The Epic vs. Apple trial has begun. Here’s what you need to knowExBulletin

Epic Games, the creator of the popular game Fortnite, has accused Apple of operating the App Store as an illegal monopoly because it can only handle in-app purchases on the iPhone with Apple’s own payment system. The outcome of the trial could have widespread consequences for Silicon Valley and the future of how money works on smartphones and other devices. Andrew Caballero-Reynolds / AFP via Getty Images hides captions

Switch captions Andrew Caballero-Reynolds via Getty Images / AFP

Epic Games, the creator of the popular game Fortnite, has accused Apple of operating the App Store as an illegal monopoly because it can only handle in-app purchases on the iPhone with Apple’s own payment system. The outcome of the trial could have widespread consequences for Silicon Valley and the future of how money works on smartphones and other devices.

Andrew Caballero-Reynolds via Getty Images / AFP

Epic Games, the maker of the hit video game Fortnite, brought Apple to federal court on Monday with the aim of launching a week-long blockbuster trial centered on Apple’s iron grip on key parts of the mobile economy. ..

The proceedings that prompted the trial are about one app developer, Epic, a $ 29 billion company based in Cary, North Carolina, but the result is how money is spent on Silicon Valley companies, smartphones, and more. A device that has the potential to have widespread consequences for the future of what works.

If Epic wins, Apple, a $ 2.2 trillion company, could be forced to restructure its profitable app store policy, which is the target of increased pressure from Washington and the EU. there is.

What exactly do you mean?

Epic has accused Apple of operating the App Store as an illegal monopoly because it can only handle in-app purchases on the iPhone with Apple’s own payment system. There are over 1 billion iPhones in the world, and payments usually cost a 30% fee.

According to Epic, what critics call the “Apple tax” is unfairly applied and has a significant impact on small app developers. Small app developers are at a disadvantage when trying to compete with Apple’s own apps to avoid charges.

The money earned from the commission is an important source of revenue for Apple and is part of the fees and subscriptions that generated $ 54 billion last fiscal year.

Apple states that taxes are required to protect the privacy and safety of apps on Apple devices.

Epic estimates that Apple’s profits from App Store pricing are close to 80% of what Apple calls “simply wrong.”

Where is the trial taking place?

The trial is taking place in an almost empty federal court in Oakland, California. The audio live stream of the proceedings is publicly available, but due to pandemic-related health concerns, there are strict restrictions on who is allowed to participate in the proceedings. The judge spoke to the lawyer on Monday from a bench surrounded by plexiglass.

Where else is Apple’s App Store under attack?

Washington lawmakers held a hearing last month focusing on the power of tech giant app stores.

Justice ministry investigators are reportedly investigating Apple’s App Store rules.

And last week, European Union regulators charged Apple for violating European antitrust laws through the app store.

In the case of Epic, who decides who will win?

Federal Judge Yvonne Gonzales Rogers believes that Epic’s proceedings at least justify a complete trial, as Epic has been able to clear enough procedural hurdles to move forward.

However, under U.S. law, plaintiffs face a difficult battle to win antitrust proceedings as courts have long interpreted the country’s 100-year-old competition law in a way that favors large corporations. I will.

In a pre-trial ruling, the judge hinted that he was skeptical of Epic’s allegations that Apple violated the 1890 Sherman Antitrust Act by acting like an illegal monopoly.

Proving Apple’s monopoly isn’t enough, as it’s not illegal under US law. Instead, Epic must show that Apple is abusing its monopoly power to hurt its competitors and distort the entire market. Experts say that clearing it is a high standard.

Both sides have waived their right to a jury trial. This means that it is a bench trial decided by Gonzales Rogers.

Whatever her decision is, the appeal process drawn out is largely guaranteed.

Tim Sweeney, CEO of Epic Games, entered the Ronald V. Dellums building in Oakland, California, and attended his company’s federal proceedings against Apple.Noah Burger / AP hides captions

Noah Berger / AP to switch captions

Tim Sweeney, CEO of Epic Games, entered the Ronald V. Dellums building in Oakland, California, and attended his company’s federal proceedings against Apple.

Noah Burger / AP

What happened in court on Monday?

Epic’s lawyers tried to convince Gonzales Rogers that Apple designed the App Store to give it an edge over other developers. There are no other payment processing options. Either use Apple’s payment system or don’t pay for the app or items within the app. Epic’s lawyer claimed it was illegal.

“When you pick up your iPhone, you’re in another world. Every time you make an in-app purchase, you’re taxed at 30%,” said Epic lawyer Catherine Forest. “The most popular flower in a walled garden is the Venus flytrap.”

In its own opening statement, Apple’s lawyer said a 30% fee would help ensure the company’s privacy and security standards. Apple lawyers argued that this was not an abuse of power, but a quality check of Apple’s operating system known as iOS.

“Epic requires the court to enforce permission on all third-party app stores to allow Apple to distribute unreviewed and untested apps on all iOS devices,” Apple said. Attorney Calendan said.

According to Dan, Apple did not produce 30% from thin air. Rather, she argued that when the App Store was introduced, it became the industry standard for digital transactions, such as in gaming platforms, in 2008.

Epic CEO Tim Sweeney stood on the stand on Monday. Sweeney told the judge that he “early loved it” when it came to Apple’s mobile ecosystem, wearing a blue suit and tie instead of regular T-shirts and cargo pants, but over time. With that policy is becoming more and more restrictive.

As a result, it costs money to support the app on Apple devices. For example, in the case of the popular game Fortnite, Epic could have more than 100 developers working on the mobile version of the game.

Sweeney estimated that by making a 30% reduction on each in-app purchase, Apple made more money than the developers who created them from some apps.

However, according to Sweeney, the purpose of the Epic proceedings was not to compensate for financial damages, but to persuade the judge to order Apple to change the behavior of the iPhone app in the market.

“Epic is just looking for changes in Apple’s future behaviour,” Sweeney said.

In Apple’s question, Apple lawyer Richard Doren pointed out last year’s Sweeney decision that “Fortnite” players would use Epic’s own payment processing system to pay the game’s currency at a lower rate than Apple. Allowed. This violates Apple’s Terms of Service.

“Did you deliberately choose to violate your contract with Apple as Epic’s shot originator in August 2020?” Drain asked Sweeney.

“Yes,” Sweeney replied, knowing that Apple could kick “Fortnite” out of the app store, but still wanted Apple to “rethink that policy seriously.”

When Apple refused, Sweeney sued Apple for a parody of an old Apple ad, urging “Fortnite” gamers to gather around the #FreeFortnite hashtag.

On Monday, Apple lawyer Drain asked Sweeney if everything was a public relations stunt over personal complaints.

“Our goal was to show smartphone owners that they could save money by removing platform charges,” said Sweeney.

Sweeney’s cross-examination will continue on Tuesday.

What will happen next?

The trial will last for three weeks.

The most anticipated testimony is expected to be from Apple CEO Tim Cook, but the exact date of Cook’s testimony has not yet been set.

In addition to company executives, duel economists are called in from their respective sides to testify about market issues related to the incident.

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