Epic Games and Apple are heading to court. Experts say the case could mean big changes for consumers
'I think the end is coming for this 30 per cent fee,' says Sally Hubbard
As a lawsuit between Epic Games, which makes Fortnite, and Apple heads to court, its outcome could mean industry-wide changes for how consumers buy apps and make in-app purchases on their devices, according to experts.
At the heart of the dispute is a 30 per cent fee Apple charges app developers on purchases made directly inside apps and games. Epic alleges that Apple is using control over its operating system and services to hold back competition.
Epic kicked off the fight last August when Apple booted its hit multiplayer game Fortnite from the App Store for implementing a workaround to Apple's payment system that offered customers lower prices on in-game content. Apple requires most developers to use its payment system.
"Basically what Apple has is gate-keeping power. It has a choke point between millions of businesses and consumers," said Sarah Miller, executive director of the American Economic Liberties Project.
"They use that choke point to preference themselves through extracting very high fees, through developing competing apps and then preferencing those apps because they can see the whole kind of universe of the app ecosystem."
Experts say that a ruling in favour of Epic could mean lower prices for consumers.
What does Apple say?
Apple says it needs to keep a tight hold on the apps it distributes in order to protect the security and privacy of its devices and users.
That tight hold prevents users from installing apps downloaded or purchased from other sources, a method called sideloading, which is allowed on Apple's laptop and desktop computers.
Google also provides the option on its Android operating system, though Miller says that the option is rarely used due to the complexity.
She argues that Apple is using the safety argument as a veneer to keep consumers and developers locked into its payment system.
"I think in this case … Apple is using privacy and security essentially as an excuse to maintain control over this particular gate between businesses and consumers," she said.
What could be the outcome?
Some have likened the Epic and Apple case to U.S. v. Microsoft Corp. in 2001, which focused on whether Microsoft engaged in anti-competitive behaviour by favouring its Internet Explorer web browser over others, like Netscape Navigator, on Windows.
"They were using an operating system to disadvantage competitors in the browser market that needed to be distributed through the operating system," explained Sally Hubbard, author of Monopolies Suck and a director at the Open Markets Institute.
She compares that case to Apple's control over what apps can be installed on its devices. "So it is quite analogous to the current situation with Apple," she said.
A judge ultimately found that Microsoft worked to stifle threats from their competitors.
In response to criticism over its fees, Apple last year reduced its cut of sales to 15 per cent for small developers making less than $1 million US per year. Miller says that fee is still too high.
"If you compare that [15 to 30 per cent cut] to what a credit card company takes, they tend to take two to three per cent. So we're talking about multiple of what is typically kind of expected to facilitate a transaction," she explained.
And while experts say Epic's battle won't be resolved any time soon, Hubbard welcomes what she calls a reckoning for tech companies — and she expects to see some changes.
"Regardless of what happens in this particular case, I think the end is coming for this 30 per cent fee.
Is Epic alone in their fight?
The California court case is not the only legal challenge Apple is facing.
Regulators in the European Union accused Apple on Friday of anti-competitive practices in the music streaming market, siding with Spotify. That case could lead to hefty fines against Apple.
"This significant market power cannot go unchecked as the conditions of access to the Apple App Store are key for the success of app developers," European Competition Commissioner Margrethe Vestager said in a news conference.
Spotify welcomed the investigation, while Apple rebuffed the charges. They argue that Spotify has become the largest music streaming service in the world, in part thanks to the App Store.
U.S. senators also took Apple, along with Google, to task last month over the fees they charge to developers. Representatives for Spotify and dating services company Match Group testified against the companies.
Hubbard says that for too long, smaller companies have resisted taking action against California's big tech giants — but that's changing.
"The reason why we haven't seen action from private parties is it's really hard to have the resources to sue a monopolist," she said. "And there's incredible fear of retaliation when you actually go against a company that controls your ability to get to market."
Epic Games derives most of their revenue through gaming consoles, Hubbard notes, which puts them in a unique position to take on the tech giant on.
Written by Jason Vermes with files from Reuters. Interview with Sarah Miller produced by Sameer Chhabra.