A Few Takeaways From the Epic v. Apple Ruling

on September 14, 2021

I know this has been a somewhat persistent subject, but the implications, from a broader antitrust standpoint, are important to keep a pulse on. Below are a few takeaways from the ruling.

  • Apple is not a Monopolist: This may be the most important statement to come from the ruling. Keep in mind many governments, including the US gov, are posturing themselves to start cracking down on “monopolies” via several bills and perhaps more DOJ/FTC lawsuits. Judge Gonzalez’s ruling in several areas will make future lawsuits against Apple much more challenging.
  • Judge Gonzalez was convinced that Apple provides significant value and competitive advantage with IAP. This means IAP is not going anywhere. Despite some of the headlines, Apple’s in-app-purchase will remain the default transaction mechanism consumers are presented with for App Store transactions.
  • Judge Gonzalez’s ruling affirms that Apple provides clear and distinct value from the App Store ecosystem and underlying mechanics, which include app review and IAP
  • The one area Apple will now be required to modify their App Store rules is around developers being able to “steer” their customers to other payment methods and options. It is unclear how this will be implemented, but from the initial wording, it seems unlikely app developers can attempt to cut Apple out entirely. Judge Gonzalez agreed all of Apple’s innovation and IP related to the App Store warranted a commission of some kind. She did not necessarily feel the 30% was justified, which I took as a hint for Apple to strongly consider lowering that rate as a whole. How developers will offer an alternate payment method or process via this steering provision and still give Apple some cut is unknown, but Apple has options in front of them to concede this point and still get a commission given the way this point was worded

One of the biggest things that stands out to me in this case, as well as the FTC vs. Qualcomm case, is how hard the burden of proof actually is in an antitrust case. Two of the largest antitrust cases of the last decade both largely went the way of the defendants in Apple and Qualcomm, respectively. Which, in my opinion, does not bode well for all the posturing of the US Gov to try and bring more monopoly suits against tech giants.

And, ultimately, governments tend to do more damage and enable a variety of unintended consequences when they try to forcibly legislate change rather than pressure the companions to self-regulate. This is where I think we would all prefer, for the most part, tech companies take responsibility to run their platforms in a competitive manner.

While I do believe Apple sensed the allowing of developers to steer customers to alternative means of transactions that IAP was the one they felt they would lose, Apple can still be rigorous in their approach here.

As details emerge on how this will be implemented, it will be interesting to see how Apple approaches this and how tightly they try to hang onto their 30%. As I have repeatedly said, the cleanest solution is for Apple to simply lower their rate. Alternately, after some other broad conversations, another potential angle is for Apple to split out the games portion of the App Store and have a dedicated game store where they are more strict in enforcing IAP and more closely manage the implementation of outside linking and alternate payment methods. Games account for ~70% of Apple’s App Store commission, so if there are going to be aggressive protecting IAP commissions, this is the area it makes the most sense to apply more stringent rules to.

The other angle that does not get talked about is Apple’s advertising strategy within App Store. There is a belief that I think is logical, that once Apple starts getting enough revenue from ads that they are then incentivized or more willing to lower their rate and allow the ads revenue to offset any losses. This theory has legs, but it is a big assumption that Apple’s ads business is lucrative in this regard.

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