The Morning Dispatch: A Tale of Two Tech Titans

Happy Thursday! The New York Knicks won their first playoff game since 2013 last night, but it’s important to remember that two of their best players—and their head coach—came from the Chicago Bulls. So it’s kind of like the Bulls got the win, too. 

Quick Hits: Today’s Top Stories

• President Joe Biden said in a statement Wednesday he has asked the intelligence community (IC) to “redouble their efforts” to investigate the origin of COVID-19, “including whether it emerged from human contact with an infected animal or from a laboratory accident.” Biden said the IC has yet to reach a definitive conclusion on the issue, as “the majority of elements do not believe there is sufficient information to assess one [theory] to be more likely than the other.”

• The Senate voted unanimously yesterday to pass Sen. Josh Hawley’s bill that would require the director of national intelligence to declassify “any and all information” the federal government has about links between the Wuhan Institute of Virology and COVID-19’s origins. The legislation would need to be approved in the House and signed by President Biden to go into effect.

• A gunman killed eight people at a rail yard in San Jose, California on Wednesday. The suspect—who was a transit system employee and died after likely shooting himself—is believed to have set his home on fire prior to the shooting, according to a spokesman for the Santa Clara County sheriff’s office.

• Former Republican Sen. John Warner of Virginia—who also served as secretary of the Navy in the early 197os—died Tuesday evening at the age of 94. Children’s author and illustrator Eric Carle—most famous for The Very Hungry Caterpillar—also died earlier this week at the age of 91. 

• The United States confirmed 24,058 new cases of COVID-19 yesterday per the Johns Hopkins University COVID-19 Dashboard, with 3.2 percent of the 762,561 tests reported coming back positive. An additional 1,016 deaths were attributed to the virus on Tuesday, bringing the pandemic’s American death toll to 591,941. According to the Centers for Disease Control, 22,810 Americans are currently hospitalized with COVID-19. Meanwhile, 1,423,432 COVID-19 vaccine doses were administered yesterday, with 165,074,907 Americans having now received at least one dose.

The Apple v. Epic Antitrust Showdown

If you have teenagers at home—or are a teenager yourself (thanks for reading TMD!)—you’ve likely heard of Fortnite, the massively popular online video game developed and released by Epic Games in 2017. The game boasts hundreds of millions of players across the globe, and—speaking from personal experience—those players can get sucked into gameplay for hours on end.

What you might not know, however, is that Fortnite is currently at the center of a lawsuit with mammoth stakes for mobile gaming, antitrust law, and the digital economy as a whole.

Apple removed Fortnite from its App Store last August when Epic Games implemented an update allowing users to access discounts on in-app purchases if they made said purchases through Epic’s direct payment feature rather than the App Store itself. Why? Because Apple charges developers a 30 percent fee on every app and in-app purchase—except for small businesses generating less than $1 million in annual revenue, which pay a 15 percent commission—and Epic was looking for a way to circumvent it.

“Today, Epic Games took the unfortunate step of violating the App Store guidelines that are applied equally to every developer and designed to keep the store safe for our users,” Apple said in a statement at the time explaining its decision to boot the app. “Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services. … The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users.”

Epic—aware that its actions would provoke such a response—quickly filed a civil antitrust lawsuit against Apple. “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear,” it read. “Epic brings this suit to end Apple’s unfair and anti-competitive actions that Apple undertakes to unlawfully maintain its monopoly in two distinct, multibillion dollar markets: (i) the iOS App Distribution Market, and (ii) the iOS In-App Payment Processing Market.”

Fast forward nine months. Lawyers for both sides have been arguing before U.S. District Judge Yvonne Gonzalez Rogers for the past several weeks, and the trial came to a close on Monday—although Gonzalez Rogers’ verdict has yet to be handed down.

The outcome will ultimately hinge on how the judge defines the markets in which Apple and Epic operate. “Epic is arguing that the relevant market in this case is iOS products—Apple products—and that Apple has 100 percent of that market,” Boston College law professor Daniel Lyons told The Dispatch. Apple, meanwhile, views its iOS operating system as just one of many platforms on which users can play Fortnite: The game is also available on PlayStation, Xbox, Nintendo, Windows, and—in a roundabout way—Android (Epic is suing Google for similar reasons).

“We are pleased that the trial shined a light on Apple’s anti-competitive app store practices that limit innovation and hurt consumers,” Meghan DiMuzio, executive director of the Coalition for App Fairness—of which Epic is a founding member—told The Dispatch. “With greater awareness of Apple’s conduct, there is growing support around the world for our goal of a fair app marketplace that will benefit all developers and their customers.”

Epic and its allies argue Apple’s alleged App Store monopoly harms consumers by artificially inflating prices. “When you choose to use Epic direct payments, you save up to 20% as Epic passes along payment processing savings to you,” the company told users when it rolled out its iOS competitor in August. But Apple argues its customers choose iPhones in part because of the App Store’s closed ecosystem and more stringent safety, security, and privacy features—and that those benefits are worth paying a premium for.

“I think [consumers] have a choice today,” Apple CEO Tim Cook told Gonzalez Rogers. “They have a choice between many different Android models of a smartphone, or an iPhone, and that iPhone has a certain set of principles behind it in safety, security, and privacy.”

That safety, security, and privacy doesn’t come cheap. Applications that make it to the App Store go through a rigorous review process that Apple says requires a remarkable amount of labor. A spokesperson for Apple told The Dispatch approximately 100,000 apps are submitted for approval every week, and about 40,000 of those do not make it through. The company argues it should be allowed to profit from this curation process that provides its customers a better user experience, and that a 30 percent cut is in line with industry standards.

But Gonzalez Rogers, an Obama appointee, seemed taken aback by the stability of Apple’s commission rate over the years. “If there was real competition, that number would move,” she said. “It hasn’t.”

It’s an uphill battle to win an antitrust suit in the United States. Competition law here centers on the “consumer welfare standard,” which requires plaintiffs to provide evidence that a company’s monopoly power is actively hurting customers through higher prices, reduced innovation, or lower quality goods. It would generally not be enough, for example, for Epic to demonstrate that Apple’s policies are harming Epic.

So if Gonzalez Rogers sides with the video game developer, this would represent a sea change in antitrust enforcement. “A ruling in Epic’s favor would be pretty significant,” Lyons said. “It could potentially have implications for the government suits against Facebook and Google as well, because part of what’s going on in those cases is how do you define the market? … How do you think about what the outer boundaries of the market are for a particular product when that product is online rather than brick and mortar?”

The proceedings here have been operating as a “bench trial,” meaning Gonzalez Rogers—not a jury, or panel of judges—will be the sole decider in the case. The judge said earlier this week it will be “a while” before she reaches a verdict, likely several weeks.

Blinken’s Middle East Tour

Back in January—eight days into the Biden administration—Politico reported that National Security Adviser Jake Sullivan had begun the process of restructuring his team to include more specialists versed in the Indo-Pacific and fewer focused on the Middle East, kicking off President Biden’s broader “pivot” from a region marred by historical conflict and controversy for the United States. In the following months, the White House pursued moves to limit American military and financial entanglements in the Middle East.

This reprioritization was put to the test earlier this month, when 11 days of cross-border rocket fire between Israel and Hamas culminated in upwards of 260 deaths and thousands of displacements after a period of relative calm. Secretary of State Antony Blinken traveled to Israel, the West Bank, Egypt and Jordan for the first time in his official capacity this week to shore up a tenuous Egypt-brokered ceasefire.

Blinken’s tour included meetings with some heavy hitters: Israeli Prime Minister Benjamin Netanyahu and President Reuven Rivlin, Palestinian Authority President Mahmoud Abbas and Prime Minister Mohammad Shtayyeh, and—notably—Egyptian President Abdel Fattah Al Sisi.

Per a State Department readout of the meeting with Sisi, Blinken “affirmed the strong strategic partnership between the United States and Egypt” and “conveyed President Biden’s appreciation to President Sisi for Egypt’s critical mediation efforts in support of a ceasefire between Israel and Hamas and other groups in Gaza.”

According to Jonathan Schanzer, senior vice president of the Foundation for Defense of Democracies, this credit was certainly due. “This is a government that really doesn’t like the Muslim Brotherhood, and they worked with a Muslim Brotherhood splinter group—Hamas—to help achieve a ceasefire,” Schanzer told The Dispatch. “So they held their nose and pushed forward and were able to successfully reach a ceasefire in 11 days.”

But the ceasefire is tenuous. Hamas leader Yahya Sinwar on Wednesday promised to strike the Jewish state again if it “violates” the Al-Aqsa mosque on Temple Mount or goes through with evictions of Palestinian tenants in the East Jerusalem neighborhood of Sheikh Jarrah. “What has happened is but a drill for what will come,” Sinwar warned.

Blinken announced U.S. aid totaling more than $360 million to the West Bank and Gaza. On top of assistance unveiled in March and April, the U.S. government will allocate an additional $75 million to development and recovery, $38 million to humanitarian efforts, and $33 million to the United Nations agency for Palestinian refugees (UNRWA)—which former President Donald Trump cut U.S. funding to in 2018 amid disproportionate U.S. financial commitments. 

“All of these funds will be administered in a way that benefit the Palestinian people—not Hamas, which has only brought misery and despair to Gaza,” Blinken said in a statement Wednesday, adding that the financial contributions promote “U.S. interests and values” in the region.

This may be easier said than done. As George Washington University Middle East expert Nathan Brown told Politico earlier this week, effective distribution of emergency aid typically requires cooperation with local political authorities. In this case, the local authority to deal with is Hamas. A State Department official told reporters on Monday the administration would work “in partnership with U.N. and Palestinian Authority to channel aid there in a manner that does its best to go to the people of Gaza.”

“The United Nations has a significant and meaningful presence on the ground there,” the official added.

Throughout the tour, the Biden administration frequently voiced its support for Israel’s national security and defensive measures. When asked in a Channel 12 interview with Yonit Levy if the Democratic party’s progressive flank would successfully block an arms deal with Israel, Blinken said the administration is “committed to Israel’s security, period. We will make sure that Israel has the means to defend itself.”

But there’s an elephant in the room, and it’s Biden’s likely impending return of the U.S. to the 2015 Joint Comprehensive Plan of Action (JCPOA) with Iran. With the Obama-era deal’s revival would come sanctions relief, and hundreds of millions of dollars reviving the cash-strapped Islamic Republic and its many regional proxy militias, including Hamas.

“The U.S. will effectively be funding both sides of the next round of the Hamas-Israel conflict, which is an insane prospect,” Schanzer explained. “But that money will also flow to the coffers of Hezbollah in Lebanon, Shia militias in Syria and Iraq, the Houthis in Yemen, and perhaps other groups as well. With America on a diplomatic offensive in the Middle East to calm jittery nerves and to reassure the region of American leadership, it may yet ring very hollow in the very near future.”

Paul Ryan Speaks

Former House Speaker Paul Ryan will speak this afternoon at the Ronald Reagan Foundation and Institute, where he will call for a return to the limited government principles favored by Reagan and warn about the perils of populism and progressivism. Ryan’s is the first speech in a series called, “A Time for Choosing.” 

From the speech:

“Once again, we conservatives find ourselves at a crossroads.  And here’s one reality we have to face.  If the conservative cause depends on the populist appeal of one personality, or on second-rate imitations, then we’re not going anywhere.  Voters looking for Republican leaders want to see independence and mettle. …

“We win majorities by directing our loyalty and respect to voters, and by staying faithful to the conservative principles that unite us.  This was true even when the person leading our movement was as impressive, polished, and agreeable as they come.”

And: “In 2020, the country wanted a nice guy who would move to the center and depolarize our politics.  Instead, we got a nice guy pursuing an agenda more leftist than any president in my lifetime.  These policies might have the full approval of his progressive supporters, but they break faith with the middle-of-the-road folks who made the difference for him on Election Day.

“For conservatives, this painful existence as the opposition can actually be an opportunity.  Out of these years can come a healthy, growing, and united conservative movement, a movement that speaks again to the heart of a great nation.”

Worth Your Time

• Last January, Republican Sen. Tom Cotton pointed out in a hearing that the Chinese government lied about COVID-19 originating in the Huanan Wholesale Seafood Market, which is located in the same town as China’s only biosafety level-four laboratory. Cotton got a lot of flack from virologists—and in turn the mainstream media—for raising questions about the origins of what we were all then calling the “novel coronavirus.” In his Wednesday Slow Boring post, Matt Yglesias tracks how the debate around the lab leak theory has evolved over time, and how press coverage failed it. “This is a case of a smallish group of reporters and fact-checkers proclaiming a scientific consensus where none ever really existed,” he writes. “How did people let the original story of what Tom Cotton even said go so badly awry? Essentially Cotton said something that was then transformed into a fake claim of a Chinese bio-attack, then the fake claim was debunked, and then the debunking was applied to the real claim with little attention paid to ongoing disagreement among researchers.”

• May 31 and June 1 will mark the hundred-year-anniversary of one the most brutal events in modern American history: the Tulsa Massacre of 1921. Nearly a century ago, hundreds of black residents and businesses of the Greenwood neighborhood of Tulsa, Oklahoma were killed in one brutal streak of violence. “Greenwood was so promising, so vibrant that it became home to what was known as America’s Black Wall Street,” write several New York Times reporters in a piece commemorating the lives of those who were lost. “But what took years to build was erased in less than 24 hours by racial violence—sending the dead into mass graves and forever altering family trees.”

Presented Without Comment

Toeing the Company Line

• The one-year-anniversary of Seattle’s Capitol Hill Autonomous Zone is fast approaching, and boy, does Jonah have some thoughts. “What I loved about [CHAZ] was the way in which it beclowned the modern Rousseauians who find the basic foundations of civilization contemptibly artificial and unnecessary,” Jonah writes in his latest G-File (🔒). “They thought they could live in radical egalitarian tranquility and comity. And then nature—specifically human nature—said, ‘Nah, bruh.’” Check out Wednesday’s newsletter for Jonah’s thoughts on why CHAZ didn’t work, why crime disproportionately hurts the poor, and why defunding the police is still a wildly unpopular belief among four out of five Americans.

• With Biden’s legislative agenda coming up against many roadblocks in Congress, Sarah, Steve, David, and Jonah debate on Wednesday’s episode of The Dispatch Podcast which of Biden’s priorities will survive the congressional chopping block. Stick around for a discussion of Florida’s new “anti-Big Tech” law, the politics of crime, and what comes next after the Belarusian government’s arrest of a 26-year-old dissident journalist.

• The Senate is now considering the United States Innovation and Competition Act of 2021, one of the largest industrial policy packages in modern memory. This gargantuan bill provides Scott Lincicome with the perfect opportunity to explain public choice theory in his latest Capitolism (🔒), and “why designing and implementing good industrial policy in the United States is so darn difficult.”

Let Us Know

In honor of Eric Carle, let’s talk about children’s literature. Which author and/or book had the biggest impact on your childhood? What, in your mind, separates the great children’s books from the good ones?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Haley Byrd Wilt (@byrdinator), Audrey Fahlberg (@FahlOutBerg), Charlotte Lawson (@charlotteUVA), Ryan Brown (@RyanP_Brown), and Steve Hayes (@stephenfhayes).