Apple's 'flat out victory' will cause problems for antitrust regulatory efforts
Judge Yvonne Gonzalez Rogers' ruling in the Epic vs. Apple lawsuit may cause headaches for the U.S. government, after Epic failed to prove that Apple violated antitrust laws.
On Friday, Judge Rogers issued her ruling in Epic's lawsuit against Apple. While the ruling could potentially cost Apple billions in enabling developers to advise users of third-party payment methods, it may have also helped Apple escape some scrutiny over other issues.
This includes the U.S. government's attempts to tempter the power of big tech companies like Apple and Google, such as its June 11 legislation package taking aim against antitrust behavior.
As part of the ruling, Judge Rogers deemed that Epic had "failed in its burden to demonstrate Apple is an illegal monopolist." While admitting that Apple had considerable market share and high profit margins, the court believed "these factors alone do not show antitrust conduct. Success is not illegal."
That same ruling may also apply an extra burden on attempts by the U.S. government to rein in the tech giants, according to observers speaking to Bloomberg. As Apple was found not to have violated the Sherman Act, a law typically used to take on monopolistic firms, the ruling makes it much harder for others to use the same law against Apple in the same way.
"It raises the bar to any Justice Department lawsuit," said Cadwalader, Wickersham, & Taft LLP antitrust lawyer Joel Mitnick. "Apple pretty much got a flat out victory on all the Sherman Act claims."
It is also thought that Apple's restrictions on developers, justified to ensure security of the platform, could be a problem. As Judge Rogers says the market is two-sided, this makes the job of determining the harms and benefits of multiple sides, as established in a 2018 U.S. Supreme Court decision, tougher.
"The biggest thing that scares me about this opinion is the two-sided market complexity," according to John Newman, a teacher of antitrust law at the University of Miami School of Law.
"If this is a two-sided market, you can't prove harm to just developers or harm to just consumers. You have to somehow prove net harm across all the different groups that interact through the platform."
Even so, there is still a chance government investigators could see a change of situation. Judge Rogers says that Apple was "near the precipice of substantial market power, or monopoly power," and failed to truly justify the 30% commission fee for many App Store transactions.
Cardozo School of Law teacher and former Justice Department antitrust division lawyer Sam Weinstein slightly differs in his opinion.
"There's a lot here to encourage an enforcer depending on what their investigation looks like," said Weinstein. "If I'm the government, I don't look at this and think we're out of business."
While the ruling primarily affects Apple, it could be argued that elements could be adopted by other platform owners, such as Google and its Play Store, which operates as a direct competitor to the App Store. For example, Google could justify the two-sided market element similarly applies to its store, as it too has developer and consumer "sides" to consider.
Meanwhile, Epic has started its bid to appeal the ruling itself.
Read on AppleInsider
On Friday, Judge Rogers issued her ruling in Epic's lawsuit against Apple. While the ruling could potentially cost Apple billions in enabling developers to advise users of third-party payment methods, it may have also helped Apple escape some scrutiny over other issues.
This includes the U.S. government's attempts to tempter the power of big tech companies like Apple and Google, such as its June 11 legislation package taking aim against antitrust behavior.
As part of the ruling, Judge Rogers deemed that Epic had "failed in its burden to demonstrate Apple is an illegal monopolist." While admitting that Apple had considerable market share and high profit margins, the court believed "these factors alone do not show antitrust conduct. Success is not illegal."
That same ruling may also apply an extra burden on attempts by the U.S. government to rein in the tech giants, according to observers speaking to Bloomberg. As Apple was found not to have violated the Sherman Act, a law typically used to take on monopolistic firms, the ruling makes it much harder for others to use the same law against Apple in the same way.
"It raises the bar to any Justice Department lawsuit," said Cadwalader, Wickersham, & Taft LLP antitrust lawyer Joel Mitnick. "Apple pretty much got a flat out victory on all the Sherman Act claims."
It is also thought that Apple's restrictions on developers, justified to ensure security of the platform, could be a problem. As Judge Rogers says the market is two-sided, this makes the job of determining the harms and benefits of multiple sides, as established in a 2018 U.S. Supreme Court decision, tougher.
"The biggest thing that scares me about this opinion is the two-sided market complexity," according to John Newman, a teacher of antitrust law at the University of Miami School of Law.
"If this is a two-sided market, you can't prove harm to just developers or harm to just consumers. You have to somehow prove net harm across all the different groups that interact through the platform."
Even so, there is still a chance government investigators could see a change of situation. Judge Rogers says that Apple was "near the precipice of substantial market power, or monopoly power," and failed to truly justify the 30% commission fee for many App Store transactions.
Cardozo School of Law teacher and former Justice Department antitrust division lawyer Sam Weinstein slightly differs in his opinion.
"There's a lot here to encourage an enforcer depending on what their investigation looks like," said Weinstein. "If I'm the government, I don't look at this and think we're out of business."
While the ruling primarily affects Apple, it could be argued that elements could be adopted by other platform owners, such as Google and its Play Store, which operates as a direct competitor to the App Store. For example, Google could justify the two-sided market element similarly applies to its store, as it too has developer and consumer "sides" to consider.
Meanwhile, Epic has started its bid to appeal the ruling itself.
Read on AppleInsider
Comments
“...the evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share. Apple is only saved ... perhaps, because plaintiff did not focus on this topic.”
The two-sided market mention is very pertinent too, first time I had seen that mentioned. Any future case targeting big tech is going to have to be well-crafted and argued.
Even so, there is still a chance government investigators could see a change of situation. Judge Rogers says that Apple was "near the precipice of substantial market power, or monopoly power," and failed to truly justify the 30% commission fee for many App Store transactions.
My first reaction was it was judicial hubris. Why does Apple have to justify their fee to the court? They could make it 50%. Or 75%. Or 1%. It's all about what the market demands. If they aren't an illegal monopoly, then what say does the Court have?
But then I thought about it. This is as close to complete "bench slap" as you'll ever see. I think that perhaps the judge threw Epic a bone by allowing 3rd party payment systems and making the comments above (and the like). It may just be an attempt to "take the stank off" and help it survive appeal.
Apple will extract their pound of flesh from Epic. Like Samsung it make take years but eventually they will not have the business relationship they enjoy (ed) today.
...glad the judge wasn't having it. Hope it sticks.
https://en.wikipedia.org/wiki/Epic_Games <--
The other shareholders should just sell their shares. But who is going to buy them?
The judge ruled that Apple had a right to get compensated for the sales Epic garnered outside of the Apple platform during the time it violated what was a valid contract. The judge did NOT say that Apple could continue banning Epic if Epic began adhering to the contract they signed. However, the judge did rule that one component of the contract, the one to do with outside linking, was anti-competitive under California law and declared that part of the contract unenforceable. So Epic and other developers may now link to outside payment systems without violating their contracts. None of what you say about everything being in Apple's hands now is nonsense. If Epic adheres to the contract, they have to be let back into the App Store - if Apple doesn't do so, Epic can simply sue again - this time for discrimination - and it would be a pretty open and shut case in Epic's favor.
Try the mall landlord analogy. You can’t open up shop in a private mall and not pay rent. If Apple didn’t ask for rent from IAPs, then obviously every single app would change its price to $0 and use an IAP to unlock. Thus Apple bought the mall property, built the mall, pays for the infrastructure of the mall, the advertising for the mall, yet would receive $0 in rent from tenants of the private property mall. Makes no sense. You wouldn’t do this. Why should Apple?
You can’t have an illegal monopoly on your own business.
1. Success is not illegal.
2. Apple is not a monopolist (duh, ever hear of Android?)
3. This isn't just about the welfare of developers, consumers also matter
I think what truly baffles SO MANY people (including Wall Street types, who for years undervalued AAPL), is that it's actually possible to persistently make pretty big profits without being a monopolist. The key? Consistently stay a step ahead of the competition by consistently making better products.
I mean, I understand the Econ 101 argument here -- that if it were a competitive market, some other firm would eventually come along and offer a product as good as Apple's at a lower price, and so then Apple would have to cut prices, etc.
The thing that's not covered in Econ 101 is a scenario in which very well capitalized firms do come along and enter the market, but somehow still can't quite match Apple, even though Apple isn't a monopolist who can keep them out.
What's the disconnect between Econ 101 and what we are observing? I think maybe the answer is that the 'perfect competition' story is just a story, it's not Truth. Markets don't instantly clear. Some ideas are hard to copy, even if you have a lot of money and nobody is stopping you from trying.
I am not sure the judge understands fully what’s monopoly is either. No way could Apple be in the cusp of being a monopoly. It does not have anywhere near enough market share. I suspect that was just a political statement, a bone to throw to those who side with Epic.
Apple doesn't have to let Epic back in. Realistically, they will find a reason. Suing for "discrimination?" That would not be a valid legal claim. Companies don't sue others for discrimination. The best Epic could hope for is breach of contract. But Apple Legal will be too well prepared to fall into that trap.
As for the IAPs, Apple can easily deal with this in future contracts. Nothing says Apple can't surcharge-in one way or another- those developers who use third party payment systems. They aren't just going to sit back and make less money.