Goda, a senior fellow and deputy director of SIEPR, will serve as a senior economist as part of President Biden’s Council of Economic Advisers.
Late in 2020, Epic Games, creator of the popular gaming platform, Fortnite, sued Apple in federal court, charging that Apple is using the power of its App Store to stifle competition — unfairly forcing app makers to use its payment system and pay its fees. After months of buildup in the media, the trial began last week. Here, Stanford Law Professor Mark Lemley, a technology law expert, discusses the case and its wider implications.
Why did Epic Games sue Apple?
Apple exercises tight control over what apps people can load on their phones. It has blocked or limited apps that compete with it, and it charges a 30 percent fee—not just 30 percent of the purchase price, but 30 percent of all the revenue the app generates, including from in-game purchases. Epic announced that it would process in-game purchases for its blockbuster game Fortnite outside the app store, avoiding the 30% surcharge. In response, Apple banned Fortnite from the iPhone.
What does Epic Games need to prove to win the case Apple has brought?
To win, Epic needs to prove two things. First, it needs to show Apple has market power. That means persuading the court the relevant market is for people already in the Apple ecosystem. But I also think they should win that argument. While courts are reluctant to define single-brand markets, it seems appropriate to do so here. If you own an iPhone you can only buy apps through the Apple App Store. And people aren’t going to switch phone ecosystems based on the availability of a single app.
Beyond that, Epic needs to win the argument that app purchases and app payments are two separate markets rather than part of the same transaction. If Epic can win that and the App Store monopoly argument, it has a strong case. If it can’t, it will have to show that Apple’s payment policy is on balance anticompetitive, and Apple will be able to offer procompetitive justifications for its policies.
Does Apple have much to worry about with this case?
I think Apple has more to lose here, because it has a very lucrative business model at stake.
And how about Epic Games? Is the Apple model unique?
Epic has a lot of money at stake too, not only here but in a similar case against Google and potentially with Steam and the console stores, which have similar pricing policies.
What are the implications of the case if Epic wins? I understand that the European Union charged Apple with violating antitrust laws over its app rules and fees and that state and federal regulators in the U.S. are taking a closer look at Apple.
Antitrust agencies around the world have been focusing attention on the large tech platforms. So far much of that attention has focused on Facebook, Google, and Amazon. Apple has gotten off pretty easy. But a win for Epic in this case would open the door to other challenges based on Apple’s control of the App Store.
And what would a win for Epic mean for the tech industry and innovation?
The world would probably be a better place if Epic won this case, because it would open up both the type of apps people can use on their iPhones and because it would start some real price competition, likely driving the 30 percent fee down substantially. Indeed, both Apple and Google have taken steps to reduce those fees for small app developers.