A federal judge’s edict that Apple Inc. is not a monopolist elicited claims of victory by the iPhone maker, but it has also cemented the resolve of lawmakers in the U.S., Europe and elsewhere to push even harder for new antitrust laws.
Judge Yvonne Gonzalez Rogers’ assessment of Apple
in her decision Friday on Epic Games Inc.’s antitrust lawsuit seemed to both undercut and energize legislators’ efforts to cast Apple as a monopolistic bully.
“This shows the limitation of the powers that legislators and the judiciary system have over antitrust law,” Ed Mills, a Raymond James analyst who covers federal policy, told MarketWatch. “You need some court cases that you lose [such as when a major company is not ruled a monopolist, as in Epic-Apple] to put political pressure on Congress.”
There is historical precedent, as Sen. Amy Klobuchar, D-Minn., chairwoman of the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, pointed out in her recent book, “Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age.” The Sherman Antitrust Act was born in 1890 against a backdrop of abuses of power by large corporations and railroad conglomerates. The rise of Big Tech, she argued, highlights how current antitrust law falls short in addressing the immense monopolistic powers wielded on digital platforms.
And with a similar Epic antitrust lawsuit vs. Google expected in federal court in North Carolina next year, the pressure is ratcheting up for federal lawmakers.
Gonzalez Rogers’ carefully crafted decision “fashioned a legal theory that implemented a remedy,” antitrust lawyer Valarie Williams told MarketWatch. “The judge said some of Apple’s behavior was anticompetitive, but not supported by current antitrust law,” Williams said. “She is leaving it to lawmakers.”
Indeed, the decision is “further evidence that Congress must enact clear rules of the road to prevent platform monopolists from abusing their power and picking winners and losers online,” tweeted Rep. David Cicilline, D-R.I., chairman of the House Antitrust Subcommittee.
“While the ruling addresses some of those concerns, much more must be done,” Klobuchar said in a statement last week. “We need to pass federal legislation on app-store conduct to protect consumers, promote competition and foster innovation.” (Klobuchar is co-sponsor of a bill that would regulate the App Store and Alphabet Inc.’s
Google Play Store.)
Gonzalez Rogers, who oversaw the federal trial in Oakland, Calif., in May, delivered a potential gut punch in ruling that Apple cannot force app makers to use its in-app payment service. But to the relief of Apple and its investors, she rejected Epic’s argument that Apple and its App Store constitute a monopoly — the linchpin of legislation attempting to rein in Big Tech players such as Apple, Google, Amazon.com Inc.
and Facebook Inc.
(On Sunday, Epic appealed the decision to the Ninth Circuit Court of Appeals in San Francisco.)
Though it has repeatedly claimed a “resounding victory,” Apple is also likely to appeal an injunction from the decision that lets developers direct consumers to third-party payment systems outside of the App Store, thus saving developers commission fees of up to 30%. Apple is expected to introduce its latest iPhone on Tuesday.
U.S. lawmakers are convinced new bills will add teeth to antiquated antitrust law, making it easier for federal and state judges to identify and punish Big Tech as monopolists. But some financial and legal scholars don’t expect wholesale changes: They anticipate other countries, especially those in Europe, to follow recent moves in South Korea and Japan, where small developers have the option of directly communicating with consumers within the App Store and directing them to third-party payment systems.
“I am not super optimistic” that U.S. legislation will reshape antitrust law, Florian Ederer, associate professor of economics at the Yale School of Management, told MarketWatch. “There will be legal limits” that prohibit anti-steering on the App Store, which is “bad news for Apple,” he said.
Ederer, who noted a $70 billion loss in Apple’s market share following Friday’s ruling, expects a “global phenomenon” in which developers in most countries are given the option of steering their consumers to payment systems outside of the App Store. This could prompt Apple to charge a new commission for developers to sell goods on the App Store, or a legal appeal by Apple over Gonzalez Rogers’s decision.
Chris Cardinal, who runs a consultancy that builds custom software for startups, enterprises and the government, believes the “split decision” gives “enough daylight to Epic and lawmakers through its unique carve-out for payments.
“It’s a game changer for Apple’s bottom line, resulting easily in $1 billion a year in less revenue for the App Store,” he said. “It is as close to an existential risk for losing a rent-seeking tax on the back of nearly every developer. Apple has to be quaking in its boots.”