Apple Inc (NASDAQ: AAPL) has been embroiled in a legal battle with Epic Games Inc. since last August when Epic sued Apple for violating antitrust laws after its popular video game app ‘Fortnite’ was removed from the App Store. Apple maintains that Epic breached the developer contracts due to which the app was taken off.
Tom Forte, managing director and senior research analyst at the investment banking firm D.A. Davidson, was on CNBC and said:
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“I definitely think that Apple wins the battle but I still think there is risk of losing the war to the extent that the government steps in and regulates commission rates.â€
The case for government regulation of App Store
Forte said that by Apple’s own admission it charges 30% commissions on small developers in the first year and 15% in the second year while it also has strategic partnerships with companies such as Amazon, which is charged 30%. So, Apple charges lower rates on its App Store in some cases, which opens the gate for government regulation.
Even though they might win the battle against Epic, they might lose the larger war of avoiding government regulation of its App Store.
Apple vs. Epic legal battle
Apple has a strong case against Epic. Apple’s own data suggests that it has 30% share of the smartphone market in the United States and 15% worldwide.
Epic has the option to sell its video games through other App Stores and even the Sony Playstation. In fact, the majority of the games are played using gaming consoles where Apple does not have any presence.
There are several other avenues available to Epic to sell its game.
In the ongoing court case, Apple’s CEO Tim Cook, former marketing chief Phil Schiller and head of software, Craig Federighi have also testified. App Store is a critical part of the company’s services business that generates more than $50 billion annually.
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