Back in May, I posited in this newsletter about how the Epic Games vs. Apple lawsuit may end. As I wrote then, “If you held a Fortnite ‘boogie bomb’ to this columnist’s head and asked for his prediction, he would say this: Apple will be forced to ease up on its ban against developers advertising alternative payment options in the app store.”
On Friday, that’s exactly what happened. Federal judge Yvonne Gonzalez Rogers, who presided over the tech fight, said the iPhone maker must let app developers point to alternate, potentially cheaper payment options—through buttons, external links or other calls to action—alongside their iOS apps. She did not deem Apple to be a monopoly, a big victory for the Cupertino, Calif. Colossus.
I based this forecast on two legal precedents. The first operative case is “United States v. Terminal Railroad Association of St. Louis,” a 1912 Supreme Court case. The high court decided that a railroad association could not use its control of local infrastructure to block competitors from accessing a river crossing. Judge Gonzalez Rogers alluded to this case when she asked whether Apple’s app store should be regarded as an “essential facility,” meaning a piece of infrastructure that is key for a competitor to remain in or enter a market.
The analogy is imperfect yet apt. In some ways, the App Store is an essential facility, given the way it mediates so many people’s relationship with the digital world. But the App Store is not quite as essential as is a physical bridge that connects railroad tracks. The technologies are different, and the law may apply differently.
The second basis for my forecast was a Supreme Court precedent set in a case involving American Express. The top court ruled in 2018 that merchants couldn’t steer customers to use lower-fee credit cards from Amex rivals like Visa and Mastercard. Apple lawyers cited this case in defense of Apple’s “anti-steering” practices, arguing that Apple should not have to advertise alternative payment options. But the difference is that, unlike a cash register, which one expects to present a variety of payment processor options at checkout (e.g., logos for Visa, Mastercard, Discover, Amex, etc.), the App Store forbade all mention of alternatives.
So why not force Apple to allow those ads? That was the rationale behind Data Sheet’s guesswork. The appeals are already under way. And it’s unclear how the decision will be implemented in practice. For instance, how will Apple rewrite its terms of service to accommodate external links in the app store? And could Apple discourage the use of outside payment methods by making these links less noticeable, costlier, or less usable, such as by increasing the number of clicks it takes to use a non-default option?
We called the ruling—but the fight isn’t over.
Robert Hackett
@rhhackett
[email protected]
NEWSWORTHY
Pumped, then dumped. Cryptocurrency Litecoin tanked Monday after rocketing more than 33% following a purported Walmart press release that said the company would soon accept the token as payment. But shortly after several news outlets published the information, Walmart said the press release was fake, sending the crypto into a tailspin, and raising questions about whether the press release was part of a pump-and-dump scheme.
Epic appeal. On Sunday, Epic Games, the video game maker that has been caught in a legal battle with Apple over its App Store model, appealed a mixed ruling in the case that came down last week. The decision from Judge Yvonne Gonzalez Rogers determined that Epic would need to pay millions in breach of contract damages to Apple and that the tech giant does not in fact qualify as a monopoly in the gaming transactions business.
Divvying up Alipay. China's government wants Ant Group to create an entirely different app for its lending businesses, in addition to separating its two lending units (Huabei and Jeibei) from its main business, the Financial Times reported. Ant would also be required to turn over user data within its lending business to a new credit-scoring joint venture that the Chinese government is setting up, according to the FT.
Toasting in the public markets. Payments company Toast, whose technology is used by restaurants, is looking to raise up to $717 million in an IPO that could value it at $16.5 billion, Bloomberg reported. Revenues for the company jumped 105% in the year from the first half of 2020 and the first half of 2021, according to a regulatory filing.
A credit reporting giant moves to expand. Credit reporting company TransUnion has struck a $3.1 billion deal to acquire Neustar in what seems to be a move to stretch beyond its traditional business. Virginia-based Neustar used data analytics and modeling software to help companies figure out the best ways to target possible customers through advertising. TransUnion, by comparison, is among the most well-known credit reporting agencies (along with Experian and Equifax).
FOOD FOR THOUGHT
XCheck. A new report from The Wall Street Journal details how Facebook has for years held celebrities, politicians, and other high-profile users to a lower standard that often allows them to skirt some rules. Known as Cross Check, or XCheck, the program has let millions of account holders post conspiracy theories, harassment, or unauthorized nude photos with little oversight, often providing some VIP users with a 24-hour window to delete their content themselves. A summary of the program from late last year obtained by The Journal found that posts allowed under the XCheck program that violated Facebook's rules were viewed at least 16.4 billion times before being removed.
From the article:
At times, the documents show, XCheck has protected public figures whose posts contain harassment or incitement to violence, violations that would typically lead to sanctions for regular users. In 2019, it allowed international soccer star Neymar to show nude photos of a woman, who had accused him of rape, to tens of millions of his fans before the content was removed by Facebook. Whitelisted accounts shared inflammatory claims that Facebook’s fact checkers deemed false, including that vaccines are deadly, that Hillary Clinton had covered up “pedophile rings,” and that then-President Donald Trump had called all refugees seeking asylum “animals,” according to the documents.
A 2019 internal review of Facebook’s whitelisting practices, marked attorney-client privileged, found favoritism to those users to be both widespread and “not publicly defensible.”
“We are not actually doing what we say we do publicly,” said the confidential review. It called the company’s actions “a breach of trust” and added: “Unlike the rest of our community, these people can violate our standards without any consequences.”
IN CASE YOU MISSED IT
Circle, Brex, Stripe: Payments companies are attracting supersize funding deals by Jessica Mathews
Unicorn startup Papaya Global nearly quadruples its valuation, eyes an IPO by Lucinda Shen
'Shang-Chi' is a box office hit and a milestone for Asian representation—but fans in China may never see it by Grady McGregor
Why climate action is about becoming more competitive by Alan Murray and David Meyer
China vows to consolidate its bloated electric vehicle industry—and its 'Big Three' are poised to benefit by Eamon Barrett
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BEFORE YOU GO
De-extincting woolly mammoths. A startup called Colossal is working to bring back woolly mammoths—the elephant-like creatures that last roamed the Earth thousands of years ago. With the financial backing of the Winklevoss twins, Tim Draper, and other big-name investors, Colossal hopes to resurrect woolly mammoths, thereby providing the Earth with a new tool in the fight against climate change.
