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Tom Kool

Tom Kool

Writer, Safehaven.com

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as news editor for Oilprice.com and Safehaven.com

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Apple May Be Worth $2 Trillion, But Its Payment Monopoly Is Under Fire

Apple

Apple is one of the most thrilling stories of the year as it trounces tech, gaining some 400% this year, reaching a valuation of $2 trillion in a first for a U.S. company, and now gearing up for a stock split that will make it easier for more retail investors to own it. But there is sometimes a point where a company on a major high can get shot down for overshooting. Now, it may not be able to keep taking large chunks of revenue eternally from apps that are powers in their own right.   

Last November, Epic Games, the maker of wildly popular "Fortnite," introduced its own payment system in mobile versions of the game, bypassing Apple's commission. In response, both Apple and Google pulled the game from their app stores two weeks ago.

The App Store conditions state that Apple takes 30% of revenue generated from in-app digital purchases, and developers are not allowed to advertise that prices may be cheaper outside the app. Google takes the same cut on its Play Store. Fornite’s parent company, Epic Games, itself charges a 12% commission in its PC game marketplace. 

But Epic is big, too. So when it got booted from the app stores, the giant game-maker sued both two companies, accusing them of monopolistic practices. The lawsuits are apparently not seeking any monetary damages.

Epic Games CEO Tim Sweeney criticized Apple for having an absolute monopoly on app stores.

“Apple has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software,” Sweeney told CNBC. He shared the same sentiment on Google.

Epic Games won a partial victory earlier this week when a federal judge barred Apple from kneecapping the “Fortnite” maker’s trademark development tool.

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According to the ruling, Apple can continue to block Fortnite from its App Store. However, it cannot terminate Epic Games' developer accounts or compromise its graphics tool Unreal Engine, which is used by many third-party developers. 

Saying that Apple’s move that could cause “significant damage to both the Unreal Engine platform itself, and to the gaming industry generally”, US District Judge Yvonne Gonzalez Rogers Rogers wrote in the decision that “Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders.” 

A full hearing is now scheduled to take place in September. 

Refusing to order Fortnite reinstatement, Judge Rogers said that “the current predicament appears of its own making”, but also stressed that she saw no competition in commission to Apple’s App Store.

“The question is, without competition, where does the 30% come from? Why isn’t it 10? 20? How is the consumer benefiting?” she asked.

Epic isn’t the first company to speak out against Apple and Google’s 30% fee.

Last week, Apple threatened to block updates to the website builder WordPress iOS app until the company enabled in-app purchases through Apple’s payment system. However, earlier this week, Apple decided to back down from the conflict and even apologized to WordPress.

In June, the European Commission opened formal antitrust investigations against Apple following last year’s unfair competition complaint by Spotify, citing the fee as forcing them to artificially inflate the price of its Spotify Premium membership.

Last Year, online dating application Tinder also introduced a default payment process meant to bypass the fee.

By Tom Kool for Safehaven.com

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