The next chapter of the legal battle between Apple and video games developer Epic Games over its App Store is due to begin today as the two companies go before a federal court.
Epic, maker of the popular video game Fortnite, alleges that Apple has transformed App Store, a once-tiny digital storefront, into an illegal monopoly that squeezes mobile apps for a significant slice of their earnings, which Apple denies.
Epic wants to topple the so-called ‘walled garden’ of the App Store, which Apple started building 13 years ago as part of a strategy masterminded by co-founder Steve Jobs.
App Store brings in billions of dollars each year while feeding more than 1.6 billion iPhones, iPads and other devices made by Apple.
Both Apple CEO Tim Cook and Epic CEO Tim Sweeney will testify in a Oakland, California federal courtroom today, kicking off a trial expected to last most of May.
An Apple logo adorns the facade of the downtown Brooklyn Apple store in New York. Apple is heading into a trial that threatens to upend the app store that brings in billions of dollars each year while feeding the more than 1.6 billion iPhones, iPads, and other devices at the core of its digital empire
The court case stems from Epic’s issue with Apple taking a commission of 15 per cent to 30 per cent on purchases made within apps, including everything from digital items in games to subscriptions.
Apple’s is one of the world’s most profitable companies with a market value that now tops $2.2 trillion, while privately held Epic’s estimated market value of $30 billion is puny in comparison.
Its aspirations to get bigger hinge in part on its plan to offer an alternative app store on the iPhone.
Last August, Apple removed all Epic Games products from its App Store amid a legal battle with the video game developer over in-app purchases
The North Carolina company was expelled from its app store last August, after Epic added a payment system that bypassed Apple.
Epic then sued Apple, prompting a courtroom drama that could shed new light on Apple’s management of its app store.
Neither side wanted a jury trial, leaving the decision to US District Judge Yvonne Gonzalez Rogers, Associated Press reports.
Much of the evidence will revolve around arcane but crucial arguments about market definitions, it says.
Epic contends the iPhone has become so ingrained in society that the device and its ecosystem have turned into a monopoly Apple can exploit to unfairly enrich itself and thwart competition.
Apple claims it faces significant competition from various alternatives to video games on iPhones, like the approximately 2 billion smartphones don’t run iPhone software or work with its app store – primarily those using Google’s Android system.
Epic has filed a separate case against Google, accusing it of illegally gouging apps through its own app store for Android devices.
Apple will also depict Epic as a desperate company hungry for sources of revenue beyond Fortnite, which has been a massive success for the firm.
Apple claims Epic merely wants to freeload off an iPhone ecosystem in which Apple has invested more than $100 billion over the past 15 years.
Estimates of Apple’s app store revenue range from $15 billion to $18 billion annually, although Apple – which doesn’t publicly disclose its own figures – disputes these estimates.
Instead, it has emphasised that it doesn’t collect a cent from 85 per cent of the apps in its store.
Under Apple’s current policy, it takes a 30 per cent cut of all in-app purchases in its App Store (pictured)
The commissions it pockets, Apple says, are a reasonable way for the company to recoup its investment while financing an app review process it calls essential to preserving the security of apps and their users.
About 40 per cent of the roughly 100,000 apps submitted for review each week are rejected for some sort of problem, according to Kyle Andeer, Apple’s chief compliance officer.
Epic will try to prove that Apple uses the security issue to disguise its true motivation – maintaining a monopoly that wrings more profits from app makers who can’t afford not to be available on the iPhone.