So can I define Epic having a monopoly on being able to buy things in Fortnite? What if I want to sell my cool “Scarface dance” next to the “Carlton dance” within Fortnite without paying the “Epic Tax”?
I upvoted your comments based on a good faith belief that you're open to learning more about how antitrust law works. It has little to do with market share, and everything to do with a concept called "market power."
Market power is the ability to coerce people into paying more for something via a mechanism other than actually offering a better product or service. A textbook example which most people would agree is bad is a trust/cartel situation where a few players artificially limit supply, and then can raise the price on consumers because there are no competitors. But if a firm is able to drive up prices with impunity for any reason, it's likely they possess market power.
When a firm possesses excess market power it's good for that firm, but bad for the market, consumers, and society. By definition a firm with a lot of market power has very little competition, so even as their margins grow, product quality will decline and price will increase. (Sound like Apple in 2020?) And new firms will find it difficult to compete in that market even as the firm with market power grows very rich, which exacerbates the problem of wealth inequality. (Sound like America in 2020?)
A society which doesn't place some sort of checks on a firm's ability to acquire market power ends up being a place where the way to get ahead is to find an unfair advantage, abuse it, and screw everyone else. (Again, sound familiar?)
At this point it's almost certain that Google is violating antitrust regulation by abusing its market power (proven in the EU, and the US looks poised to start filing lawsuits this year). Apple, Amazon and a few others are up for debate and it's also fair to say that antitrust regulations should evolve to address the tech industry more effectively. The antitrust problem isn't limited to tech however, anti-competitive behaviors of questionable legality have proliferated all over the US since the 80s due to a lax regulatory environment.
If you want to learn more about this topic, Matt Stoller's newsletter "BIG" on Substack is a phenomenal place to start.
> Market power is the ability to coerce people into paying more for something via a mechanism other than actually offering a better product or service.
How exactly does Apple "coerce people into paying more for their phones via a mechanism other than actually offering a better product or service", and what is that mechanism?
> But if a firm is able to drive up prices with impunity for any reason, it's likely they possess market power.
How is Apple actually able to "drive up prices with impunity for any reason"? It seems to me, the more Apple raises iPhone prices, the more people are priced out and decide to switch to a cheaper phone instead.
The matter under contention is the pricing of in-app purchases, not the pricing of phones. By disallowing app stores other than Apple's App Store, Apple is coercing users to pay an inflated price for in-app purchases, since it takes a 42.8% price hike to negate Apple's 30% fee.
Both are relevant, because in order to successfully win an antitrust tying claim under US law you need to prove the seller had sufficient market power in a tying product in order to coerce buyers into buying the tied product.
In this case, once you buy an iPhone, you're forced to use Apple's system to make in-app purchases. The tying product is the phone, and the tied product is the in-app purchase.
So you need to show that Apple has sufficient market power in the smartphone market, and that is where the question of the ability to control prices of phones comes in.
Epic's lawsuit does not accuse Apple of tying App Store sales to phone sales. Two of the nine counts are about allegedly tying in-app purchases to app sales, and the rest don't involve tying.
But since you mentioned it, I'm not really sure that Epic will succeed with their argument that the "iOS App Distribution" market is the relevant tying product market absent an analysis of the overall smartphone market.
So what’s the true value of those cool Carlton dance moves I can get on Fortnite? How much less would the coins and loot boxes cost? Just imagine the overhead that Epic has to charge to reproduce the $18 billion of virtual goods it sales.
This article is about WordPress, not Fortnite. For WordPress.com to cancel out Apple's 30% fee, its monthly prices for its paid plans would need to increase from $4 to $5.71, from $8 to $11.43, from $25 to $35.71, and from $45 to $64.29.
I'm not sure that they are. I did say that something smells rotten (products getting worse and prices going up), but this alone is not justification for punitive measures.
The government playbook in this sort of situation is normally to start subpoena'ing emails, execs etc. and look for hard evidence of actual anti-competitive practices. They're not only interested in a business model as it's described in the media, they want to know what company execs actually did. If they find something they file a suit.
> Wouldn't an antitrust claim against Apple likely fail if the plaintiff cannot establish they actually have market power in the smartphone market?
Well, assuming it is one based on abuse of market power and not the other kinds of antitrust violations (e.g., combination in restraint of trade, etc.), it would fail if the plaintiff couldn't establish that Apple had market power in the market for the product for which they allegedly abused market power. If that was iPhones, for instance, that would be the market for iPhones plus whatever products empirically people substitute for iPhones in response to pricing changes. (Of course, if Apple has market power, there is some range in which the “plus...” part is “none”, since market or pricing power is the ability to raise prices without driving sales to a competing good.)
IANAL, but if the lawsuit was about selling smartphones, then yes I think so.
If the lawsuit was about selling some popular class of app in which Apple leveraged its monopoly over app distribution, I think the plaintiff could have a pretty strong case.
Do you think that a court will permit a plaintiff to claim Apple has a "monopoly" over app distribution without an examination of its market power in the greater smartphone market?
Keep in mind that even if Apple only had 1% market share in the smartphone market they would still have a "monopoly" over app distribution on their own phones.
> So can I define Epic having a monopoly on being able to buy things in Fortnite?
If price increases for Fortnite IAP don't, empirically, drive people to stop buying them in favor of alternatives of some kind, yes. Or, rather, you can't define the market that way, but if there is no substitution effect a US court considering an anti-trust claim is likely to see that as the relevant market, not some broader, say, battle royale game IAP market in which price-driven substitution does not occur.
I guess that’s the value of evaluating on a case by case basis. Depends on what you define as a market worth pursuing antitrust issues for. I would also argue this informally happens when people start to talk about antitrust as it’s usually applied to markets that are general enough that more or less everyone participates in (or feels consequences from) them.
So the government should make decisions on a case by case basis? Isn’t that what everyone is whining about Apple doing - treating small developers and large developers differently?
I’m much more worried about the government deciding what happens to people randomly than a corporation. I don’t have to buy Apple products. It’s a lot harder for me not to have to deal with a capricious government.
I’m with you, I’m simply stating the upside. My further point was that it is already treated somewhat case by case by the selection of antitrust cases to pursue.
You might be able to do just that after this Apple/Epic ruling. That's kind of why NFTs/digital ownership is so exciting. You might be able to buy or sell your dances on any store you want to and use them in the game.
I wish I could be on the other side of a bet against most of HN, betting against all of the wannabe lawyers who don’t understand what a “monopoly” is and posting examples of market collusion showing how Apple/Google could be charged based on the App stores.
Market power is the ability to coerce people into paying more for something via a mechanism other than actually offering a better product or service. A textbook example which most people would agree is bad is a trust/cartel situation where a few players artificially limit supply, and then can raise the price on consumers because there are no competitors. But if a firm is able to drive up prices with impunity for any reason, it's likely they possess market power.
When a firm possesses excess market power it's good for that firm, but bad for the market, consumers, and society. By definition a firm with a lot of market power has very little competition, so even as their margins grow, product quality will decline and price will increase. (Sound like Apple in 2020?) And new firms will find it difficult to compete in that market even as the firm with market power grows very rich, which exacerbates the problem of wealth inequality. (Sound like America in 2020?)
A society which doesn't place some sort of checks on a firm's ability to acquire market power ends up being a place where the way to get ahead is to find an unfair advantage, abuse it, and screw everyone else. (Again, sound familiar?)
At this point it's almost certain that Google is violating antitrust regulation by abusing its market power (proven in the EU, and the US looks poised to start filing lawsuits this year). Apple, Amazon and a few others are up for debate and it's also fair to say that antitrust regulations should evolve to address the tech industry more effectively. The antitrust problem isn't limited to tech however, anti-competitive behaviors of questionable legality have proliferated all over the US since the 80s due to a lax regulatory environment.
If you want to learn more about this topic, Matt Stoller's newsletter "BIG" on Substack is a phenomenal place to start.