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A trial begins today that will determine the future of mobile apps.
A federal judge in Oakland, Calif., will begin hearing arguments in the legal battle between Apple and Epic, the maker of the popular game “Fortnite.” Opening statements are expected to begin at about 11:30 a.m. EDT, and you can tune in via the court's website. The trial will determine whether Apple’s control over its mobile operating system is a monopoly, and whether Apple can use that control to require developers to use its payment system, my colleague Reed Albergotti reports.
Epic alleges that Apple is using its control of smartphones to squash competition, following the phone maker’s move to kick Fortnite off the App Store last year. The video game maker was booted after it offered customers an alternative payment option, in an attempt to bypass the 30 percent fee that Apple charges on purchases in the app.
Right now, developers have to play by the company’s rules and go through Apple’s payment system if they want people to be able to download their apps through the App Store.
“One possible outcome in the case is a very different smartphone landscape, in which the powerful computers in everyone’s pockets operate more like desktop computers, where any kind of software is allowed to exist,” Reed writes.
The trial comes as Apple faces global antitrust scrutiny of its App Store.
Especially if Apple prevails in the case, it could fuel calls in Washington and in states to pass new competition rules that would target app stores. It's a critical moment for large tech companies in Washington, as lawmakers from both parties weigh updates to antitrust laws so they can better address digital markets.
U.S. lawmakers recently hosted a hearing where Apple’s critics aired their concerns about the company’s impact on competition. The Department of Justice is also probing the company’s market power, and it could use evidence that emerges in this trial to bring legal action against the company in the future.
Sen. Richard Blumenthal (D-Conn.) said at that hearing that the tactics of Apple and Google in their app store were worse than Microsoft's conduct nearly a decade ago, and that he supported strengthening antitrust laws.
Apple chief compliance officer, Kyle Andeer, made the case the company's App Store has allowed developers to create new businesses and grow.
“If you presented this fact pattern in a law school antitrust exam, the students would laugh the professor out of the classroom because it’s such an obvious violation of our antitrust laws,” he said. “Enforcement of them is too little, too late. Courts are overly deferential, agencies are reluctant to bring lawsuits and therefore we need to reform our laws is the takeaway here.”
Europe has been even more aggressive. The European Commission brought antitrust charges against the company for allegedly abusing its “dominant position” to limit competition from music streaming rivals. The charges were spurred by a complaint Spotify brought in 2019. Apple didn't immediately respond to a request for comment from The Post, but it took aim at Spotify in a statement to The Verge, saying that Spotify is the largest music subscription service in the world. “The Commission’s argument on Spotify’s behalf is the opposite of fair competition,” Apple said.
The trial has some parallels to the showdown decades ago between Microsoft and the Justice Department, in which Microsoft was accused of using its control over the Windows operating system to hurt rivals, such as Netscape. That trial forever changed the public image of the company and its founder Bill Gates.
Top executives at both Epic and Apple are expected to be under the microscope. Epic founder and CEO Tim Sweeney and Apple CEO Tim Cook are both on the witness list. Other key Apple executives including fellow Phil Schiller, Senior Vice President of Software Engineering Craig Federighi and Senior Vice President of Internet Software Eddy Cue are expected to testify too.
The case will be determined by how the court defines a market – a controversial issues in the digital age.
To rule on whether Apple has a monopoly, the judge will have to first decide how to look at the market in this case. Epic argues the “market” should be defined narrowly, and the judge should only consider the Apple mobile operating system. That's because, Epic argues, it's the only distributor of apps to smartphones around the world, and it also wields power over the payments system. But Apple has argued the market is much broader. If the market is defined as smartphones, it would include the many U.S. phones running Google's Android operating system. And the iPhone maker argues the judge should also consider the many other platforms people can play Fortnite on, including PCs, gaming consoles and more.
Even if Epic can prove that Apple has a monopoly, it will also have to make the case the company abused that power in a way that breaks existing antitrust laws. Epic's key argument is that Apple is breaking antitrust laws by tying one product or service to the sale of another. In this case, Epic argues the company is forcing developers to use the App Store to get their apps on people's phones, and then use its payment processing system. Apple argues the App Store and payment system are one product, so it can't be guilty of “tying,” as my colleagues reported.
For more details about the trial and how it could effect you – whether you're a gamer or a smartphone owner – read this helpful guide from Shannon Liao, Reed and Mikhail Klimentov.
Our top tabs
More than one-third of Basecamp’s workforce is leaving after the company banned political chatter at work.
At least 20 of Basecamp’s 57 employees have said they are resigning in the wake of the decision, the New York Times’ Sarah Kessler reports. The exodus included Basecamp’s heads of marketing and design, who both cited “recent changes” at the company, whose CEO, Jason Fried, wrote in a blog post that the conversations were a “major distraction” and “not healthy.”
The company offered severance packages to employees who wanted to leave in the wake of the move, chief technology officer David Heinemeier Hansson wrote. The packages amounted to up to six months' salary for employees who were at Basecamp for more than three years, and three months' salary for employees who were at the company for less time.
Journalist Casey Newton reported that the policy change stemmed from an internal list of “funny-sounding” customer names and a subsequent reckoning over race at the company.
Basecamp did not respond to a request for comment from The Times.
Manufacturers of everything from dog-washing booths to home appliances are affected by the chip supply shortage.
A family-run Illinois dog-washing booth manufacturer, CCSI International, was told that it would have to change its circuit boards to accommodate new chips, raising company costs, Jeanne Whalen reports. The shortage demonstrates the pervasiveness of semiconductors, which are found in most modern electronics and are increasingly showing up in high-tech households.
“This particular problem affects all aspects of manufacturing, from little people to big conglomerates,” said CCSI International's president, Russell Caldwell. Other manufacturers, from appliance maker Whirlpool to Chinese appliance companies, have said they're unable to keep up with demand amid the shortages.
The shortages could have negative effects on the economy as the recovery from the pandemic begins.
“When the chip supply tightens, the whole economy suffers,” Glenn O’Donnell, a tech analyst at market-research firm Forrester, told Jeanne.
After its successful return of NASA astronauts, SpaceX is turning to private trips to space.
The Inspiration4 flight, which will shoot an all-civilian crew into space, is scheduled to take place in September, Christian Davenport reports. But Sunday’s touchdown marked the completion of SpaceX’s first full-duration mission, and while it has flown two sets of astronauts to and from the International Space Station, it still has a lot to prove.
“We’re still at the beginning steps of continuing to make this look easy,” Kathy Lueders, the head of NASA’s human spaceflight directorate, said. “But this is only our first full operational mission. So we need to keep having missions look like this. … But it is very exciting that we’re starting to lay in the foundations for these key capabilities.”
SpaceX is also planning an October NASA flight and another civilian mission in January, with the goal of reaching the space station. A trio of billionaires, who are each paying $55 million, will fly onboard.
Rant and rave
Tesla and SpaceX CEO Elon Musk asked Twitter for “skit” ideas ahead of hosting “Saturday Night Live” this weekend. Former SNL cast member Jon Lovitz:
Politico Europe creative director Tim Ball:
Comedian Pauly Casillas:
Inside the industry
- Sen. Josh Hawley (R-Mo.) discusses his plan to break up tech companies at a Washington Post Live event on Tuesday at 10 a.m.
- European officials discuss Europe’s proposed artificial intelligence legislation at an Information Technology & Innovation Foundation event on Wednesday at 10 a.m.
- The House Energy and Commerce Committee holds a hearing on disparities in access to broadband on Thursday at 11:30 a.m.
- Securities and Exchange Commission chairman Gary Gensler testifies at a House Financial Services Committee hearing on GameStop and social media-related market volatility on Thursday at noon.
- IBM chairman and CEO Arvind Krishna speaks at a Washington Post Live event on Thursday at 1 p.m.
- The House Financial Services Committee’s artificial intelligence task force holds a hearing on how AI can address systemic racism on Friday at noon.