Likely competition for Uber/Lyft in California. Grocery delivery is growing. Apple’s response to Epic’s lawsuit

Potential competition for Uber/Lyft in California

The two poster children of ride hailing companies in the US, Uber and Lyft, are having a legal fight with the state of California. The outcome of that battle remains to be seen, but if they lose, the companies already threatened to leave the state. Meanwhile, CNBC reported that at least 2-3 ride hailing startups talked about potentially swooping in to replace Uber and Lyft if they depart. One of those startups that I found interesting is Alto. Alto is a ride hailing startup that mainly operates in Dallas and Fort Worth. What differentiates Alto from their two bigger peers is that Alto’s drivers are salaried employees with benefits. Also, drivers don’t have to worry about gas or maintenance costs. Here is what their recruitment page says

Source: Alto

Some critics of AB5, the law that can potentially cause Uber/Lyft to leave California, say that the law is flawed in that it kills the flexible schedule that drivers, classified as contractors, enjoy. That is a valid point. Some do prioritize a flexible schedule over everything else. I have seen myself several drivers who just drive on the weekends to get some more money on this side gig. These drivers likely wouldn’t appreciate entering an employment contract that would likely require them to work more than they want. Clearly, in this case, AB5 likely won’t work.

That; however, doesn’t change the fact that Uber and Lyft’s refusal to classify drivers as employees can put drivers as disadvantage. Some drivers put in a lot of working hours, but do not earn enough after they take into account gas, car maintenance expenses and dead miles (hours when they drive around without any rides). Because they are not employees, they don’t have benefits like paid time off or insurance either.

There are two separate camps in this argument with virtually conflicting interests. Whether AB5 alone is a sufficient fix remains to be seen, but the existence of companies like Alto and its willingness to enter California’s market offer proof that there is an alternative model to what Uber and Lyft stand for.

Online grocery continues to grow amid the pandemic

Since March, Covid-19 has pushed online grocery to new heights that few could have predicted. According to Brickmeetsclick, even though growth has plateaued in June, online grocery sales reached $7.2 billion and an incredible 85 million orders.

Recent market developments suggest that the trend is likely to continue in the upcoming months. Shipt announced the drop of membership requirements and instead let customers pay $10 for a single order, $9 per delivery for 3 orders and $8 for 5 orders. Additionally, Walmart and Instacart recently partnered to provide same-day delivery in four markets across California and Oklahoma. Last Thursday, DoorDash entered the grocery delivery market with DashPass, a $10/month subscription which allows customers to order and receive groceries in about an hour. Last month, Uber joined the party with their own grocery delivery option through the main Uber and Uber Eats apps. Moreover, FreshDirect unveiled its expansion into New Jersey, New York and Connecticut.

Grocers and delivery services are working in tandem to facilitate more online grocery spend. Grocers let customers receive orders at their front door, pick up and drive up at stores. Delivery services lower barriers and compete with one another to acquire users. In the near future, this battle will be very fierce and the biggest beneficiary will be the end consumers.

Apple’s legal issues with Epic Games

Apple responded to Epic Games’ lawsuit over the App Store policies. In the response, Apple offered reasons why the court should let Apple continue to ban Epic Games’ apps while the legal battle rumbles on, including:

  • Epic’s alleged harm is not irreparable. Epic’s apps will be reinstated on the App Store if the game maker removes its own payment option, the cause of its violation of the terms of services, and adheres to the guidelines that Epic agreed to from day one.
  • Epic’s alleged harm is its own doing. The game maker first asked Apple for a special treatment by creating an Epic Store inside the App Store. Then, it asked Apple to open up the App Store by allowing more payment options. After the requests were declined, Epic Games decided to circumvent the App Store policies by offering its own payment scheme, suing Apple and launching a coordinated PR attack.
  • Apple does not engage in anti-competition practices and the App Store policies are to make sure that 1/ consumers’ privacy and safety are protected and 2/ Apple gets paid for its investments

The legal document is here and if you’re interested in this kind of stuff, you should have a read.

Personally, I don’t think Epic will win this legal battle. The App Store is Apple’s investment and intellectual property. Hence, Apple is entitled to enforcing the policies on the app marketplace, the same policies that Epic Games has agreed to when it launched its apps on the App Store. Whether Apple is wielding too much power is another matter for discussion, but if you created a marketplace and invests a lot of resources into it, it’s pretty difficult to understand the sentiment that you’re not allowed to benefit from your own investments or to enact and enforce policies that you see fit.

Plus, what happened, based on the emails exchanged between Apple and Epic, seems pretty distasteful and bully-like from the latter. On 6/30/2020, Tim Sweeney wrote to Apple the following, which is part of a longer email. His requests were rejected by Apple on 7/10/2020:

Source: Scribd

On 8/13/2020, Epic wrote to Apple, declaring its intention not to follow the App Store guidelines and to take legal actions if Apple retaliated. Apple subsequently wrote to Epic twice, informing the app maker of its violations and asking it to remedy the situation. Epic Games instead sued Apple for enforcing rules on…Apple’s own app marketplace.

Source: Scribd

Since I am not a lawyer, I’ll leave the argument on legal standings to the court and the lawyers from both sides, but from a common sense perspective, I don’t see a chance for Epic here. Hey app from Basecamp had trouble with Apple before. Instead of raising a legal fuzz, Basecamp raised the issue publicly on Twitter and engaged in discussions with Apple to resolve conflicts, which it did. And Hey didn’t even demand to have its way in the App Store like Epic Games did. That’s the way to do it, not the course of actions and manner that Epic Games pursued here.

This legal battle will leave Epic’s reputation tainted while also not doing Apple’s any favor.

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