A decision in a landmark antitrust legal case could come by the end of the month, but that is far from the only concern bearing down on Apple Inc.
Legal experts anticipate federal Judge Yvonne Gonzalez Rogers will side with Apple
in its legal fight with Epic Games Inc., denying the “Fortnite” maker’s primary requests that it be allowed to sideload apps onto the App Store and operate a third-party payment system within the digital store. Rogers, however, could invoke unfair competition law in California, resulting in legal and legislative headaches down the road for Apple.
For more: The (predicted) Epic v. Apple verdict is in
The experts based their prognostications on Rogers’ line of questioning during closing arguments in May. Both sides are all but certain to appeal the decision, setting into motion what could be a yearslong process. Apple and Epic declined to comment.
Federal regulators, state lawmakers, and legal experts are closely watching for where Gonzalez Rogers lands during what many agree could be a renaissance in antitrust law. The judge could focus on California law because it has been changed more in response to the rise of Big Tech and other companies in recent decades, while federal law has not, at least until current legislative efforts produced fruit.
“We are at an inflection point, based on the president’s executive order on competitiveness, federal appointments, actions by European regulators, U.S. legislation and investigations, and private lawsuits,” Joel Mitnick, an antitrust expert and former FTC trial lawyer, told MarketWatch. “It is unlikely we come out of this period without some substantial changes.”
While Rogers’ decision could spark a long appeals process, both houses in Congress are forging ahead with sweeping antitrust legislation with profound consequences for Apple, Alphabet Inc.’s Google
and Amazon.com Inc.
Apple appears to be a major focus in the near term, however, with legislation introduced Wednesday that regulates app stores while competitors like Facebook, Tile, and Spotify Technology
publicly snipe at the iPhone maker.
The Open App Markets Act in the Senate, designed to regulate app stores, backed by Sens. Richard Blumenthal, D-Conn., Klobuchar, and Marsha Blackburn, R-Tenn., all fierce and vocal critics of Big Tech, was announced Wednesday.
Read more: New Senate bill targets Apple and Google’s app store tactics
“We have been looking at this issue case] for some time,” Blumenthal told MarketWatch. “The [Epic v. Apple] trial presented dramatic evidence, but did not fashion our legislation.”
The Blumenthal-led bill is the latest in both houses of Congress to take on Big Tech. A package of bills from Rep. David Cicilline, D-R.I., could come up for a full House vote later this year as Cicilline, chairman of the Subcommittee on Antitrust, Commercial and Administrative Law, negotiates with California House members to gain their support for legislation that will affect some of the state’s largest companies — Apple, Alphabet, and Facebook.
For more: What the House antitrust bills are trying to do
In the Senate, separate legislation led by Sen. Amy Klobuchar, D-Minn., would press for general antitrust reform rather than the sector-specific rules in the House bill on mergers and acquisitions, and dominant digital platforms with specific companies in mind. Klobuchar, chairwoman of the Subcommittee on Competition Policy, Antitrust, and Consumer Rights, is seeking bipartisan support for her legislation, which would come in addition to the app store bill.
A spokesman for Klobuchar confirmed she is working on bills to go with a House antitrust package to rein in technology giants. The contours of the legislation would hew more closely to European regulatory law, shifting the burden of proof in antitrust cases to the defendant rather than the plaintiff. Klobuchar also seeks to expand resources and personnel for antitrust cases within the FTC and Justice Department.
Revisions to antiquated antitrust law are essential to help shape it for the digital economy, legal scholars and consumer advocates contend. The rise of online platforms and stores have increasingly squeezed smaller competitors and stifled innovation, resulting in less choice for consumers.
The push for legislation mirrors political and consumer pressure to more closely oversee the so-called GAFA of Big Tech — Google, Apple, Facebook, Amazon —whose power has expanded during the pandemic. The collective market value of the four companies is nearly $7 trillion.
“Economies change. Antitrust law is out of date by a century,” said Andy Yen, CEO of Proton Technologies, one of the founding members of Coalition for App Fairness, an organization of more than 50 developers opposed to the app store policies of Apple and Google. Without new antitrust parameters, he added, federal agencies and courts “are bringing a knife to a gunfight” to enforce anticompetitive behavior.
Coalition for App Fairness, whose other members include Epic and Spotify, has been working with federal and state legislators to address what they consider to be anticompetitive, suffocating business practices a the App Store and Google Play Store. The strain of investigations and lawsuits has often resulted in Big Tech rivals pointing fingers at one another, as Apple has done in criticizing the privacy and security flaws at Facebook. Facebook, in turn, ran an ad campaign in the spring ahead of changes to the iPhone operating system that defended personalized advertisements. The social network argued that targeted ads are vital to the success of small businesses, millions of which rely on Facebook.
See also: Why Facebook is considering an antitrust lawsuit against Apple
President Biden’s recent far-reaching executive order on antitrust and competition — coupled with the appointments of Lina Khan, considered by many the most progressive leader in FTC history, and Jonathan Kanter to lead the Justice Department’s antitrust division — underscore the seriousness of the administration, say financial experts.
“There is a seismic shift in antitrust enforcement even though it is moving at a glacial pace,” Ed Mills, who covers antitrust legislation for Raymond James, told MarketWatch.
Khan, in particular, bears watching. An outspoken critic of Big Tech, she has expressed a willingness to pursue cases such as one to cleave Instagram and WhatsApp from Facebook, that could lead to court cases. While previous FTC commissioners were content to seek settlements from companies, Khan desires judicial decisions that could spur legislation, Mills said.
See also: New FTC chair Lina Khan is Big Tech’s biggest nightmare
Khan is likely to affect Big Tech more profoundly than Kanter. She has rule-making authority on a five-member commission, isn’t afraid to flex political muscles, and has generally more freedom to operate, according to a people familiar with Apple’s legal strategy. Indeed, one of Khan’s first moves as FTC chair was greatly expanding her powers.