Steering committee

Both sides in Epic v Apple have declared victory, and both are partly right. On 10 September Judge Yvonne Gonzalez Rogers, sitting in Oakland, found that Epic Games had not shown Apple to be a monopolist. Epic lost its claims under the federal Sherman Act and California’s Cartwright Act. It won one claim, under California’s Unfair Competition Law, and that single win may prove the more expensive for Apple.^{3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021}

Apple’s general counsel, Kate Adams, was quick off the mark. “Let me repeat that: the Court found that Apple is not a monopolist under ‘either federal or state antitrust laws,’” she said, calling the outcome “a resounding victory”.^{19to5MacApple statement on the Epic Games ruling10 Sept 2021} Epic’s Tim Sweeney said the ruling “isn’t a win” for developers or consumers, and Epic filed notice of appeal on 12 September.^{3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021,5Michael TsaiAnti-steering ruling in Epic v Apple10 Sept 2021} Each camp is reading the half of the judgment it likes.

We think the judge got both halves right. The monopoly finding is more defensible than it looks. The court rejected the market that Epic proposed (iOS app distribution) and the one that Apple proposed (all digital gaming), and settled on mobile gaming transactions.^{3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021} Within it she accepted that Apple has real power, with a share “over 55%” and “extraordinarily high profit margins”. Then she added four words that antitrust lawyers will be quoting for years: “Success is not illegal.”^{4GSMArenaEpic Games v Apple lawsuit ruling10 Sept 2021} A firm that builds a popular, tightly run platform does not break the law by being popular, and the law is better for saying so.

Nor did she buy Epic’s attack on the walled garden itself. She was persuaded that a closed ecosystem is reasonably necessary for security, privacy and a curated user experience, so Apple may still bar alternative app stores.^{3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021} Customers who like an iPhone because it is hard to infect with malware will, on the whole, be relieved.

The second half is where Apple should worry. Under the Unfair Competition Law the judge found an “incipient violation of antitrust law” in Apple’s anti-steering rules, which stop developers from telling users that another way to pay exists.^{3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021,5Michael TsaiAnti-steering ruling in Epic v Apple10 Sept 2021} Her injunction bars Apple from prohibiting “buttons, external links, or other calls to action” that point customers to other purchasing mechanisms, and from blocking developers who wish to contact users who registered in their apps.^{2TidBITSJudge rules for Apple over Epic Games, strikes down App Store anti-steering policies13 Sept 2021,3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021} The order applies nationwide and takes effect on 9 December unless a higher court stays it.^{2TidBITSJudge rules for Apple over Epic Games, strikes down App Store anti-steering policies13 Sept 2021,5Michael TsaiAnti-steering ruling in Epic v Apple10 Sept 2021}

The remedy is modest in what it demands. Apple can still collect its commission on purchases made inside its apps; the judgment does not touch the 30% rate, nor the 15% and 40% tiers.^{2TidBITSJudge rules for Apple over Epic Games, strikes down App Store anti-steering policies13 Sept 2021,3FenwickMixed ruling on Epic's antitrust challenge to Apple's App Store13 Sept 2021} Epic, for its part, must pay Apple 30% of the revenue it collected through its own payment system in Fortnite, which the press puts at more than $3.5m.^{2TidBITSJudge rules for Apple over Epic Games, strikes down App Store anti-steering policies13 Sept 2021,5Michael TsaiAnti-steering ruling in Epic v Apple10 Sept 2021} That is a rounding error for a firm of Apple’s size, and a mild rebuke to Epic.

Yet the modesty is the point. An Apple that may no longer gag developers has to defend its commission on the merits. A developer can now put a link in an app saying that the same subscription is cheaper on the web, and a customer can click it. If Apple’s 30% is worth paying for the security and convenience the judge praised, plenty of users will stay put. If it is not, the link will say so.

The strongest objection comes from Apple’s side. A platform, it may argue, has the right to control how its own store works, and using Apple’s audience while steering sales away from it is precisely the free-riding the commission exists to prevent. There is something in this, since Apple built the audience that developers reach. But the judge also noted Apple’s “low apparent investment in App Store-specific intellectual property”,^{5Michael TsaiAnti-steering ruling in Epic v Apple10 Sept 2021} which sits awkwardly with a claim to payment in perpetuity. A toll road may charge a toll. It may not forbid signs saying there is another road.

This is also, for those who prefer markets to mandates, the right sort of remedy. A court that ordered lower commissions would be setting a price, and judges are no better at that than at designing phones. A court that stops one firm suppressing information leaves prices to competition.

Apple was found not to be a monopolist. It was also found to have been gagging its customers, and it may keep the first title only if it gives up the second.