How to define the market as the core in the digital age

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Tencent Technology News reported on May 3 that the antitrust lawsuit between apple and Epic Games, the developer of Fortress night, will officially begin in Oakland, California on May 3. In this high-profile antitrust lawsuit, the chief judge will try to solve a core problem: how to define the market in the digital age.
The case pitted the world’s most valuable company against a privately held video game maker. Apple helped lead the application economy more than a decade ago, which wanted to subvert what Apple calls its walled garden. According to epic, Apple’s app store is monopolized because Apple is the only app publisher of more than 1 billion iPhones and controls the only payment system for digital services in these apps. Epic said that this power allowed apple to control commissions that limited competition, including up to 30% revenue sharing and other terms that hurt developers and raised prices. Epic submitted an analyst estimate to the court that the operating profit margin of app store in fy2019 is as high as 80%. Apple said the assessment was wrong.
Apple provides a broader market vision. Apple believes that the app store is only one of many ways for epic to release games. Other ways include Sony’s Playstation, Google’s Android and PC. In this broader market, Apple says it doesn’t have any near monopoly power, just to make sure customers use the app easily and safely. If epic doesn’t like Apple’s rules, it can choose other ways.
Yvonne Gonzalez Rogers, the U.S. district judge in charge of the case, is expected to decide which view is right. The case touches on broader concerns about online platforms and digital commerce, which are facing scrutiny from courts, regulators and legislators around the world“ It’s going to be a trial of global interest, “Gonzales Rogers told lawyers at an earlier hearing.
Randy picker, a law professor at the University of Chicago, said: “these issues are crucial to how the digital world we live in works.” In the past, there have been antitrust cases involving so-called closed platforms, involving industry giants such as Microsoft and Kodak. However, in the modern digital economy, Pike said, “this is a brand new field.”
Antitrust officials at the U.S. Department of justice have been reviewing Apple’s practices. Last week, the European Commission, the EU’s top antitrust enforcement agency, filed a lawsuit against apple, saying the company squeezed other music streaming applications by requiring competitors to use its in app payment system. Apple denies wrongdoing.
Last month, the U.S. Senate antitrust Committee held a hearing on Capitol Hill to review the power of the app store. During the hearing, participants discussed the epic case.
If epic wins the lawsuit, it could undermine a pillar of Apple’s fast-growing services business. The revenue of Apple’s services business is close to $54 billion in fiscal year 2020. Apple’s victory is likely to chill other app developers seeking to challenge Apple’s terms. Either outcome could lead to years of appeal.
The app provides a way for other companies to install software on their iPhones. This approach takes advantage of hardware and works better than through a website. Some app developers make money by selling downloads, but over time, it becomes more common to offer apps for free and make money by selling subscriptions or digital add-on features in apps, such as extra features in video games. It’s a huge revenue for apple to get a share of all these digital sales.
Since Apple launched the app store in 2008 and opened the iPhone to external software developers, the number of apps has surged from 500 to 1.8 million, helping to nurture technology giants such as Uber. But since the launch of the app store, app developers have been complaining about Apple’s rules.
Last August, epic introduced its own user payment system in the mobile version of Fortress night, bypassing Apple’s App Store Commission and established rules. In addition, the company is well prepared for a larger legal and public relations campaign, releasing a video mocking Apple’s legendary advertisement “1984” and adding the label of “free fortnite” on personal social media. Apple responded by removing fortress night from the app store. Epic, which is expected to see the result, quickly filed a lawsuit, while Apple filed a counterclaim.
Tim Cook, Apple’s chief executive, and Tim Sweeney, epic’s co-founder and chief executive, are likely to testify in court, which is expected to last until late May. It is reported that Sweeney will sit next to the attorney in court every day. Both sides have expert witnesses who have different views on the market.
It is difficult for the plaintiffs to win the antitrust lawsuit, and apple cited recent major rulings in favor of defendants such as Qualcomm and American Express as its support. In recent decades, the court’s interpretation of the anti-monopoly law is more narrow than before, giving companies more freedom, especially in the rapidly developing technology market. Even if epic’s market definition is accepted, there are other issues in this case, including whether Apple’s policies actually cause antitrust damage, and whether consumers’ benefits from Apple’s practices outweigh the reduction in competition.
“Market definition is the biggest obstacle to epic,” said Paul Swanson, an antitrust lawyer at Holland & Hart LLP, a law firm that is following the case“ An iPhone, IOS, app store and in app payment feel like part of a cohesive product. Consumers can’t just buy one of these products or services. ”

Epic is suing Google, Alpha’s flagship subsidiary, separately for similar reasons, and the date of the trial has not yet been set. Google said epic violated its app store’s policy to keep users safe.
Apple and Google jointly dominate the smartphone market, epic said in a court filing against apple. According to the company, smartphones are “the only platform device that most people around the world have and the only device that people almost always carry with them.” Court documents show that about 10% of Fortress night’s daily average players use Apple devices. Through the Apple operating system, apple players’ in app payments reach nearly 750 million US dollars every year; And about two-thirds of Fortress night’s paid players come from Apple players.
Last fall, apple refused to let epic release apps in its app store. “It’s a controversial anti competitive act,” Gary Bornstein, a partner at law firm cravath and Swaine & Moore LLP, which represents epic, told the judge.
Apple argued in court documents that the company believes that the app store’s charging standard is consistent with other platforms and fair, because it creates the value of technology for developers“ This is the forefront of antitrust law, “said Theodore boutrous, Apple’s attorney in charge of the case.
In the pretrial proceedings, judge Gonzalez Rogers expressed some sympathy for Apple’s arguments about the market, saying that the wall platform of video games is not new. But the judge also said Apple’s approach to app developers could cause new problems. The judge added that her court was used to this new problem in California“ They don’t call it the Wild West for no reason. We see this kind of new problems all the time, especially in science and technology, “she said( Compiled by Tencent technology / Wuji)