The Epic v. Apple’s antitrust lawsuit is going to be complicated. Experts from each side will present consumption data and economic theories. Executives will be made aware of business practices and forced to explain incriminating emails. The lawyers will give their opinion on what this all means. But finally, the case is likely to come down to one deceptively simple question: what is the market?
In its lawsuit, Epic Games, the company behind blockbuster video games like Fortnite, accuses Apple of having built a monopoly on iPhone and iPad games by requiring that all applications be downloaded through its App Store. Apple is using this monopoly, the lawsuit alleges, to extract unfairly high fees from developers – up to 30% off all transactions – who have no choice but to use Apple’s payment system if they want to reach its users. (Epic is making similar complaints about Android in a lawsuit against Google that does not yet have a trial date.)
In its defense, Apple makes a number of counter arguments, but the most important is this: the App Store is not a monopoly. People can download games from all kinds of other places like Android phones, game consoles, and desktop operating systems. Epic can focus on attracting customers to these platforms if it doesn’t like Apple’s terms of service.
Resolving this dispute comes down to how Judge Yvonne Gonzalez Rogers, who is presiding over the federal trial that began this week, chooses to define the relevant market. This is a crucial step in many antitrust cases, because to prove a monopoly, you have to show that a market is dominated. If Rogers accepts Apple’s market definition, Apple wins. In a market that includes Android, Xbox, and laptops, there’s no way Apple has a monopoly on game distribution. And if he doesn’t have a monopoly, Epic’s other claims don’t matter.
This means that Epic has to convince the judge that the market should be defined more narrowly as, simply, iOS apps. Apple, of course, owns 100% of the mobile app distribution market on its own platform. (Some owners have hacked into their devices so they can run unsanctioned apps, a process known as “jailbreaking,” but that’s a tiny fraction of users.) So if Epic wins on the problem of defining the market, this automatically proves that Apple has a monopoly. This is probably the biggest legal hurdle to cross.
It may seem strange to say that a brand can be considered an entire market, but there is precedent for this in antitrust law. In a major case in 1992, Kodak was sued for pushing customers into its own repair services, ousting independent companies that provided repairs and equipment for Kodak photocopiers. Kodak argued that anyone who didn’t like it could stop buying Kodak machines. But the Supreme Court at variance. Sometimes the Court has noted that “a mark for a product may constitute a separate market”. In this case, from the customer’s point of view, once someone owned a Kodak copier, it didn’t matter whether other brands were in the market. Kodak had created an “aftermarket” for repairs. The key point was what is called interchangeability: “Kodak equipment service and parts are not interchangeable with service and parts from other manufacturers.”
Epic makes a similar statement about Apple: The iPhone has created an aftermarket for apps. In this aftermarket, you can’t say that an iPhone game is interchangeable with an Android game, let alone an Xbox download. Some jurists, however, doubt that this argument works. Paul Swanson, an antitrust lawyer in Denver, pointed out that Kodak allowed the third-party repair market to grow for years before deciding to crush its competitors, when Apple designed the iPhone (and l ‘iPad) as a walled garden from almost the very beginning. : Since the launch of the App Store in 2008, a year after the beginning of the iPhone’s existence, developers have always had to go through it and agree to its terms before reaching customers. Courts tend to be reluctant to force companies to change their business models.