In a comment Sanjay Srivastava asked, “What do you think about the Epic vs Apple legal case? Would you allow Apple to continue their way of managing the App eco-system?”
I confess that I was unaware of the legal battle until Sanjay asked about it. I have subsequently read a bit about the case. The core conflict appears to be that Epic is challenging Apple for the latter’s decision to remove Epic from its app store for violating the Apple app store’s terms of service.
Allow me to state up front my position. I don’t think that Epic has a case, and that it is attempting to use the courts to do what it could not do, namely create its own marketplace to sell its products.
Epic wants to sell its products using Apple’s marketplace — a marketplace that Apple has created — without paying for the benefits that being on the Apple marketplace it would obtain. In short, Epic would like to free-ride. It would like to use Apple’s property to flog its wares without incurring the cost of paying for that service.
Let me use this analogy. Imagine that I have a product that I’d like to sell to a large number of customers but I don’t have a way to reach a large number of potential customers on my own. I realize that millions of people visit Acme (a large supermarket chain around here) and therefore if I put my product on Acme shelves, I’d get a lot sold.
I go to Acme and ask them to put my product on their shelves. They say, “Fine. We’d like 25% of your retail price for you to do that.” I say, “No. I will use your store but I will pay you nothing.” Acme refuses to carry my product. And then I take Acme to court arguing that Acme must allow me to put my stuff on its shelf for free.
Acme is a business. The business it is in is providing space for suppliers to sell their wares. If it does so efficiently that a large number of suppliers wish to get their products sold through Acme, then it continues to be in business. If a particular supplier finds Acme’s terms of doing business unsatisfactory, it has the freedom to go to another supermarket chain, or even create its own retail outlet. That makes sense. What does not make sense is to demand that Acme carry the supplier’s product without paying Acme for the service.
The core economic principle relates to is what is termed private property rights. Those are rights related to the acquisition, maintenance, use and disposal of property by the owner so long as that use does not violate similar rights held by another.
Societies that recognize and enforce private property rights do better than societies that don’t. I will not go into the details of the instrumental and utilitarian justifications of that here. For the moment I will only use the moral argument against property theft.
Apple created its store using its capital and technology. The Apple store is Apple’s private property; it has the right to dictate the terms of service. Firms freely choose to use that Apple’s store on Apple’s terms. If a firm doesn’t like those terms, it is free to go to a competing store (Google Play, for instance) or create its own store.
There are some reasonable-sounding objections to the position I take. One could be that Apple is a monopoly in the market that is defined by Apple products such as iPhones and iPad and the sort. Therefore it has to be controlled by the courts in the public interest. Monopolies, so the argument goes, have to be restrained from “unfair” practices. The US has “antitrust laws” against them.
Those antitrust laws don’t make sense to me from an economics point of view. I will pass on the arguments why. Here I wish to note that I am an Apple “anti-fan” — I don’t like Apple products for various reasons. I marvel at their marketing but I pity the poor sods who pay exorbitant amounts for Apple merchandise. But the customer is king. People are free to buy whatever they want — even overpriced stuff — with their money.
The bottom line is this. I hope the decision by the bench in the Epic vs Apple case is in favor of Apple. Epic needs to prove that it can compete in the marketplace without needing to steal Apple’s property.