On Fri., Sept. 10, 2021, federal court Judge Yvonne Gonzalez Rogers ruled that Apple must change its App Store policy. To avoid an antitrust violation, the tech giant must allow app developers to steer customers toward alternative payment processing services. This Epic Games v. Apple showdown resulted in Apple’s stock falling 3.3%—its biggest decline in many months—and the S&P 500 falling 0.8% not long afterward. This drop cost Apple around $85 billion from its market capitalization.
How did this all start?
When a customer goes to the Apple App Store or Google Play Store to purchase an app, subscription, or in-app purchase, the tech giants usually take a very large cut from app developers. The payout is usually around 30% but can also vary.
The majority of apps are free to download, so apps usually make money through in-app purchases. But because of the 30% cut, purchases within the app stores are more expensive than they need to be. For this reason, many app developers offer cheaper options outside of the App Store. However, Apple takes it a step further by not allowing developers to advertise the cheaper options.
Apple’s own apps don’t have to pay a commission (because they’re within the house of the Apple brand), resulting in their products being cheaper than competitors. Over the years, many app developers, such as Spotify, have complained that this behavior is anti-competitive.
Epic Games, with its popular game Fortnite, didn’t like this system and bypassed Apple’s payment system. So, Apple de-platformed Fortnite from its store, which resulted in Epic Games suing Apple. Now, after the recent federal court ruling, developers will be allowed to receive payments through other avenues, bypassing Apple’s large commission.
How is the stock affected?
So, how did this ruling cause the stock to plummet? Because Apple can no longer enforce its large commissions, its revenue will decrease. And, because future earnings may be affected, people have sold Apple Stock, thinking the price will go down. Due to the concept of supply and demand, investors create a self-fulfilling prophecy that makes the stock continue to fall. Stocks are like Tinker Bell: If you don’t believe in them, they die.
Stocks are like Tinker Bell: If you don’t believe in them, they die.
The precedent set by Epic Games v. Apple
This ruling is a big win for Epic Games and the gaming community. Game developer stocks such as Zynga shot up 6.28%, and Playtika jumped up 6.08%. Epic Games v. Apple is also a big win for the antitrust sentiment, making it one of the first legal actions against Big Tech. Apple and other large companies probably will see more lawsuits for antitrust violations in the future.
So, what do you think? Do you think there should be more antitrust rulings against Big Tech?
Scott Hantler contributed to this article.
