...Of Platforms & Aggregators: Why Breaking Apart Big Tech Will Be Hard

The ruling in the recent Epic Games (the creator of Fortnite) vs Apple court case is proof of why breaking up the seemingly anti-competitive practices of big tech giants is going to be incredibly difficult. A summary of the litigation is that Epic Games took Apple to court because the latter had pulled the former's Fortnite app from its App Store for violation of its policies. 

The violation? Well, the way Apple's App Store works is that developers of apps that are made available on the store are not allowed to use any other payment systems to process app users' in-app purchases other than the one provided by Apple through the App Store. As an example, let's say that you are playing Fortnite and would like to buy some cool character costumes (this is referred to as an in-app purchase). The way Apple's system works is that when a user makes this purchase, they get a 30% cut from the amount a user spends on the purchases. 

Epic Games was not happy about that so what they did is that in an update to the Fortnite app, they included an alternative payment system specifically for Fortnite users which meant that Apple would not be able to get their 30% cut. Apple found out, decided to pull the Fortnite app from the App Store for violation of its policies and Epic Games took them to court for that.

Fast forward to the ruling, the judge decided in favour of Apple in 9 of the 10 counts brought against them.  With regards to the 30% cut that Apple takes for all in-app purchases, the judge noted that although the amount may be "unjustified" looking at the value the App Store offered to developers, Apple still had the right to take some cut for licensing its intellectual property to the said developers like Epic. A lack of competition in the app store space was what allowed Apple to take a high percentage cut and according to the judge, the court could not do anything about that.

Epic was ordered to pay back 30% of the revenue they had withheld from Apple by bypassing the App Store payment processing system. On top of that, Apple is also in the future allowed to block any future Epic Games apps from their App Store. That part of the judgement won't really matter much because Epic themselves have vowed to not make any of their apps available on the App Store until Apple allows the use of alternative payment processing systems.

In what one might perhaps call a consolation victory of some sort for Epic, in the one count that the court ruled in their favour, Apple is now not allowed to block developers from letting users know about alternative payment systems they can use (but those payment systems are not allowed to be a part of the actual app made available on the App Store).

The Epic vs Apple ruling shows why proving the illegality of supposed monopolistic practices of big tech platforms in court is so difficult. So, what is a platform, though? The infographic below by Ben Thompson on the Stratechery site provides a simplistic representation of the idea:

The idea behind a platform is pretty straightforward. It facilitates a relationship between users and third-party developers. Tech platforms aren't anything new. What also isn't new is the supposed anti-competitiveness of platforms. Microsoft's Windows operating system is an example of a platform and in the 1990s, Microsoft also faced litigation because of its bundling of the Internet Explorer web browser with the Windows operating system which some makers of competing internet browsers interpreted as an anti-competitiveness practice.

Of course, the details of the two cases are significantly different but what is uniform throughout is the fact that platform providers seem to find no problem with engaging in anticompetitive practises until they are faced with litigation which, as we saw with the Epic vs Apple ruling, goes in their favour in most cases. In other words, they do it because they can. 

This then brings up the question of, if the courts don't see anything wrong with big tech's practices, are they really doing anything wrong or just taking advantage of their market position? After all, as the judge noted, Apple is providing its intellectual property for developers which allows the developers to reach millions of users for their apps so it's only fair that they get a cut. Yes, the lack of competition in that market is what allows Apple to take such a huge cut but is that Apple's fault, in all fairness?

Aggregators too have faced their own share of scrutiny with regards to anti-competitiveness practices but they too, like the platforms, have had the advantage in courts of law. So what exactly are aggregators? Another Ben Thompson infographic comes in handy to provide an explanation:

Aggregators intermediate the relationship between users and third-party developers. The biggest tech aggregator of them all is probably Google Search. Whenever you are looking for a particular service on the internet, say a travel agency, you go to Google and search "travel agency near me" or whichever search term then boom, like magic, Google gives you a whole bunch of websites on the search results.

Anti-competitive practises that Google has been accused of taking part in through Search in the past include putting its products first in search results e.g. Google Flights appearing first in a search query for "cheap flights near me", or Google charging dubious fees for search engine marketing, or Google banning some websites from search results for their own reasons. They have also been accused of collecting an incredible amount of data on users to drive their advertising machine.

The reason such cases, like the ones against platform providers, don't fare well in courts of law is that at the end of the day, Google is just taking advantage of its market position and not really breaking any laws. A business model that works perfectly and brings in billions is not criminal, so says the courts. I mean with Google, if websites are not happy with the service, they can still reach users through listing on alternative search engines like Bing, Yahoo, etc or users can just access the publisher's website directly by typing it on a browser URL bar. For those concerned about their data being collected, alternative privacy-centric search engines like DuckDuckGo exist.

The fact of the matter is that big tech platforms and aggregators have acquired their market position by creating incredible products that have significantly improved the lives of users. Imagine a life without Google Search, Apple's App Store or Facebook. Scary! Another fact is that yes, some of their practices have been morally questionable at worst, but illegal? Courts have proved over and over again that no, they have not been doing anything illegal.

With this in mind, the onus then falls on the regulators to create laws that would actually be effective against big tech giants in court, something they are dragging their feet to do and making it more and more difficult to do in the future. Look at Facebook for example. It should have never been allowed to acquire Instagram or WhatsApp in the first place. But because no regulation prevented it from doing so, right now, whats it is doing is integrating the functionalities of its different apps to make it into one seamless ecosystem which means that in the future when attempts are made to break it apart, it would be next to impossible to do so.

Because of the difference in how they function, platforms and aggregators are going to require different and specific regulatory frameworks to rein them in and although some efforts have been initiated, time is ticking away. A blanket approach would not work because one aspect of regulation that reduces the market power of a platform provider can strengthen the market power of an aggregator. The more time they are left to their own devices, the more they will consolidate their market position which would not only make it impossible for future regulation to have an impact on them but make it impossible for any competition to make any significant leeway.

Big tech giants have created innovations that have been of great importance to humanity but it's imperative that their power is put in check. A monopoly or duopoly coupled with minimal regulation is a recipe for disaster regardless of how innovative the involved companies are. However, regulation is not the responsibility of tech giants and it's quite unfair for them to be vilified for taking advantage of a lax regulatory environment that allows them to add billions of dollars to their bottom line. After all, capitalists will also capitalise.