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Epic Game’s Apple App Store lawsuit will test antitrust lawsuits

‘Fortnite’ maker Epic Games is suing both Apple and Google’s app stores, claiming the tech giants are taking advantage of the gaming market and breaking antitrust laws. Yahoo FInance’s Dan Howley joins The Final Round to break down the details.

Video Transcript

MYLES UDLAND: A star of the show throughout all this, has been Apple's App Store, and the increasing regulatory scrutiny that Apple is now facing. And this week, the company is in court with Epic, which makes the "Fortnite" game. And Dan Howley joins us now for the latest on this story. And I guess, Dan, what seems to be a now series or likely ongoing rolling series of challenges by companies that have the sort of heft and sort of confidence of an Epic to really take on Apple for that 30% cut that they charge developers in their app store.

It would seem, and Apple has now said, that they've changed the policy on some types of events, and they're kind of trying to back their way into changing App Store policy without either one, having it regulated, or two, admitting that they actually bowed to pressure from their customers and competitors.

DAN HOWLEY: Yeah, and really pointing out that Epic is one of the deep-pocketed companies to really have a chance to go after Apple, it is important. Because there have been companies for a while, different app developers, who've been pushing back against Apple and its 30% commission that it collects on sales of apps through the App Store. By the way, this is the exact same commission that Google's Play Store charges as well, and they haven't escaped the kind of scrutiny that app developers throw out there.

But it's really Apple with its walled garden kind of ecosystem that has gotten the brunt of this. And now with Epic going to court together, basically fighting to have "Fortnite" reinstated on the iPhone, it's going to be a long fight, I think. This started when Epic Games pushed out an update, kind of what they call a hot fix, for "Fortnite." And in it, they put a ability to allow customers to make purchases in the app using Epic's own payment system. That was in addition to Apple's own payment system.

Apple, however, forbids anyone from using proprietary payment systems. They have to use the Apple system. And so Apple immediately revoked "Fortnite." The idea here was "Fortnite" saying, look, Apple charges this 30% commission. We'll offer our customers a cheaper option that will still give us a little bit of extra money on the side, in addition to offering them the ability to, if they want to, use Apple's solution. And so Apple pulled the plug. They did the exact same thing on Play Store and Google pulled the plug.

And now they're in court basically trying to determine, can they get "Fortnite" reinstated, can Apple ban other apps that use the Unreal Engine, and does Apple actually violate the Sherman Antitrust Act. And that's what "Fortnite" maker, Epic Games is saying through the App Store. Now this is all going on concurrently with the ongoing investigations into Apple, as well as other big tech firms as far as antitrust issues go. For Apple, it is the App Store, whether or not they stifle competition or whether or not it's unfair that they charge that 30% commission while offering competing apps that obviously don't have to pay the commission, because they're Apple's.

MYLES UDLAND: Yeah, I mean, I think, look, we don't need to go into a whole thing about the Sherman Antitrust Act, but obviously, the consumer benefit test is, I mean, Apple's got to feel like they have good standing there, because there has been a massive consumer benefit from the existence of the App Store at all, regardless of how they're charging developers.

But I guess just to kind of zoom out a little bit, we've heard big tech regulation for years and years and years, and in my mind, it's always been about, is Amazon anti-competitive within their offerings, should Facebook have been able to buy WhatsApp and Instagram and roll them all up into one. And Apple was never really part of that conversation, in my view at least, until this year.

And then all of a sudden it was like, oh yeah, the App Store, it's actually really problematic. And it's funny that they're now the first of those big majors that's really taking on or really dealing with the kinds of challenges that I think so many investors had feared could be coming for your Facebooks and Amazons.

DAN HOWLEY: Yeah, and I think Apple feels that it has the best standing among those tech companies. I mean, you have to look at it really as Amazon, are they aping other companies designs, competing designs that are sold through their own platform to then basically push out those other third party sellers? Is Google hurting companies by putting its search results in a certain manner? Facebook, did they strong arm companies into selling to them? And then Apple's over here. It feels like it's the lesser of the three, obviously.

And that seems to be the way that during the House Judiciary Committee hearing, the politicians or lawmakers rather, we're looking at it as well. Apple didn't get hit nearly as hard as the other companies. It was also the first time that Jeff Bezos, by the way, appeared before Congress. So that's probably got to do with why he was knocked pretty hard, as well as the business practices there.

But I think for Apple, this is going to be something that they are willing to fight for. And as you said, their argument is look, we curate the App Store, we give you the ability to work in the App Store, we provide these SDKs and different software features through these programs. We need to recoup that cost. And Apple will, of course, say that the App Store has launched different sectors of the economy. You're not getting Grubhub, you're not getting Uber, you're not getting the mass proliferation of social media sites the way you would without the App Store.

So Apple will continue to push that, say that they provide benefit, other companies have to pay into it. And then, of course, they like to say that not nearly as many companies have to pay a commission as those that offer free apps through the App Store. So this is going to drag on, I think. And when it comes to the broader investigations that we're seeing from regulators and lawmakers, it seems that Apple is nowhere near coming to a head. We see Google coming forward first, perhaps Facebook coming forward after that. And then Amazon. And then Apple you feel like is just down the lane still.

MYLES UDLAND: Yeah, Dan, I think it's almost exactly two months to the day that all those tech execs were in front of Congress, and boy, that feels like a lifetime ago. All right, Dan Howley, we'll talk to you later this week.