After nearly 100 hours of testimony ranging from secret deal-cutting with Netflix, to grilling Apple CEO Tim Cook, to discussions about a nude banana-man, the three-week-long Epic Games vs. Apple trial hearings concluded on Monday.
The fight erupted in August, when Epic updated the iOS version of Fortnite, its popular video game, with a “hot fix” to route around Apple’s 30% take on in-app payments. At that time, Apple promptly ejected Fortnite from the iPhone app store. Epic filed suit, alleging that Apple was abusing its market power. The two companies have been duking it out ever since, leading up to Monday’s “hot tub” session, which saw a debate-style close to the trial proceedings instead of the usual closing arguments.
While there’s no knowing which way the court will side in the legal spat, U.S. District Judge Yvonne Gonzalez Rogers, who is presiding over the case, has offered some hints about her thinking. She is looking to antitrust case law, and she appears reluctant to hand either Apple or Epic an easy victory.
For one thing, it’s unlikely that Judge Gonzalez Rogers will upend Apple’s business. “Can you find me a single antitrust case where the type of relief you are requesting”—that is, forcing a large company to substantially alter its business; or, specifically, in this case, making Apple host multiple app stores on its devices—”has been granted by a court?” she once asked Epic’s counsel, as reported by the Financial Times. “It is a pretty significant step that courts haven’t done.”
But Judge Gonzalez Rogers likely won’t let Apple get off scot-free. At one point, she pressed the company on its apparent stranglehold over the app store. “The 30% number has been there since the inception,” she said at one point, referring to Apple’s general cut of digital payments. “If there was real competition, that number would move—and it hasn’t.” (After litigation commenced, Apple reduced the fee for certain transactions to 15%, including for small developers and for subscription revenues that recur after the first year, a move later copied by Google.)
Fundamentally, the question at the heart of the case is how one defines the market in which Apple supposedly competes; it is the classic monopolist’s dilemma. Apple has been trying mightily to persuade everyone that it faces stiff competition from other app stores and device makers, like Google’s Android and Samsung, thereby justifying its app store rent-taking. Epic, meanwhile, has been pulling out all the stops to argue that Apple’s tight grip on the app store is anticompetitive, greedy, and overbearing.
If you held a Fortnite “boogie bomb” to this columnist’s head and asked for his prediction, he would say this: Apple will be forced to ease up on its ban against developers advertising alternative payment options in the app store. It’s a possibility that Judge Gonzalez Rogers has alluded to during the proceedings, and it nods at judicial precedents from earlier cases involving American Express and railroads.
I suspect the court will apply this tweak only to the mobile gaming market, another idea Judge Gonzalez Rogers has floated. Such a narrowed ruling would reduce the impact to Apple’s overall business, and it might help to appease a particularly aggrieved segment of app store developers—even if it offers cold comfort to other discontents, such as Match Group, Netflix, and Spotify, alongside countless smaller fish.
However Judge Gonzalez Rogers rules, one thing is almost certain: Appeals will lengthen the saga.
Robert Hackett
Twitter: @rhhackett
robert.hackett@fortune.com
NEWSWORTHY
Antitrust is earned, not given. Apple isn't the only company facing antitrust issues. German antitrust regulators have added Alphabet to the list of tech companies, like Facebook, that it is investigating over possible abuses of market power. Meanwhile, back in the U.S., the Attorney General for Washington, D.C., is suing Amazon over anticompetitive pricing practices.
You know the drill. It's time to update your Apple devices. The company released a macOS update that closes a security hole that would otherwise allow hackers to hijack people's cameras to take surreptitious recordings and screenshots. Apple also rolled out iOS 14.6, which includes security fixes and updates related to podcast subscriptions and lossless audio features. That makes today a Patch Tuesday.
In Russia, Internet throttles you. Russia's communications watchdog, Roskomnadzor, has given Google one day to strike what it describes as prohibited content from its services, or else it will fine the company up to $54,000 and slow its Internet service speeds. Google is suing the regulatory agency over the demands. Meanwhile, Indian police paid a visit to Twitter's offices in New Delhi after the company labeled a political leader's tweet as "misleading."
Apologies to my censor. Florida Governor and possible future presidential aspirant Ron DeSantis signed a bill into law on Monday that prevents social media companies from banning political candidates from their services for Florida users for more than 14 days. The law also makes it illegal for companies like Facebook and Twitter to "censor, deplatform, or shadow ban a journalistic enterprise based on the content of its publication or broadcast." Constitutional lawyers say the law will be struck down the moment it is challenged in court.
Cold sesame noodles. The Chinese tech markets are cooling a bit. The stocks of former darlings such as Meituan, Pinduoduo, and Kuaishou dropped by more than a third from highs reached earlier this year. Amid rising inflation fears, investors are shifting money to old-school, stable business sectors, like consumer and industrials, versus these unprofitable, high-flying, hi-tech firms. Facebook cofounder Eduardo Saverin remains bullish on Chinese software providers, however. Also, Hangzhou-based camera-maker Hikvision, already banned by the Pentagon, is facing fresh allegations of ties to the Chinese military.
A bicycle built for two. Fitness bike-maker Peloton said it plans to open a new factory in Ohio in 2023. The company is aiming to boost its production output after struggling to meet consumer demand during the pandemic. The site is slated to supply the U.S. and also potentially to help the company expand in Europe.
Hip to the crypto. The cryptocurrency-focused Consensus conference, hosted by Coindesk, is taking place this week. In sessions on Monday, hedge funder Ray Dalio said he prefers Bitcoin to bonds, and Fed Governor Lael Brainard said the central bank is keeping close tabs on China's digital yuan project. Elsewhere in cryptoland, Tesla CEO Elon Musk said he met with Bitcoin miners to push them to adopt greater transparency and greener energy sources.
Tune in, Build out. Microsoft's annual Build developer conference kicked off today at 11 A.M. ET. The three-day event can be viewed here. CEO Satya Nadella took the stage for a keynote at noon ET, or 9:00 A.M. PT.
The cheese stands alone.
FOOD FOR THOUGHT
Israel is home to an extremely effective missile defense system called Iron Dome. The program was on full display in recent days during the recent Palestinian conflict, when it intercepted 90% of 1,500 rockets headed for built-up targets inside the country. In a provocative essay, The Atlantic suggests that the technology's effectiveness—it saves many lives—may be thwarting the nation's political will to address the underlying social crises that so frequently erupt in violence.
“On the one hand, Iron Dome is the perfect example of Israeli ingenuity and improvisation,” the journalist Yaakov Katz, who co-wrote The Weapon Wizards, a book about Israel’s arms industry, told me. “But its very success is a reflection of Israel’s biggest problem. Iron Dome allows you to almost ignore the fact that you have a neighbor just across the border with thousands of rockets pointed at you, because they can no longer really harm you. Iron Dome allows you not to find deeper solutions for that problem. And that’s very Israeli as well.”
IN CASE YOU MISSED IT
How Airbnb is trying to adapt to a new travel reality by Danielle Abril
Inspired by Podesta breach, Material Security raises $40 million to neuter email hacks by Robert Hackett
Chia, the ‘green’ Bitcoin alternative, looks to IPO as early as this year by Gillian Tan
This startup just landed more funding to bolster its fight against phishing by Jonathan Vanian
Crypto climbs, stocks gain as markets cheer a weak dollar by Bernhard Warner
Why Coinbase stock could rise another 36%, according to Goldman Sachs by Anne Sraders
Black neighborhoods in the U.S. saw an increase in startup creation during the pandemic, a new study explains by Alex Tanzi
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BEFORE YOU GO
If you own any Apple products, chances are you've had the distinct displeasure of dealing with frayed wires. Why do iPhone, MacBook and iPod cables break so easily? The YouTube channel Apple Explained untangles the knot: In 2006, Apple ditched strain-relieving ribbed cable ends in favor of thin, sleeker rubberized sleeves. The new design got rid of PVC, a durable plastic vinyl material, supposedly for environmental reasons. The changes made newer cables softer, weaker, and more brittle.
I'm sure Apple totally cared about protecting the planet and that these decisions had nothing at all to do with building planned obsolescence into its products, forcing people to dish out $20 on replacements every few years. Same goes for its recent, "eco-friendly" nixing of free "power brick" adapters with iPhone purchases. Go green, if by green you mean dollar bills.
