The game company Epic Games v. Apple’s monopoly case ended the trial. During the three-week trial, Epic dug up a lot of black material for Apple, and there were many scenes that were difficult to justify during the cross-examination. But unlike Epic’s “multi-point attack”, Apple insists on telling a clear brand story, which seems to be moving regardless of the outcome of the lawsuit.
01 Epic sues AppStore for unfair competition, iOS closes Apple’s monopoly on the market
On August 13, 2020, North American time, ” Fortnite” introduced its own payment method in the promotion of the day, which bypassed the payment channel required by Apple’s App Store. Apple removed “Fortnite” from the App Store on the grounds that it violated in-app payment rules. Epic filed a lawsuit against Apple on the same day, and the case went to trial three weeks ago.
Epic complained that the App Store controlled the distribution of apps, forced developers to use Apple’s payment system, and charged 30% commission, which harmed the interests of developers and users. Epic pointed out that the closed nature of iOS increases the cost for users to replace devices or systems. At the same time, since the iOS system does not allow side-loading of third-party applications or third-party application stores, Epic directly describes Apple’s application distribution as a “unilateral market”, where Apple has absolute control. Once the definition of “unilateral market” was established, Apple violated the “principle of necessary facilities.”
The principle of necessary facilities requires that if a leading enterprise in the upstream market controls necessary facilities that are indispensable and cannot be replicated for downstream production, it is obliged to allow downstream manufacturers to use these facilities on appropriate commercial terms. This is directly related to the content of the anti-monopoly law.
Especially in the gaming industry, Apple clearly stipulates that unless every game in the cloud game is downloaded from the App Store and undergoes independent review, cloud games such as Microsoft xCloud, Google Stadia, and Nvidia GeForce Now are prohibited from being listed on iOS. Epic asked a group of game manufacturers to testify, trying to reveal that Apple’s monopoly on games went further.
During the three-week trial, Epic organized many witnesses, collected a lot of data, and also produced some internal emails from Apple. For example, Epic proved that the App Store’s profit margin can reach 78%; “Fortnite” helped Apple earn $100 million in the 11 months since its release; Epic disclosed Apple’s motives for handling the worst security incident in iOS history (XcodeGhost incident); Apple gives special permissions to Netflix, Hulu and other applications, such as providing user data and helping A/B testing.
It seems that Epic has torn off Apple’s “hypocrisy” mask and portrayed Apple as a guy who only recognizes money. But the problem also lies here. Most of the time, Epic only seems to represent the interests of developers or manufacturers. It rarely mentions users, and the witnesses brought by Epic lack the voice of users. In a monopoly case, the impact on users is what the judge wants to know more about.
02 Judges and Cook Debate Business Model
Judge Yvonne Gonzalez Rogers had a copy of the antitrust law in the trial, which recorded research cases such as the American Standard Oil Monopoly Case and the American Express Case. The history of antitrust law is a history of “the downfall of giants.” During the three-week trial, the judge always wanted to know what kind of situation consumers faced in the collision of the two commercial companies. She doubted Epic’s motives, questioned the rationality of Apple’s remedial measures requested by Epic, and precisely pointed out the inconsistent aspects of Apple’s business model.
Apple forces developers to use its own payment system but does not completely prohibit third-party payment channels. Users can use Safari and other web-side channels to recharge. However, the App Store has a “reversal rule”, which requires developers not to inform users of the existence of third-party recharge methods or recharge activities outside the site.
Judge Rogers hopes that Epic can tell her how much users want to use third-party payment channels or the differences between different channels for users. At the same time, she also used the “reversal rule” to initiate soul torture to Apple to let users know why it is not possible. Most of the time, the questions she asked Apple were more precise than those asked by Epic.
On the day Cook appeared in court, Judge Rogers and Cook fought fiercely over Apple’s business model. Cook said that only allowing apps to use the built-in payment system with 30% commission is the business model that Apple has chosen, and it is also the return of Apple’s intellectual property rights.
The judge was obviously not convinced. She said that all developers are using Apple’s intellectual property rights, but only a portion of the developers pay Apple, and they are actually paying for all developers. She also pointed out that the App Store has brought users to game developers, but in the future, developers have retained these users with game content, and all Apple can do is collect commissions.
An Epic Games survey showed that 39% of developers said they were dissatisfied with Apple’s distribution services. Judge Rogers asked Cook: “If 39% of the developers are not satisfied, how can you accept it? In my opinion, you do not feel the pressure of competition, otherwise, you will definitely take measures to address the developers’ concerns .”
She speculated that Apple’s plan to reduce the rake rate this year was not out of competitive pressure, but out of concerns about supervision and legal proceedings. Starting this year, Apple has reduced App Store commissions to 15% for small businesses with annual revenues of less than $1 million.
The judge believes that Epic has never come up with enough cases that can prove Apple’s monopoly, and her two-hour battle with Cook is a judgment on whether Apple’s business is good or bad, more like a business discussion rather than a monopoly. discuss. However, the final judgment, there is still a few weeks away. She has hinted that starting from the “reversal to the rules”, choose a “compromised” way to resolve this dispute. The “reversal rule” seems to be the closest to the user in this case.
03 Apple: We care about users
Apple’s performance in these three weeks is not so much a nervous trial, as public relations. Especially in the two days that Apple’s senior vice president of global marketing, Phil Schiller, appeared in court, he played his advantage as a marketing expert and almost regarded the court trial as the site of the product announcement.
Apple repeats the story it has told on countless occasions-we care about users.
Schiller told the story of the birth of the App Store. He said that the App Store was not born for profit. In order to avoid the risk of iPhone “jailbreaking” to users, the App Store provides an official channel for installing apps. In addition, as a marketer, Schiller participated in the design of the iPod click wheel. Schiller used this anecdote to support a convincing statement: Apple’s different departments are not simply divided according to their functions. Apple claims that it does not know how much money the app store makes because of such management within Apple. system.
Epic asked a technical researcher to come to the court to prove technically that if iOS allows third-party apps/stores to be sideloaded like MacOS, it will not affect the security of the iPhone. Craig Federighi, Apple’s senior vice president of software engineering, appeared in court for a “cesarean examination”. The engineer in charge of iOS and Mac software directly denied the security of Mac computers. He frankly admitted that the Mac The malware exceeded their expectations.
On the day of Cook’s appearance in court, while defending his business, he repeatedly emphasized that users also purchased “certain security and privacy principles” when choosing iPhones. They entered a complete ecosystem and they should not be forced to do so. The cumbersome and complicated decision of where to buy an app has become Apple’s principle of removing illegal apps.
Therefore, in the story of Apple, its style is like this:
Why is the App Store so strong? Answer: In order to help users filter malicious apps, the App Store will protect customers from potentially fraudulent transactions worth more than $1.5 billion in 2020, excluding nearly 1 million new apps with risks and vulnerabilities.
Why doesn’t the App Store abolish the reversal rule? Answer: In order to protect users, it is not safe to input payment information through other channels.
Why does iOS not allow third-party sideloading? Answer: The iOS ecosystem is one of the reasons why users choose iPhone. Third parties will bring catastrophic damage to the iOS ecosystem.
Does the closedness of iOS increase the user’s replacement cost? Answer: Users can play games on different platforms. Apple does not close games.
Apple tells a story that everything starts from the user. In front of this story, Epic’s proof is more like accusing: You clearly said that you want to get 100 points, why you only get 60 points. Apple said: I have scored 80 points.
04 The case is overshadowed
Most of the time, Apple has an advantage in court trials. But in the battle between Cook and the judge, both of them performed strongly, which is considered to be the suspense of this case.
In the story of Apple’s “all for users”, the judge pointed out that you are essentially making money from users. There are other ways to make money, but Apple chooses to draw commissions from developers, and the wool ends up on users. Cook also demonstrated the “duty” of a businessman. Cook said: “Obviously there are other ways to make money, but we chose this one because we think this one is the best way.”
In addition, the judge also pointed out that Apple has no competitive pressure, and this emotional tilt cast a shadow over the case.
If Apple wins the lawsuit, its three-week “public relations campaign” will undoubtedly be a success, and its “all for users” story has a firm foothold in the court.
If the “reversal rule” is abolished, in a sense, Apple has optimized a “shop bullying” link, maybe the iPhone will usher in a wave of “road to fans”?
And if the trial requires iOS to be open, iOS will actually become an “Android” in addition to Android, which may have the greatest impact on Apple. But be aware that Epic is also filing a lawsuit against the Android store over the commission, which cannot be explained by the judge. The most important point is that this is a local federal court, and the final decision may not be accepted by other courts.
Concluding remarks
The case will affect the mobile application market with a market size of 142 billion U.S. dollars. The core is whether this “market” has formed a monopoly in the traditional sense.
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