Protocol | Policy

Eight things we learned from the Epic v. Apple ruling

Anti-steering is out, mobile gaming is in, Fortnite's still off the iPhone and more.

The Apple logo and a Fortnite character on a yellow background.

District Judge Yvonne Gonzalez Rogers ruled Friday in the Epic v. Apple trial.

Image: Protocol

It's finally here, the moment that gamers and tech antitrust nerds alike waited months for: District Judge Yvonne Gonzalez Rogers ruled Friday in the Epic v. Apple trial.

As part of one of the biggest tech competition decisions in a generation, Apple has to end its policy prohibiting apps from directing users to make purchases outside the App Store, where Apple doesn't get a commission. But there's so much more.

Mobile games are a huge deal, especially for Apple

The judge's ruling contained a bit of scolding that neither side was quite willing to talk about what was really going on: Epic wanted to rail about how Apple controls its App Store, and Apple wanted everyone to look at all kinds of ways to do all kinds of gaming.

Gonzalez Rogers said, though, that the real market at issue was mobile games. Not all apps like Epic wanted, not all games on all platforms like Apple said, but where the actual money is for these companies. After all, the industry is worth $100 billion, according to the decision.

"Over 98% of Apple's in-app purchase revenue came from games in 2018 to 2019," Gonzalez Rogers wrote, suggesting that some of the numbers had previously been sealed. "Moreover, game transactions overall accounted for 76% of Apple's App Store revenues in 2017, 62.9% in 2018, and 68% in 2020."

As if that weren't enough, just 6% of people who spent any money on games in 2017 accounted for a massive 88% of all game billings that year, according to the decision. Gonzalez Rogers wrote that economically, the App Store is "primarily a game store and secondarily an 'every other' app store."

Epic, of course, is also suing Google, and Gonzalez Rogers said the model looked similar for that company.

Fortnite's still not coming back to the iPhone yet

Following the ruling, Epic's Tim Sweeney tweeted that "Fortnite will return to the iOS App Store when and where Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers." That obviously didn't happen. Apple, meanwhile, doesn't seem to feel particularly welcoming, either: On Friday, it said it denied a request from Epic to republish Fortnite on iOS in South Korea. Last month, the country passed a law opening the door for alternative mobile app payment systems.

Apple probably got the better end of things

Sure, the ruling changes the core of how the App Store has long worked. And it went further than Apple was willing to last month in settling a class action lawsuit that was also before Gonzalez Rogers. There, Apple only allowed advertisements about alternative payments outside of apps.

Still, the decision may seem like a good deal compared to where things could be going for the company. South Korea's law goes further than Friday's ruling, for instance, and Apple's recent settlement with Japanese competition authorities did allow notices in-app in certain cases. Apple also faces the app store bill in Congress, a Justice Department probe where officials were watching the decision and more. Epic, meanwhile, won on only one count, and it has to pay for breach of contract.

Apple tends to project pluckiness even when it feels panicked, but the statement of its general counsel that called the ruling "a resounding victory" may not have been so far off.

We're still not sure what a video game even is

For a ruling that deliberately rejected Apple's focus on the full video game market, Friday's decision seemed shakiest when trying to say what a video game actually is. During the trial, there was already a late-night dorm room quality to the discussions about defining video games. Throw in consoles, PCs, cloud gaming and the metaverse, and it seems things got pretty muddy right into the judge's decision.

"At a bare minimum, video games appear to require some level of interactivity or involvement between the player and the medium," Gonzalez Rogers wrote. "In other words, a game requires that a player be able to input some level of a command or choice which is then reflected in the game itself."

She lamented, though, that even Epic and Apple didn't seem to be able to define the "highly eclectic and diverse" genre comprehensively. The judge mentioned Pong, Oregon Trail, The Sims and "Black Mirror: Bandersnatch," but ultimately rested on self-conception.

"The Court need not reach a conclusive definition of a video game or game because by all accounts, Fortnite itself is both externally and internally considered a video game," she wrote.

Apple's not definitely breaking the law, but its fees are iffy

Epic's focus on the App Store meant it didn't offer evidence that spoke to whether Apple was acting illegally in the market for mobile games, which is what Gonzalez Rogers said Epic should have emphasized. And she accepted Apple's defenses for a lot of conduct that would likely come up in a case based on the judge's market, like Apple's assertion that it's trying to protect privacy and security on the App Store.

She also found, however, "considerable market share" for Apple in her preferred market for mobile games, "extraordinarily high profit margins" on the App Store, "numerous anticompetitive effects" and "incipient antitrust violations." Particularly important were those incipient violations ("beginning to come into being or to become apparent," thanks Merriam-Webster). Courts have found that the California Unfair Competition Law bars those, which allowed Gonzalez Rogers to stop the anti-steering provisions even though she didn't find for Epic under any federal antitrust laws.

She also said the 30% fee that Apple currently takes from many kinds of in-app purchases appeared to be above what competition would produce, and that the commission had arisen not because of market forces but simply because Apple had set its rate there.

No, the App Store is not like Nordstrom, either

As the lawyers for both sides tried to make their points about big legal concepts and new markets during the trial, they often resorted to metaphors. The App Store was like a grocery store, or a car dealership, or even a cow, depending on who you asked.

In her decision, Gonzalez Rogers wrote about the notion that, if Nordstrom doesn't advertise in Macy's, Apple shouldn't have to let apps post about the fact that users can get cheaper subscriptions and goods on the web. But the judge was having none of it. After all, she reasoned, Nordstrom shoppers know all about Macy's; that's maybe not true of app users.

"Apple created a new and innovative platform which was also a black box," she wrote. "It enforced silence to control information and actively impede users from obtaining the knowledge to obtain digital goods on other platforms."

Lawmaker pressure is still on

The ruling pleased critics of Big Tech and Apple's store policies, but many said it also showed how high the bar is for finding illegal monopolies and creating sweeping changes for the mobile environment. For several lawmakers, that meant changing the law.

Democratic House Reps. Jerry Nadler and David Cicilline, who have led a bipartisan bill package aimed at reforming tech giants, said in a joint statement the ruling was "even further evidence that Congress must enact rules of the road to ensure free and fair competition online." Their Senate counterpart, Amy Klobuchar, said she was "working hard" to advance a bipartisan bill she co-sponsored on mobile app stores and called for "other legal reforms we need to reinvigorate competition throughout our economy."

Appeals? Probably.

Sweeney said Epic would "fight on," and Apple left open the possibility of appealing when talking to reporters, so expect that we might revisit all of these questions soon.

And speaking of things that sound like "appeal," remember when Epic's marketing director got asked on the stand about the attire of a Fortnite character who is a … banana? Gonzalez Rogers got to the heart of it, writing "Peely" did not necessarily need to be dressed for court.

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