The Justice Department has been quietly investigating Apple’s App Store practices since 2019. — Photo by James Yarema on Unsplash
Jurors took less than four hours to find Alphabet Inc’s Google unfairly wields monopoly power in its Android app store, a lightning fast win by Fortnite maker Epic Games Inc that’s galvanising efforts to rein in the power that Google and rival Apple Inc wield over mobile ecosystems.
Google has said it plans to appeal, but key legislation in Europe, investigations in the US and UK and an expected wave of follow-on lawsuits will keep pressure on the tech giants’ app store duopoly.
Billions of dollars are at stake: in-app spending is forecast to reach US$182bil (RM849.48bil) next year and US$207bil (RM966.17bil) in 2025, according to research firm Sensor Tower. And competitors are ready to steal a piece of it: Microsoft Corp said last month that it’s already in talks to launch a mobile app store focused on gaming.
Epic’s earlier case against Apple’s App Store policies was mostly unsuccessful, with a federal judge ruling the iPhone maker’s practices don’t violate federal antitrust law. She did determine that under California law, Apple can’t restrict app owners from telling consumers that other payment systems exist and inviting them to access the apps outside of Apple’s system. An appeals court upheld both parts of the trial judge’s decision; Epic and Apple have appealed to the Supreme Court.
Different outcomes
The divergent outcomes between the Google Play and the Apple cases only appear contradictory, said Phillip Shoemaker, the former head of Apple’s App Store. Apple tightly controls the iPhone, only allows its own apps to be preinstalled on devices and has never allowed other app stores. Android, meanwhile, is open-source and has always allowed direct downloads and alternative app stores.
That required Google to enter business deals with other companies to ensure its Play Store was the favoured access point for apps on Android devices. Those side deals made it look like Google was playing favourites, while Apple was consistent in its rules, Shoemaker said.
Apple also successfully argued that iOS is a closed system to improve the safety and security for users, said Bloomberg Intelligence analyst Jennifer Rie. Google argued its payments were needed to compete against Apple – but those payments – and a bevy of documents outlining its strategy – ultimately were key to Epic winning the case, Rie said.
The knockout blow was that Google paid competitors not to compete, said Rie. “At the end of the day, whether the jury understood the technicalities of antitrust law or not, what they saw was a company that is really big, bribing and bullying” just as Epic alleged, she said.
Jury trials
The different outcomes – and the fact that a judge ruled for Apple while a jury found against Google – may embolden future efforts to bring app store challenges before a jury, said Vanderbilt Law School’s Rebecca Haw Allensworth.
“This is the same case against the same conduct, but it’s judge versus jury,” said Allensworth, who focuses on antitrust and tech platforms. The Epic case “illustrates that judges can sometimes fail to take off their legalistic hats. But the average person understands what competition is for and can call it like they see it”.
The Justice Department recently pushed to have one of its major antitrust cases – a lawsuit challenging Google’s advertising technology business – heard by a jury in lieu of a judge. “A little bit of common sense brought to questions of antitrust law can have a different outcome,” Allensworth said.
Chief executive officer Tim Sweeney said Epic’s suit should serve as a template for other developers to follow against both Google and Apple.
“There are dozens of major developers who have resources to litigate,” Sweeney said in an interview following the verdict. “And I think the same thing will start happening with Apple.”
Digital Markets Act
New European Union antitrust rules to rein in Big Tech platforms that come into full effect in early March will also play a role in curbing power over the app store market.
Under the Digital Markets Act, it will be illegal for the most powerful firms to favour their own services over those of rivals and companies must allow users to download apps from rival platforms. Both Apple’s App Store and Google’s Play Store were designated as services that fall under the law, though Apple is appealing its inclusion.
Apple said it expects to make changes to the App Store as a result of the bloc’s new rules despite the pending appeal.
Platforms that violate the DMA’s long list of rules risk fines of as much as 10% of their worldwide annual sales. This could rise to 20% in the event of repeat infringements and the commission could even demand a company be broken up in the case of systemic violations.
Shoemaker, who left Apple in 2016 and is now CEO of startup Identity.com, said the iPhone maker will likely feel pressure to make similar changes in the US. “There is going to be a groundswell to push Apple to do the same thing here,” he said.
Open App Markets Act
Not long after news of the verdict broke, lawmakers began calling for legislation that would require Apple and Google to open up their app stores. A bill, the Open App Markets Act, had advanced in both chambers of Congress last year, but never made it to the floor. With Epic’s win and a change in leadership in the House, advocates are pushing for the legislation again.
The verdict “underscores the urgency for reform in app store policies”, said John Bergmayer, legal director of advocacy group Public Knowledge, which includes Google and Microsoft among its funders.
Key lawmakers from both parties are in favour of a measure, though the chances of passing legislation in the near term are narrow with campaigns gearing up for the 2024 election.
"We must take the next step in Congress to finally update our consumer laws for the digital age,” said Senator Amy Klobuchar, the Minnesota Democrat who heads the Senate’s antitrust panel.
Antitrust enforcers
In the UK, competition enforcers are pursuing an investigation into Apple and Google’s dominance of the mobile browser market after a separate study concluded they have a “vice-like grip” over operating systems, app stores and web browsers on mobile devices. Apple initially won a decision in March halting the probe, but an appeals court revived the investigation last month. The market probe remains on hold while Apple considers an appeal to the UK’s Supreme Court.
The Justice Department has been quietly investigating Apple’s App Store practices since 2019. DOJ prosecutors attended every day of the Epic trial and have been closely following the appeals. The agency also sent some of its own lawyers to Brussels to monitor how the companies are implementing the EU’s new platform rules.
The Justice Department isn’t expected to act until after the Supreme Court decides on whether to hear Epic and Apple’s appeals. With the justices likely to rule on those petitions as soon as January, the DOJ probe could result in a lawsuit next year. – Bloomberg
