Apple vs Epic Games: Antitrust battle over iPhone app store heads to US Court of Appeals

Apple vs Epic Games: Antitrust battle over iPhone app store heads to US Court of Appeals

Apple is filing a lawsuit against the company behind the popular video game Fortnite, reviving a high-stakes antitrust battle over whether the digital fortress that protects the iPhone’s app store illegally enriches the world’s most valuable company while stifling competition.

Oral arguments on Monday before three judges of the Ninth Circuit Court of Appeals are the latest volley in the legal battle over an app store that provides a wide range of products for more than 1 billion iPhone handsets and serves as a mainstay in Apple’s $2.4 trillion empire (about Rs. 1,94,77,360 crore).

It’s a dispute that will likely remain unresolved for a long time. After hearing Monday’s arguments in San Francisco, the appeals court is not expected to rule for another six months to a year. The issue is so important to both companies that the losing side is likely to take the fight to the US Supreme Court, a process that could stretch into 2024 or 2025.

The feud dates back to August 2020, when Epic Games, makers of Fortnite, filed an antitrust lawsuit in an attempt to tear down the walls that have given Apple exclusive control over the iPhone app store since its inception 14 years ago.

That tight control over the app store has allowed Apple to impose commissions that give it a 15% to 30% cut on purchases made for digital services sold by other companies. By some estimates, those commissions pay Apple $15 billion (approximately Rs. 1,21,820 crore) to $20 billion (approximately Rs. 1,62,430 crore) annually – income that the Cupertino, Calif., company says helps cover the cost of technology for the iPhone and a store that now contains nearly 2 million free apps.

US District Judge Barbara Gonzalez Rogers backed Apple almost entirely in a 185-page ruling issued 13 months ago. This followed a closely watched trial that included testimony from Apple CEO Tim Cook and Epic CEO Tim Sweeney, as well as other top executives.

While she declared that Apple’s exclusive control of iPhone apps was not a monopoly, Gonzalez Rogers opened a loophole that Apple wants to close. The judge ordered Apple to allow apps to provide links to payment alternatives outside the app store, a requirement that has been postponed until the appeals court rules.

Monday’s arguments are expected to begin with Epic attorney Thomas Goldstein trying to persuade the trio of judges – Sidney R. Thomas, Milan D. Smith Jr.

A Justice Department attorney will also have a chance to explain why the agency believes Gonzalez Rogers interpreted federal antitrust law too narrowly, undermining future enforcement actions against potentially anticompetitive behavior in the technology industry. While the department technically isn’t taking sides, arguments from it are expected to help Epic make the case for the appeals court to overturn the lower court’s decision.

Another attorney for the California Attorney General’s Office will present arguments in defense of the law that Gonzalez Rogers cited in ordering Apple to provide links to alternative forms of payment outside of its app store.

Apple attorney Mark Perry will have the opportunity to present closing arguments, giving him the opportunity to tailor a presentation designed to answer some of the questions that judges may ask of preceding attorneys.

Much of what Perry says probably echoes the successful case Apple brought in lower court.

During his lower court testimony, Cook argued that forcing Apple to allow alternative payment systems would weaken security and privacy controls valued by consumers who buy iPhones over devices with Google’s Android software. That scenario would create “a kind of toxic mess,” Cook warned on the witness stand.

Even as he protested Apple’s tight control of the app store, Sweeney acknowledged that he owns an iPhone, in part because of its security and privacy features.

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