Epic victory over Apple? The first results of the judicial battle

Hi.

Let me remind you that attacks on Apple’s business practices have happened many times, Apple believes that it can completely restrict competition on its own platform. For example, do not give the creators of software and games alternative ways to pay for purchases other than using Apple Pay. The creators of the game Fortnite decided to challenge Apple and went to court to prove that the company is using a monopoly position in the iOS market, charging a 30% commission, which is not justified by anything. We carefully watched the development of the conflict in a series of materials and waited for a resolution.

The court considered the claims of Epic Games, judge Yvonne Gonzalez Rogers ruled that Apple cannot restrict developers in accepting payments without using Apple Pay. From now on, developers can use any means of payment that they consider correct, they can post links to them in their applications. In fact, Apple’s monopoly on accepting payments and their commission of 30% from such payments disappears. The court decision should take effect in 90 days, before that moment Apple can appeal. But even if Apple challenges such a decision, the end result will most likely not change, they will be able to delay the inevitable. Only Apple had a similar practice, for example, on Android, developers have the ability to use any payment system to receive payments. The market reacted to the message immediately, the value of Apple shares went down.

The court’s decision can be found here, 185 pages, of which a small number is of interest.

Let me remind you that Apple is betting on services and the same Apple Pay gives a huge part of both revenue and profits in this area. In the absence of alternatives, the developers were forced to give their money to Apple, and the corporation received super-profits, now this simply will not happen. We will not see the first impact of the new rules until the first quarter of 2022, when many large companies will switch to their payment systems and abandon Apple Pay. There is no doubt that this will happen, since the benefits of companies are tangible, they will be able to sell their software, services and goods for less money. This is also good news for buyers, in most cases a lower commission will mean direct or indirect discounts. And the fact that this happened can be considered an undoubted victory for Epic Games, from which all developers, without exception, benefit.

Interestingly, Epics Games insisted that Apple has a monopoly on the iOS market and payment mechanisms in that market. Apple, on the other hand, tried to dilute its share of the iOS market and offered to look at the market for all games in order to reduce its share as much as possible. That is, collect games for computers, mobile devices and calculate the company’s share based on the huge pie of this market.

The court rejected the interpretation of both Apple and Epic Games, considered that the market in question is the market for games on mobile devices, and therefore it is necessary to consider transactions only on it. Apple wanted to achieve consideration of the market of each country separately, this gave more scope for protection, guaranteed to remove the issue of monopoly, but the court rejected this interpretation as well, the global market was considered. According to the estimates of the court and invited experts, the share of Apple in the transactions of the mobile games market is 55%, but the company is not a monopoly. The court considered that in addition to Apple, there is Android in this market, as well as other players, there are no obstacles to the emergence of new companies operating in this segment. This destroyed one of Epic Games’ attack lines when the company insisted that Apple was a monopoly. But here one more reservation is important, the judge noted that these conclusions were made on the basis of the facts that were given in court. Third-party lawyers observing the course of the court unanimously say that this decision opens the way for other companies and their claims, in particular, the issue of Apple’s monopoly on iOS will be raised in lawsuits repeatedly and sooner or later someone will succeed in them. Ahead of Apple, protracted legal battles with various players await, since the company’s practice does not seem to be fully advantageous for Apple’s partners, which are forced to follow the rules that are imposed on them.

The judge noted that success cannot be illegal, which was immediately picked up by Apple, the company’s main message that it is not a monopoly. But there is little consolation for Apple, as the practice of levying fees through Apple Pay will have to be abolished.

Epic Games disagrees with the court decision, since the company is not satisfied with the formal victory, plus other courts are underway, in particular, Apple is demanding compensation for losses due to the fact that they blocked the Fortnite app store (as a result of the fact that Epic Games went to violation of the contract). This battle in the courts will continue for a long time, there are no prerequisites for the companies to agree to an amicable agreement. But even the interim results cast doubt on Apple’s ability to maintain the old business model. And this applies not only to software, but also to hardware. For example, keeping the Lightning connector and imposing the purchase of additional accessories, here is exactly the same approach as when selling software. I am sure that lawyers in many countries around the world are already sharpening their knives in order to bite off some apple pie and get money for themselves and those who can be considered victims.

Attacks on Apple are becoming a familiar part of the worldview, and they come from different directions. The higher the capitalization of the company, the higher the costs of lawyers, and they are trying to fend off software developers, patent trolls and real owners of intellectual property, mass lawsuits about factory defects in equipment. Apple gold beckons people and they want to profit from them, some succeed. Therefore, we can safely assume that legal battles will accompany the company in the coming years and it will not be able to resolve these issues in one fell swoop.

The decision of the American court is interesting in terms of European hearings, giving more weight to those who attack Apple. And that means the company could face billions of dollars in fines and be forced to change its business practices. It is possible to believe that this is Apple’s victory only in feverish delirium, since this court decision alone means the loss of billions of dollars annually and the lack of growth in the service segment. But it will get even more interesting further.

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