If you sell an app for use on an iPhone, Apple demands a 30% cut of any revenue generated by the app. But is this legal?
Apple is being sued by Epic, the maker of the popular video game “Fortnite,” for allegedly using its control of its mobile operating system to stymie competition....Up for debate is how Apple allows apps to function on iPhones. The only way to install software on Apple’s mobile operating system, called iOS, is through the company’s App Store. Developers who make software for iOS must follow Apple’s rules and use its payment system, which charges a commission on every sale.
....The trial will determine whether Apple’s control over iOS is a monopoly, and whether Apple can use that control to force developers to use the App Store and its payment system. One possible outcome in the case is a very different smartphone landscape, in which the powerful computers in everyone’s pockets operate more like desktop computers, where any kind of software is allowed to exist.
The trial begins today. As it happens, Apple's market share of smartphones in the United States is about 50%. Does that qualify as a monopoly? I'm not sure, but it comes pretty close by anyone's measure.¹
One thing to keep in mind, because a lot of people don't seem to understand this, is that there's no law against being big. Nor is there any law against having a huge market share. Like it or not, though, there is a law that prevents big companies from abusing their bigness. A small company could charge anything it wanted to sell apps on its phones and no one would have a case against them. But a big company has to be more careful. There are things a small company can do that a big company can't.
So the question is whether Apple is doing something that they shouldn't, even if it's something that a smaller company could get away with. But the peculiar thing about this case is that antitrust law is generally oriented toward preventing big companies from doing things that stifle competition. Spotify, for example, says that Apple's 30% charge makes it hard for them to compete against Apple's own music offerings. That's a fairly normal case.
But Epic is different. Even if they can show that Apple has a habit of stifling competition in some cases, Apple doesn't have a big presence in the gaming market and their 30% charge doesn't really do much to prevent competition against Apple's own offerings. It's just a way of hoovering up a bunch of money. So even if Apple is, in some sense, abusing its bigness, it doesn't seem like it's doing anything that makes it harder for small gaming companies to enter the market.
In any case, this trial is scheduled to last three weeks plus about a thousand years of appeals, so don't expect any quick decisions. Normally, I might predict that the companies will reach a settlement before then, but both CEOs seem inclined to treat this as something of a dick-measuring contest and are unlikely to give up. So this case might truly drag on nearly forever.
Will they say that each separate operating system, Apple, Windows, Android are not in competition with one another as much as in competition against those who want to play in their discreet sandboxes, that a successful OS is inherently its own monopoly in its own universe and that it's market share is actually 100%?
For me, this will be the interesting argument. Because Windows and Android are not closed discreet sandboxes; Windows doesn't have any "restricted" storefronts and whilst GooglePlay is the default for Android, it's easy to install things from other places (just by setting a checkbox), and even to install directly.
Whereas Apple seem to be very keen on locking down any iOS access at all.
So whilst it is true that you can e.g. only run Windows software on a Windows machine (not strictly true, of course, as you can emulate OSes but let's not go there!), you aren't constrained in where you get your Windows software.
iOS on the other hand is a different story.
How much will this affect Amazon?
The question with Epic is not that Apple isn't doing gaming now, but that it can swoop in anytime it likes.
Epic is the one swooping in, though.
I hate Apple. Always have. But Epic is being bankrolled by China in the form of Tencent. Epic has been throwing that money around to buy up exclusives for their own game store in addition to going after Apple. Also this isn'tjust tied into the cut Apple takes but also what can and cant be prohibited on their storefront.
So this is one of those few situations where I hope Apple crushes them.
The situation Kevin describes is called a monopsony, where a company abuses its size to squeeze its suppliers instead of its customers. Amazon and Wal-Mart also qualify. The fact that Apple takes a 30% cut of all sales is a frickin' crime. Or should be.
What if there were a law that stated that, once something gained 75% market share, it must be turned into an open source product? So, all patents and copyrights expire, immediately.
Huge market share may indeed be an antitrust violation. Ask Standard Oil, AT&T et al. In recent decades, lawyers, economists, and courts turned against that view, but the intellectual mood could change.
That change is thanks (no thanks) largely to the "thinking" of Robert Bork.
The greatest Epic fight since Mike Patton vs. Anthony Kiedis.
Epic, in itself, is a terrible example, since they use predatory contracts to claim exclusive rights to things they never should have had rights to. They steal from artists, entice their partners to break promises and contracts, they're worse than Apple.
And they want to stiff the very markets and operating systems they run on.
Their own store is notoriously bad in security and design.
We need competition in the market, but Epic isn't about making a better mousetrap: It's about leveraging venture capital to not actually employ developers.