(Bloomberg) -- The judge overseeing the high-stakes trial between Epic Games Inc. and Apple Inc. hinted at a compromise that turns on the iPhone maker allowing developers to inform users through their mobile apps that they can buy virtual goods on the web at a cheaper cost.
U.S. District Judge Yvonne Gonzalez Rogers appeared to be looking for middle ground while hearing from economists called by both companies as expert witnesses in a case that threatens to upend the multibillion-dollar marketplace for apps that run on mobile phones around the world.
The judge questioned Apple’s App Store rule that blocks developers from including a link or other information in their apps to steer users away from the store to buy virtual goods elsewhere online at a discounted rate. The anti-steering policy is at the heart of Epic’s argument that Apple maintains a near-monopoly and juices profits by barring developers from offering alternative payment options in their apps.
“What’s so bad about it anyway, for consumers to have choice?” Gonzalez Rogers asked Richard Schmalensee, an economist and Massachusetts Institute of Technology professor, who was testifying Wednesday as an expert witness for Apple in the second week of trial in Oakland, California.
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Her question drew pushback from Schmalensee, who noted that the U.S. Supreme Court, in a 2018 ruling, threw out a lawsuit that accused American Express Co. of thwarting competition by prohibiting merchants from steering customers to cards with lower fees.
“If the app vendor can say, if you press this button you can buy this for less, that means the App Store can’t collect its commission,” Schmalensee said. That amounts to “undercutting” Apple’s App Store sales, he said.
Gonzalez Rogers said she didn’t think the situations were “factually the same.” At stores, customers can see signs that say they can use Visa, MasterCard and other credit card options -- unlike in the App Store. “Visual indications of options don’t exist in this circumstance.”
The fight blew up last year when Apple pulled Epic’s blockbuster Fortnite game from the App Store after Epic let users purchase virtual currency for buying game upgrades through its own payment system.
“If Apple didn’t have these rules, would the problem be solved?” Rogers asked Epic’s economist, David Evans, who also pushed back at the compromise solution when he was on the witness stand Tuesday.
“That wouldn’t eliminate the market power Apple has here, but it would certainly diminish it,” Evans said. For many apps, including game apps that don’t have alternative payment systems, “it would not be much of a solution at all,” he said.
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