File picture: AP Photo/Alan Diaz
File picture: AP Photo/Alan Diaz

Epic v. Apple final day in court: A glimpse of what comes next

By The Washington Post Time of article published May 26, 2021

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By Shannon Liao

The Epic Games v. Apple trial wrapped up its final day on Monday. The antitrust case attracted broad attention due to the subject matter and the involved parties - two massive companies behind enormously popular products - and shed light on the secretive gaming industry. The trial birthed new memes and dragged in other gaming companies like Microsoft and "Roblox." Now, the dust is starting to settle as we wait for a decision later this year.

U.S. District Judge Yvonne Gonzalez Rogers said she'll do her best to sift through hundreds of exhibits entered into evidence to deliver a ruling within weeks, if not months. But there's a lot we already know: Here's everything that happened over the last three weeks, what we've learned and what's next.

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The year-long case began on August 13, 2020, when multibillion dollar games company Epic Games updated "Fortnite" on the Apple App Store to allow users to pay Epic directly, without going through Apple's payment system. The developer promised discounted prices if people used this alternative payment method, as Epic would pass on the savings from not having to pay Apple a 30% revenue commission. Apple responded by removing "Fortnite" from the App Store for violating its rules. Epic followed with a lawsuit, arguing that Apple had a monopoly over the App Store.

The trial kicked off May 3 with Epic Games CEO Tim Sweeney delivering testimony about why he believes Apple runs a monopoly that's harmful to competition. Sweeney was followed on the stand by Epic executives, third-party testimonies (including an Xbox vice president), then rounds of expert witnesses. It concluded with a group of Apple executives that included CEO Tim Cook. The proceedings wrapped Monday when the judge requested that both sides present their best arguments debate-style, in a legal practice known as "hot-tubbing."

During that session, Epic said it wants the judge to order Apple to open up the iPhone, allowing developers to distribute apps outside the App Store and allow payment outside of Apple's proprietary system. Currently, Apple only lets apps on its iPhones and iPads if developers submit them for review for distribution in the App Store, unlike the more open ecosystem consumers get on Android or desktop PCs, where apps can be downloaded from anywhere.

Apple has rejected the monopolist label, and claimed that Epic's proposed solution doesn't work because it would make the iPhone less safe and secure, and make payment collection a messier process. The iPhone-maker would like things to remain the way they are.

In an antitrust case, to determine whether a company has too much market power and is a monopolist, it's important for both sides to first define what the market is, and for the judge to decide which market definition she favors. Epic wants to define the market as the distribution of apps on the App Store, saying that you can only get apps from Apple right now, and it owns a monopoly. Apple says the market actually consists of mobile devices or gaming platforms, and that it competes with tech companies like Huawei, Oppo, Vivo and gaming consoles like the Nintendo Switch, Xbox Series X and the PlayStation 5.

The trial produced a number of strange moments. The judge and lawyers attempted to inject levity into the situation on multiple occasions, from chit-chatting about the latest Golden State Warriors basketball games, to discussing whether a banana character from "Fortnite" should be dressed for court.

There were also questions about defining the term "game." Gaming platform "Roblox" was repeatedly used by Epic as an example of Apple allowing an app that has games within a game. Apple marketing executive Trystan Kosmynka responded in testimony by calling "Roblox" an experience. Soon after, "Roblox" changed language on its website to call itself an experience and not a game. The company declined to comment.

The judge used Monday to ask hard questions, expressing skepticism at some of the arguments made by both companies. She told Epic that "there is an enormous amount of innovation on the iPhone" that allows games like "Fortnite" to be played. Epic Games lawyer Gary Bornstein conceded that point, but countered that it didn't change the fact Apple has a monopoly on app distribution.

Jennifer Rie, senior litigation analyst at Bloomberg Intelligence, said it wasn't surprising the judge was skeptical of each side's arguments.

"The case is difficult and novel and the judge is in a tough position," Rie said, "It will require a decision at the outer edges of antitrust precedent, without good corollaries for guidance, and the remedies sought by Epic are drastic and intrusive. She's also in a no-win situation. If she rules for Apple, there will be a lot of politicians and some antitrust advocates up in arms about it."

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Gonzalez Rogers also said she was considering whether there was enough legal precedent and evidence to prove Apple is running a monopoly but that there could be anticompetitive behavior. That could invoke California's Unfair Competition Law, rather than the Sherman Antitrust Act. "Well, they don't call us the Wild West for nothing," she quipped about California's more flexible legal landscape.

The Epic v. Apple trial may have come to an end, but it certainly won't be the last of large, attention-grabbing antitrust suits in the video games industry: Sony is facing a federal antitrust class-action suit in California filed May 7 for allegedly overcharging on PlayStation 5 games. That case could take years to make it through court to be potentially decided by a jury. Sony declined to comment. The plaintiff's lawyer, Joseph Saveri, said on the phone, "We think this is a case involving serious anticompetitive activity and economic harm. We're confident in our case and we're looking forward to presenting our case to the jury."

The judge's remarks on Monday hint at what she's thinking for a verdict. Experts told The Washington Post that it's unlikely that Epic Games will win outright, but Apple could be asked to change some of its App Store guidelines. Much has been made of Apple's app store guidelines that bar developers from pointing users to alternative ways to purchase in-app products, for example. One possibility is that the judge could rule that Apple needs to reverse these guidelines as a compromise.

Even if Apple wins, it will still face scrutiny from the federal government and a class-action lawsuit from developers calling the App Store a monopoly. And regardless of who wins, the losing side will likely appeal the decision.

"Under current U.S. antitrust law, and particularly given how conservative courts have been in antitrust cases in the last 40 years, it will be very interesting how the judge rules on this case," said Florian Ederer, associate professor of economics at the Yale School of Management. "Perhaps it will be the beginning of another watershed moment in tech antitrust."

In the meantime, "Fortnite" still won't be on the Apple App Store, at great cost to Epic and Apple. We learned from Apple testimony last week that the tech giant made over $100 million from "Fortnite" in its last 11 months on the App Store, and spent about $1 million on marketing for "Fortnite" in a year. Apple has said it would allow "Fortnite" back on the App Store if Epic complies with its rules, but Epic has refused. Those who have downloaded "Fortnite" and already have it installed can still play, but they're limited to the August 13, 2020 version of the game and can only play with other mobile users.

As Apple CEO Tim Cook put it last Friday, "The user is caught between two companies."

The Washington Post

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