Epic v Apple – legal battle could reshape the future of the app economy

• Apple and Epic Games square off in a trial that could decide how much control Apple can exert over the app economy
• It is the biggest antitrust trial involving a technology giant in over two decades

“Fortnite” maker Epic Games and tech giant Apple kicked off their three-week trial on Monday in a courtroom battle that could have far-reaching implications for the iPhone maker’s business model and US antitrust law. The momentous legal showdown of Epic v Apple is over the iPhone maker’s decision to remove the ultra-popular game from its App Store. If the former wins, Apple might be forced to change its iOS software and business practices that some developers say have made the App Store a de facto monopoly.

During opening statements in a federal courthouse in Oakland, Calif., Epic painted Apple as a monopolist that concocted a plan to lure software developers and customers into its iOS mobile operating system, and then lock them in with onerous and restrictive rules. On the other hand, Apple painted Epic as an opportunist looking to cut costs with a court case that could destroy iOS and endanger consumers by forcing harmful and malicious apps onto their phones.

How did Epic v Apple start?

For context purposes, Apple App Store was launched in 2008, and ever since then, it has been the sole gatekeeper between apps and iPhones and iPads. On the other hand, Google’s Android, allows apps to be downloaded through third-party app stores. For any developers who want on to Apple’s mobile devices, though, the choice is simple — it’s the App Store or nothing.

Apple also requires large companies to pay 30% of the money they receive for such sales of digital goods – since last December, smaller companies can apply for a discounted rate – a cut which Epic’s founder and chief executive, Tim Sweeney, had long complained was extortionate.

How the issue kickstarted is when Sweeney sent Apple an ultimatum; allow Epic to run its own App Store for iPhones, where it could take payments without a cut. Apple however rejected Epic’s terms, and on August 13, last year, Epic unilaterally updated Fortnite to allow users to buy V-bucks direct and offered a discount for those who did. Apple and Google, whose Google Play app store rules were also circumvented, retaliated within hours by removing the game. Epic took the fight public, reworking Apple’s famous 1984 commercial to pitch the company under Tim Cook as the new Big Brother-ish villain, and that’s how Epic v Apple came about.

How did Apple respond?

Apple responded quickly by not only removing Fortnite from the App Store, as Epic would have expected but initially tried to go further by threatening Epic’s ability to publish software for Macs too. That would have harmed another wing of Epic’s business, where the company produces the prolific Unreal engine, a popular tool for developing 3D graphics for the gaming, film, and design industries. The courts blocked that salvo after Microsoft joined in on Epic’s side.

Apple insists there is no room for negotiation, and that the rules the App Store runs on are there to ensure the safety and security of its users. The Cupertino-based tech giant insists that requirements to funnel payments through Apple protects users against financial scams, and that prohibiting the installation of alternative app stores prevents malware from running rampant on the platform. The high-profile Epic v Apple case will involve witnesses including Apple CEO Tim Cook and his top lieutenants. Representatives for fellow digital juggernauts Facebook and Microsoft are also expected to testify. Corporate emails and presentations could fuel a fierce courtroom battle over app store policies, which are increasingly under scrutiny by regulators in Europe, lawmakers in the United States, and many others.

Inevitably, the judge’s ruling for Epic v Apple — and the appeals that will almost certainly follow — could have huge ramifications not only for Apple and its iOS ecosystem, but potentially for other app stores and the overall mobile application economy, which has grown to valuations in excess of hundreds of billions of dollars, and supports millions of jobs. It’s a case that could either transform the way many in-app purchases work or entrench the power tech platforms have to set the rules of an increasingly digital world.