakland, Calif., Which will be set up to allow social distancing and will require masks at all moment.
Neither side wanted a jury trial, leaving the decision to U.S. District Judge Yvonne Gonzalez Rogers, who already seems to know her decision will likely be appealed, given the stakes in the case.
Much of the evidence will revolve around obscure but crucial arguments about market definitions.
Epic argues that the iPhone has become so entrenched in society that the device and its ecosystem have become a monopoly that Apple can exploit to enrich itself unfairly and outsmart the competition.
Apple says it faces significant competition from various alternatives to iPhone video games. For example, he points out that around 2 billion other smartphones don’t run iPhone software or work with its App Store – mostly those that run on Google’s Android system. Epic has filed a separate lawsuit against Google, accusing it of illegally hijacking apps through its own app store for Android devices.
Apple will also portray Epic as a desperate company hungry for revenue streams beyond aging Fortnite. He claims that Epic just wants to charge an iPhone ecosystem that Apple has invested over $ 100 billion in for free over the past 15 years.
Apple’s app store revenue estimates range from $ 15 billion to $ 18 billion per year. Apple disputes these estimates, although it has not publicly disclosed its own figures. Instead, he pointed out that he isn’t collecting a dime on 85% of the apps in his store.
According to Apple, the commissions it earns are a reasonable way for the company to recoup its investment while also funding an app review process that it sees as essential to keeping apps and their users safe. About 40% of the roughly 100,000 apps submitted for review each week are rejected for some sort of problem, according to Kyle Andeer, Apple’s chief compliance officer.
Epic will try to prove that Apple is using the security issue to disguise its true motivation – to maintain a monopoly that brings more profits to app makers who can’t afford not to be available on the iPhone.
But a small business can face an uphill battle. Last fall, the judge expressed some skepticism in court before dismissing Epic’s request to return Fortnite to the Apple App Store pending the outcome of the trial. At the time, Gonzalez Rogers claimed that Epic’s claims were “on the fringes of antitrust law.”
The trial is expected to last most of May with a decision expected in the coming weeks.
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