SAN RAMON, Calif .– Apple faces one of its most serious legal threats in recent years on Monday: a lawsuit that threatens to upend its iron control over its app store, which grosses billions of dollars annually every year. by powering more than 1.6 billion iPhones, iPads and other devices.
The case in federal court is brought by Epic Games, maker of the famous Fortnite video game. Epic wants to overthrow the so-called âwalled gardenâ of the App Store, which Apple began building 13 years ago as part of a strategy devised by co-founder Steve Jobs.
Epic accuses Apple of turning a once tiny digital storefront into an illegal monopoly that shrinks 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 accusation.
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 puny by comparison, with an estimated market value of $ 30 billion. Its aspirations to grow depend in part on its plan to offer an alternative application store on the iPhone. The North Carolina 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, causing drama in court 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 times.
Neither side wanted a jury trial, leaving the decision to U.S. District Judge Yvonne Gonzalez Rogers, who already appears 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 regarding 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, it 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 describe Epic as a desperate company hungry for revenue streams beyond aging Fortnite. He claims that Epic just wants to unleash an iPhone ecosystem that Apple has invested more than $ 100 billion in 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 doesn’t collect a dime on 85% of his store’s apps.
The commissions it earns, according to Apple, are a reasonable way for the company to recoup its investment while also funding an app review process it deems essential to keep apps and their users safe. According to Kyle Andeer, Apple’s chief compliance officer, about 40% of the roughly 100,000 apps submitted for review each week are rejected for some problem.
Epic will try to prove that Apple is using the security issue to disguise its real motivation – to maintain a monopoly that brings more profits to app makers who can’t afford not to be available on the iPhone.
But the smallest business can face an uphill battle. Last fall, the judge expressed some skepticism in court before dismissing Epic’s request to restore Fortnite to the Apple App Store pending the outcome of the trial. At that 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 coming in the weeks to follow.
This story was reported by Michael Liedtke of The Associated Press.