What Are the Issues in Epic's Court Battle with Apple?
2021-05-20
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1Apple is fighting a court battle against Epic Games that could affect how major technology companies are regulated in the future.
2The trial, which began in California on May 3, is expected to last about a month.
3It centers on whether Apple's control over its App Store system unlawfully locks out competition.
4Apple requires that nearly all third-party software developed for iPhones and other iOS devices be released through its App Store.
5It also requires developers to use Apple's in-app payment system, which charges commissions of up to 30 percent.
6Epic, which sells its hugely popular Fortnite video game on the App Store, argues that Apple's requirements establish a monopoly.
7The two companies are debating whether Apple has the right to set its own rules, fully control its payment system and remove apps from the App Store.
8Epic tried to avoid paying Apple by creating its own payment system for Fortnite.
9But Apple said the action violated its rules and the company kicked Epic out of the App Store.
10That dispute led Epic to bring the legal action against Apple.
11Apple rejects Epic's arguments.
12It says its payment structure is not unusual in the industry.
13And it says its commissions are fair in exchange for giving developers access to a worldwide marketplace that it spent $100 billion to build.
14Epic's CEO, Tim Sweeney, admitted in court that his company knowingly violated Apple's rules by creating its own payment system for Fortnite.
15Sweeney said Epic took the action in an effort to prove a point.
16"I wanted the world to see that Apple exercises total control over all software on iOS, and it can use that control to deny users' access to apps," he testified.
17Epic says Apple's system makes it as hard as possible for users to stop buying Apple products and services.
18Apple argues that Epic's rules violation was an attempt by the company to increase its own profits by benefiting from Apple's massive App Store structure.
19Sweeney said in court that Epic is seeking to increase profits through its own app store, which charges 12 percent commissions on in-app sales.
20While that model is not currently profitable, Sweeney said it could be in the future.
21Even though Apple's late co-founder Steve Jobs publicly said the App Store was not expected to make a lot of money when it opened in 2008, it is now highly profitable.
22It brought in nearly $17 billion in just the first three months of 2021.
23A lawyer for Epic, Katherine Forrest, noted in court that the App Store's profit margin during 2018 and 2019 was 75 to 78 percent.
24But having a financially successful App Store does not mean Apple has violated any laws.
25Most legal experts say Epic has an uphill battle to win the trial.
26"I don't think they are likely to win," said Rebecca Haw Allensworth, a law professor at Vanderbilt Law School.
27However, she said the case may have already served a valuable purpose - "drawing attention to some of Apple's practices that many developers see as abusive."
28Larry Downes, with Georgetown University's Center for Business and Public Policy, also predicted a court loss for Epic.
29"I would certainly say Apple has the stronger case under existing case law," he said.
30While Apple may be in a good position to win, regulators around the world are starting to look more closely at the company.
31As public support for regulating big tech grows in the U.S. and abroad, Epic also launched a public relations campaign to build support for its case.
32The company has run advertisements accusing Apple of taking a large cut of app sales.
33Karen Dunn is a lawyer for Apple.
34She said that rather than investing in creative solutions, Epic chose to spend money on lawyers, PR and policy advisors "in an effort to get all ... the benefits Apple provides without paying."
35Joel Mitnick is a former lawyer with the U.S. Federal Trade Commission.
36He says the biggest threat to Apple's App Store is not court cases, but possible new regulations.
37"If it were me, I would be looking at ways in which I could influence what might be inevitable changes to the rules under which (Apple) are going to operate," he said.
38One judge is to make the decision in this non-jury trial.
39Experts say the decision will come down to a market definition.
40Epic's position is that the iPhone and the App Store have grown into an influential single market.
41Apple argues that the market definition should include other devices, such as computers, or Microsoft's Xbox and Sony's PlayStation gaming machines.
42Those companies also charge developers a 30 percent commission on payments.
43Downes, the Georgetown University expert, said the judge has to place herself in the shoes of consumers.
44"If it's not harming consumers, then this is just a contract dispute between two companies, with one of them trying to use (legal action) to renegotiate the terms," he said.
45I'm Bryan Lynn.
46And I'm Dorothy Gundy.
1Apple is fighting a court battle against Epic Games that could affect how major technology companies are regulated in the future. 2The trial, which began in California on May 3, is expected to last about a month. It centers on whether Apple's control over its App Store system unlawfully locks out competition. 3Apple requires that nearly all third-party software developed for iPhones and other iOS devices be released through its App Store. It also requires developers to use Apple's in-app payment system, which charges commissions of up to 30 percent. 4Epic, which sells its hugely popular Fortnite video game on the App Store, argues that Apple's requirements establish a monopoly. 5The two companies are debating whether Apple has the right to set its own rules, fully control its payment system and remove apps from the App Store. 6Epic tried to avoid paying Apple by creating its own payment system for Fortnite. But Apple said the action violated its rules and the company kicked Epic out of the App Store. That dispute led Epic to bring the legal action against Apple. 7Apple rejects Epic's arguments. It says its payment structure is not unusual in the industry. And it says its commissions are fair in exchange for giving developers access to a worldwide marketplace that it spent $100 billion to build. 8Epic's CEO, Tim Sweeney, admitted in court that his company knowingly violated Apple's rules by creating its own payment system for Fortnite. Sweeney said Epic took the action in an effort to prove a point. 9"I wanted the world to see that Apple exercises total control over all software on iOS, and it can use that control to deny users' access to apps," he testified. Epic says Apple's system makes it as hard as possible for users to stop buying Apple products and services. 10Apple argues that Epic's rules violation was an attempt by the company to increase its own profits by benefiting from Apple's massive App Store structure. 11Sweeney said in court that Epic is seeking to increase profits through its own app store, which charges 12 percent commissions on in-app sales. While that model is not currently profitable, Sweeney said it could be in the future. 12Even though Apple's late co-founder Steve Jobs publicly said the App Store was not expected to make a lot of money when it opened in 2008, it is now highly profitable. It brought in nearly $17 billion in just the first three months of 2021. 13A lawyer for Epic, Katherine Forrest, noted in court that the App Store's profit margin during 2018 and 2019 was 75 to 78 percent. 14But having a financially successful App Store does not mean Apple has violated any laws. Most legal experts say Epic has an uphill battle to win the trial. 15"I don't think they are likely to win," said Rebecca Haw Allensworth, a law professor at Vanderbilt Law School. However, she said the case may have already served a valuable purpose - "drawing attention to some of Apple's practices that many developers see as abusive." 16Larry Downes, with Georgetown University's Center for Business and Public Policy, also predicted a court loss for Epic. "I would certainly say Apple has the stronger case under existing case law," he said. 17While Apple may be in a good position to win, regulators around the world are starting to look more closely at the company. As public support for regulating big tech grows in the U.S. and abroad, Epic also launched a public relations campaign to build support for its case. The company has run advertisements accusing Apple of taking a large cut of app sales. 18Karen Dunn is a lawyer for Apple. She said that rather than investing in creative solutions, Epic chose to spend money on lawyers, PR and policy advisors "in an effort to get all ... the benefits Apple provides without paying." 19Joel Mitnick is a former lawyer with the U.S. Federal Trade Commission. He says the biggest threat to Apple's App Store is not court cases, but possible new regulations. 20"If it were me, I would be looking at ways in which I could influence what might be inevitable changes to the rules under which (Apple) are going to operate," he said. 21One judge is to make the decision in this non-jury trial. Experts say the decision will come down to a market definition. Epic's position is that the iPhone and the App Store have grown into an influential single market. 22Apple argues that the market definition should include other devices, such as computers, or Microsoft's Xbox and Sony's PlayStation gaming machines. Those companies also charge developers a 30 percent commission on payments. 23Downes, the Georgetown University expert, said the judge has to place herself in the shoes of consumers. 24"If it's not harming consumers, then this is just a contract dispute between two companies, with one of them trying to use (legal action) to renegotiate the terms," he said. 25I'm Bryan Lynn. 26And I'm Dorothy Gundy. 27Reuters, The Associated Press and Agence France-Presse reported this story. Dan Novak adapted the reports for VOA Learning English. Bryan Lynn was the editor. 28_________________________________________________________________________ 29Words in This Story 30regulate -v. to bring something under the control of a government or authority 31commission -n. a payment made to someone who sells goods that is directly related to the amount sold 32monopoly -n. complete control of the entire supply of goods or of a service in a certain area or market 33access -n. the right or ability to approach, enter or use 34profit margin -n. the difference between the total cost of making and selling something and the price it is sold for 35benefit -n. a helpful or good effect 36inevitable -adj. sure to happen 37consumer -n. a person who buys goods and services