Epic v. Apple verdict will set the stage for future antitrust battles
Federal and state antitrust enforcers investigating Apple are about to see a judge rule on issues they could bring up. The tech industry is watching, too.
The stakes in the Epic v. Apple trial go far beyond one video game company's complaints about the App Store.
Now that testimony has wrapped, the decision is in Judge Yvonne Gonzalez Rogers's hands — and federal and state antitrust prosecutors who are already scrutinizing Apple are watching to see how she rules on issues that would likely be central to any case they might bring.
Indeed, while the practices and legal concerns at issue among the big tech companies are different, at least some in the tech industry see the Epic v. Apple trial as a battle over the extent to which any big tech firm can control its own platforms, and how to handle the complaints from rivals on those platforms.
One key issue will be whether Gonzalez Rogers accepts Epic's definition of Apple's markets as an app distributor and, separately, a provider of payment processing for those apps. Market definition is a key to most antitrust trials because it determines whether defendants actually have a monopoly.
If Apple wins, particularly on a question of market definition, efforts to sue the iPhone maker could take a hit, a person familiar with the Justice Department's thinking in the Apple probe told Protocol.
"It would just put a cloud over" a similar case, said the person, who confirmed U.S. investigators are watching the trial closely. The person asked not to be named discussing a law enforcement probe.
In extended questioning of Apple CEO Tim Cook on Friday, Gonzalez Rogers said that she was skeptical Apple faced "any pressure or competition to actually change the manner in which you act to address the concerns of the developers." She also suggested again that users deserve information about where they can engage in transactions without paying for the commissions Apple takes from many in-app purchases. Those are two key tenets of Epic's case.
Gonzalez Rogers's decision is likely to face appeal no matter who wins, and her eventual ruling doesn't necessarily bind judges in most other U.S. courts. Still, a win for Apple would provide future cases with an early, high-profile, and detailed legal rationale by a judge who heard extensive testimony on why she thinks the entire direction of enforcement against Apple has been wrong-headed.
Such a decision could prove bothersome to enforcers in part because major antitrust rulings from federal district courts are less common than decisions in other areas of law, said Sam Weinstein, a former attorney in the Justice Department's antitrust division.
"It's not as though we get a million of these decisions all the time," Weinstein, now a professor at Cardozo School of Law in New York, told Protocol. "You get a district court decision out there that plants a flag, that might mean a little bit more."
The probe into Apple by the U.S. Justice Department and several states, which is reportedly focused on the App Store, has not received as much attention as enforcers' lawsuits against Google and Facebook, and the government could always decide to close its investigations without filing any charges — particularly given the long list of labor-intensive cases it's confronting.
Yet there's little doubt of the pressure on the company. Epic is one of many app developers that have objected to the way Apple controls its App Store, how it extracts commissions from transactions in apps, and how it handles smaller companies' intellectual property. A similar complaint from Spotify, which said the fees disadvantage rivals to Apple's own offerings, led to EU antitrust chief Margrethe Vestager announcing preliminary antitrust charges against the App Store in April.
The U.S. Senate similarly heard from furious iOS developers at a recent hearing.
Apple says it faces robust competition from Android as well as from distributors of digital content on other platforms such as desktop computers or even game consoles. The company insists its App Store rules pay for a safe environment that has thrilled customers and allowed small businesses to thrive.
The other big tech companies have put forward similar arguments as they weather their own antitrust battles — that they must innovate and focus on consumers as relentlessly as less powerful firms do if they want to survive.
"If Judge Gonzalez Rogers affirms that Apple can set its own rules to please customers even if they disadvantage sellers, that will set back current and potential antitrust cases against Amazon's marketplace, Apple's App Store or Google's search results," said Adam Kovacevich, CEO of the tech-allied Chamber of Progress trade association and a former policy director at Google.
Still, the antitrust experts said that a defeat for Epic would be unlikely to stop an investigation that was otherwise on track.
"A win would be great, but I'm not sure a loss is going to derail anything," said Harry First, an antitrust professor at New York University's law school, who added that prosecutors in future cases might even "learn something about what to avoid."
Antitrust experts have also suggested that a win for Apple could put momentum behind efforts to change competition laws as a way to tackle the power of big tech. So far, business allies in Washington have said the investigations and lawsuits show that current law is up to the task of policing the industry, but even some conservatives are beginning to doubt there is enough enforcement.
"If I'm Apple, I worry about it in the long run," Weinstein said. "If I win enough, Congress will step in."