Epic Battles in Two-Sided Markets

Abstract

Epic Games, the developer of the enormously popular Fortnite, sued Apple for allegedly violating §1 and §2 of the Sherman Act. The central issue was Apple’s requirement that iPhone-compatible apps be purchased in its App Store. Because Apple collects a 30 percent ad valorem tax on each transaction, Epic Games offered an alternative payment option to iPhone owners through the Fortnite app so that consumers could avoid Apple’s 30% fee. When Apple expelled Epic Games from its App Store, Epic sued. In this article, we examine the flawed analysis of the District Court, which can be traced to a fundamental misunderstanding of economic principles.