Apple App-Store Ruling Should Make Tim Cook Sweat
(Bloomberg Opinion) -- Apple Inc.’s dominance over the mobile-app economy has just suffered its first significant setback. It could mark the beginning of a real antitrust reckoning for the technology giant that may benefit the livelihoods of millions of app developers.
On Friday, U.S. District Judge Yvonne Gonzalez Rogers issued her decision in a landmark antitrust suit brought by video-game publisher Epic Games Inc. against the iPhone maker. At first blush, it looked as if it was a resounding victory for Apple. Rogers ruled in the company’s favor on all counts but one, finding that Epic had failed to prove that Apple was a monopolist in the mobile-gaming market while also rejecting Epic’s requests for the ability to launch its own app store on Apple’s iOS operating system or allow users to install apps from third-party sources.
But that one count against Apple was critical. The judge ordered the company to let developers direct users to cheaper purchasing options from within their apps, finding that the App Store’s so-called anti-steering provisions were illegal because they stifled choice and hid important information from consumers.
I agree with the decision, and its positive implications for developers and consumers shouldn’t be understated. In contrast to Apple’s announcement last week that it would allow some media apps — including Netflix Inc. and Spotify Technology SA — to direct consumers to their websites with a link inside their apps, this ruling will have much more bite because it covers the gaming-app category. According to the trial proceedings, roughly 70% of App Store revenue came from games. Developers will soon have more money to innovate and create better software and potentially better experiences for users.
The ruling also offers a roadmap for global regulators and lawmakers — including the European Commission, Department of Justice, and members of Congress — as they develop their own antitrust cases and legislation to crack down on the App Store’s market dominance. The stakes are large. According to Morgan Stanley, Apple is projected to generate nearly $29 billion in App Store revenue next year.
Of course, the decision will be appealed. It is likely the beginning of a long back-and-forth legal process. But if this ruling stands, it would be a huge victory for the bottom lines of app developers, allowing them to invest more and spur more innovation. In some ways, the ruling shouldn't have come as a complete surprise. In May, as the trial drew to a close, Judge Rogers grilled Apple Chief Executive Officer Tim Cook over the restrictions on developers from advertising cheaper digital content prices from within their apps.
Epic didn’t get everything it wanted. CEO Tim Sweeney expressed his disappointment on social media, saying “it isn’t a win for developers or for consumers.” But I think he’s mistaken. It’s a big step forward and just the beginning of what’s likely to come in the taming of Big Tech.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
©2021 Bloomberg L.P.