The legal case of Epic vs. Apple

in Project HOPE6 months ago

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A previous article has introduced the story of the ongoing disagreement between Apple and Epic Software. While that is under development and proceeding towards the scheduled court hearing on 28 September, some considerations can be made about the legal nature of Apple's control over the App Store.

Apple is being sued on the ground of its alleged anti-competitive behavior, which – according to Epic - stifles competition from the iOS App Store. Many commenters have objected that Apple owns the App Store and therefore is free to dictate the rules, that developers who don't want to follow Apple's rules can always leave, and that Apple is not a monopoly.

The reality is more nuanced than that and deserves a closer look from a legal and normative standpoint.

First of all, it's important to know there are monopolies in virtually every type of business. In the case of Apple vs Epic, the court will have to define whether Apple has an actual monopoly status over the iOS App Store, which represents the front line of this litigation.

A monopoly status is based on whether a company's actions can change a market in ways that lower competition in that market. As such they are based on defining a market.

It is also important to remember that neither customers nor Apple get to define what is and isn't a market: that is something only the courts get to say.

If the market is "Smartphones", then Apple will likely not have monopoly power; with a share of around 25%, iOS is dwarfed by Android which commands over 74% of the worldwide global mobile market (source: StatCounter). However, if the market is more properly defined as "Application Stores for iOS devices", then Apple clearly has monopoly power, as there is only one App Store in iOS, managed as a walled garden, entirely under Apple's control.

For the court, establishing a clear definition is paramount as there are hundreds of possible markets that Apple participates in. Some of them can even be contradictory; taking for example the case of "DOJ v Microsoft", in some charges Apple was considered a significant competitor to Windows in the same market, whereas in other charges Apple was not considered to even participate in that market.

In a context where the market is defined as "Application Stores for iOS devices", Apple is obviously a monopoly.

At this point, it is important to remember that being a monopoly is not illegal. Being a monopoly is not a crime and there are several real-world cases of manufacturers which are monopolies in many markets.

What being a monopoly means is that a single control entity has enough power to cause harm to the market, if its wants to. Harming the market in such a way is defined as abusing monopoly power, and abusing monopoly power to harm the market is illegal. To avoid that, all monopolies are subject to certain rules of fair play that have to be followed; not following those rules can result in ending up in court, being fined, or being subject to the court ordering changes to the business.

Is Apple abusing its monopoly power to harm competition inside the market identified by the App Store?

In the case of Apple vs Epic, the key question that the court will address is to determine whether the monopoly possessed by Apple was anti-competitive due to their control on the distribution of iOS apps. As has been noted above, within the specific market for iOS apps – the App Store - Apple controls 100% of the distribution, as there are no other ways for getting iOS apps on the phone, neither for developers nor for end users. Apple's rules define what is and is not allowed in the App Store, and the company reserves the exclusive right to approve, deny, publish and remove apps at their sole discretion, and decide how the App Store rules apply to the approval process.

In a context where the market is defined as "Application Stores for iOS devices", leaving is not an option for developers as there are no alternatives for distribution outside of Apple's control.

This proves how the "developers who don't want to follow Apple's rules can always leave" proposition is moot, as it falls outside the lawsuit's scope.

This is in contrast with Google, as in Android there are multiple app stores available for distribution, as well as the possibility – albeit technically more complicated and heavily discouraged by Google, which is the reason why Epic is suing them for anti-competitive behavior too – to sideload apps.

At the same time, Apple is granting itself exceptions that others do not or cannot receive; and because of this control, a software developer is at the whim of Apple when it comes to publishing on the iOS App Store. That establishes the premises for Epic to claim that Apple has monopoly power over the App Store and uses it for anti-competitive purposes, as certain business partners are given exclusive privileged deals and others are not, at Apple's discretion.

Based on that, setting aside any fanboyism and bias, it is apparent that the case of Apple vs Epic is not clean-cut when it comes to proper legal grounds, and it is way more open to any outcome than either side would like the public to perceive.

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