Epic Games v. Apple
Epic Games v. Apple is a current lawsuit brought by Epic Games against Apple in August 2020 in the United States District Court for the Northern District of California, related to Apple's practices in the iOS App Store. Epic Games specifically had challenged Apple's restrictions on apps from having other in-app purchasing methods outside of the one offered by the App Store. Epic Games' founder Tim Sweeney had previously challenged the 30% revenue cut that Apple takes on each purchase made in the App Store, and with their game Fortnite, wanted to either bypass Apple or have Apple take less of a cut. Epic implemented changes in Fortnite intentionally on August 13, 2020, to bypass the App Store payment system, prompting Apple to block the game from the App Store and leading to Epic filing its lawsuit. Apple filed a countersuit, asserting Epic purposely breached its terms of contract with Apple to goad it into action, and defended itself from Epic's suit. The trial ran from May 3 to May 24, 2021, with a verdict anticipated later in 2021.
|Epic Games v. Apple|
|Court||United States District Court for the Northern District of California|
|Full case name||Epic Games, Inc. v. Apple Inc.|
|Argued||May 3–24, 2021|
Epic also filed another lawsuit, Epic Games v. Google, the same day, which challenges Google's similar practices on the Google Play app store for Android, after Google pulled Fortnite following the update for similar reasons as Apple. However, Google has stressed that the legal situation around their case is not the same around Apple's.
Since as early as 2015, Epic Games' co-founder and CEO Tim Sweeney had questioned the need for digital storefronts like Valve's Steam, Apple's App Store for iOS devices, and Google Play, to take a 30% revenue sharing cut, and argued that when accounting for current rates of content distribution and other factors needed, a revenue cut of 8% should be sufficient to run any digital storefront profitably. While a 30% revenue cut was an industry standard across computers, consoles, and mobile platforms in 2019, Sweeney stated that higher revenue shares made sense on consoles where "there's enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers", but did not extend to open platforms like mobile devices and personal computers. Part of the reasoning for creating the Epic Games Store was to demonstrate that Epic could operate at a lower revenue cut (12%).
As Fortnite expanded from personal computers to other platforms with the popularity of the Battle Royale mode in 2018, Epic Games sought to bring the free-to-play game to mobile devices. When Epic first released its Android client, it offered it as a sideloaded package rather than as a Google Play store app, as they did not want Google to take any revenue from the microtransactions in the game. However, this resulted in a number of security concerns and numerous unscrupulous clones attempting to pass themselves off as the real Fortnite game in the Google Play store, and by April 2020, Epic discontinued the sideloaded version and placed the game on the Google Play store. As Apple does not allow sideloading on iOS devices, Epic had just released the client on the App Store directly in 2018.
In mid-2020, Sweeney reiterated his stance on the 30% revenue cut that Apple and Google took, ahead of a large United States Congressional hearing investigating antitrust charges on the Big Tech companies including Google, and during similar investigations of Apple in the European Union. Sweeney said in a July CNBC interview that "Apple has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software", and "Google essentially intentionally stifles competing stores by having user interface barriers and obstruction". Sweeney further stated that "If every developer could accept their own payments and avoid the 30% tax by Apple and Google we could pass the savings along to all our consumers and players would get a better deal on items. And you'd have economic competition." After Apple stated that cloud gaming services like Microsoft's xCloud were not allowed on the iOS platform as they would allow content that bypassed Apple's content review, Sweeney wrote "Apple has outlawed the metaverse. The principle they state, taken literally, would rule out all cross-platform ecosystems and games with user created modes: not just xCloud, Stadia, and GeForce NOW, but also Fortnite, Minecraft, and Roblox."
Apple has argued that the 30% cut it takes "reflects the immense value of the App Store" and beyond the visible features it offers developers, that cut covers "Apple’s technology, tools, software for app development and testing, marketing efforts, platinum-level customer service, and distribution of developers’ apps and digital content." Apple has further argued that it requires iOS apps to use its storefront to "ensure that iOS apps meet Apple's high standards for privacy, security, content, and quality" and avoid exposing iOS users to risks from alternative storefronts.
Legal review of the cases identify the key issue is whether Apple's control of the iOS App Store is a monopoly or not. Epic Games has argued that Apple maintains a monopoly for iOS-enabled devices, and thus its behavior in restricting alternative payment systems and storefronts are anticompetitive. Apple contends that the marketplace that Epic participates in is multiple platforms, not just the iOS, and in that perspective, Apple does not have a monopoly.
Onset of legal actionEdit
In an interview with CNN, Sweeney stated that Epic planned out a course of action over several months prior to August 2020, codenamed "Project Liberty", aimed to force Apple and Google's hands, either to alter their store policies or to initiate legal action.
On August 13, 2020, Epic Games updated Fortnite across all platforms, including the iOS and Android versions, to reduce the price of "V-Bucks" (the in-game currency) by 20% if they purchased directly from Epic. For iOS and Android users, if they purchased through the Apple or Google storefront, they were not given this discount, as Epic said they could not extend the discount due to the 30% revenue cut taken by Apple and Google. Within hours, both Apple and Google had removed Fortnite from their storefronts stating the means of bypassing their payment systems violated their terms of service.
Epic immediately filed separate lawsuits against Apple and Google for antitrust and anticompetitive behavior in the United States District Court for the Northern District of California. Epic retained the legal counsel of Christine A. Varney, formerly lead of the Antitrust Division of the U.S. Department of Justice under the Obama administration, for both cases. As part of the suit against Apple, Epic also released a video called "Nineteen Eighty-Fortnite", parodying Apple's "1984" advertisement using Fortnite assets, which Epic points out in their lawsuit had been used by Apple then to challenge the weight of IBM at the time. In its suit against Apple, Epic accused Apple of antitrust behavior with its practices around the App Store and its payment system, charging that these were in violation of the federal Sherman Act and the California Cartwright Act. In its suit towards Google, Epic challenged Google's past mantra of "Don't be evil" and claimed that its practices around the Google Play store and its payment system violate the Sherman Act and California's Cartwright Act. Epic stated that Google's restrictions on the Android system interfered with deals for pre-loading Fortnite on phones from OnePlus and LG. They state in the claim "Notwithstanding its promises to make Android devices open to competition, Google has erected contractual and technological barriers that foreclose competing ways of distributing apps to Android users, ensuring that the Google Play Store accounts for nearly all the downloads of apps from app stores on Android devices." Epic did not seek monetary damages in either case but instead was "seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers." In comments on social media the next day, Sweeney said that they undertook the actions as "we're fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly. The primary opposing argument is: 'Smartphone markers can do whatever they want.' This as an awful notion.[sic] We all have rights, and we need to fight to defend our rights against whoever would deny them."
Google, in response to the lawsuit, stated to The Verge that "For game developers who choose to use the Play Store, we have consistent policies that are fair to developers and keep the store safe for users. While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play." By August 17, 2020, Apple had informed Epic that it would terminate its access to developers accounts and tools for the App Store and iOS and macOS by August 28, 2020. This led Epic to file a motion for a preliminary injunction to block this as well as prevent Apple from delisting Fortnite from the App Store, asserting that lack of access to the development tools for iOS and macOS would affect Unreal Engine development and subsequently impact all developers that used the engine. Apple stated in response to the request for preliminary injunction that Epic had approached them in June to ask for a special deal for Epic to operate Fortnite on the App Store to allow users to pay Epic directly, and when Apple had failed to grant them this, Epic had contacted them prior to updating the version on August 13, 2020, to state they were willingly going to violate the App Store terms. Apple further requested the court deny Epic the preliminary junction, calling the "emergency" situation one that Epic had created itself. Sweeney stated in response that as his emails in Apple's complaint said, he was looking for Apple to extend to this type of exemption to all iOS developers and not just for Epic Games. Epic filed a response to Apple's complaint with support of Microsoft, specifically asking the court to block Apple from taking away its iOS development tool access as this would impact all developers that have used the Unreal Engine. Microsoft wrote in their support, "Denying Epic access to Apple's SDK and other development tools will prevent Epic from supporting Unreal Engine on iOS and macOS and will place Unreal Engine and those game creators that have built, are building, and may build games on it at a substantial disadvantage."
On August 24, 2020, after a court hearing Judge Yvonne Gonzalez Rogers granted Epic's request to prevent Apple from taking away its developer licenses for iOS and macOS, but did not grant the preliminary injunction to overturn Apple's decision to remove Fortnite from the iOS store. Rogers wrote that the removal of the developers licenses had "potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally" and Apple "has chosen to act severely" in threatening that step. On terms of Fortnite, Rogers agreed with Apple that "Epic Games has not yet demonstrated irreparable harm. The current predicament appears of its own making." Subsequently, Apple terminated Epic's iOS developer account on August 28, 2020, thereby preventing the company from uploading further material to the App Store but otherwise still being able to develop for the platform.
Prior to the first hearing on September 28, 2020, Epic filed paperwork ahead of the hearing in which they intend to seek a preliminary injunction to require Apple to rehost Fortnite.
Apple filed a countersuit against Epic on September 8, 2020. Apple asserted in their suit that Epic breached their contract and was seeking to block the use of Epic's payment system from any app, including Fortnite, on the iOS storefront, and sought monetary damages to recover funds that Epic had made while their version of Fortnite was active on August 13, 2020. Apple called Epic's suit an attempt "to be part of a marketing campaign designed to reinvigorate interest in Fortnite". Judge Rogers dismissed Apple's monetary claims of theft in November 2020, stating that the claims cannot be considered "independently wrongful" of the breach of contract claims, leaving these breach claims otherwise in place.
At the first court hearing on the matter on September 28, 2020, Judge Rogers appeared likely to deny Epic's demand to require Apple to rehost Fortnite on the App Store unless they conform to the App Store policy, siding with Apple that Epic had created the situation leading to its removal itself, but otherwise ready to maintain the restraining order related to the Unreal Engine and Epic's developer accounts. Judge Rodgers did speak to looking towards a jury trial for the case, likely to be heard in July 2021, stating during the hearing "I think it's important enough to understand what real people think. Do these security issues concern people or not? Are the concerns of the developers incredibly important? I think many people would feel it is. I do think that this is something for which jury insights would be important."
In post-hearing filings, both Epic and Apple have argued that the case should proceed via judge hearings and not through jury trials. Judge Rodgers agreed, scheduling a bench trial to commence in May 2021. Subsequent to this scheduling, Judge Rogers denied to grant Epic Games a temporary injunction to require Apple to allow Fortnite in its current state (with Epic's storefront), but made permanent the injunction preventing Apple from terminating Epic's developer accounts such that it can continue to maintain the Unreal Engine for iOS and macOS systems. In her decision, Rogers stated that a key aspect of her review of the case will be Epic's contention that the App Store is unique and their arguments as to why Apple's antitrust behavior is limited to the App Store and not to the other closed systems such as Xbox Live, PlayStation Store or the Nintendo eShop. Rogers said that "a final decision should be better informed regarding the impact of the walled garden model given the potential for significant and serious ramifications for Sony, Nintendo and Microsoft and their video game platforms."
Facebook stated in December 2020 that it will fully support Epic Games in the lawsuit during its discovery phase. Facebook itself had been in prior conflict with Apple over its App Store policies and had amassed its own collection of information they plan to share with Epic.
As part of its case, Apple had attempted to subpoena records from Valve related to several hundred games and their sales on Steam, given that Steam is a direct competitor to Epic Games's storefront in the personal computer space. Valve declined to comply with these requests, arguing that Apple's requests are overly broad and unrelated to their complaint with Epic. The judge ruled in Apple's favor, stating that Valve was not the only target of Apple's subpoenas seeking similar storefront data, and thus the request was not unreasonable.
The trial commenced on May 3, 2021. Due to the nature of the case, Judge Gonzalez Rogers required that all parties be physically present at the court, with additional steps made to account for safety due to the ongoing COVID-19 pandemic. The trial ran for three weeks, with testimony ending on May 21, 2021 and closing arguments given on May 24, 2021. The law firm Cravath, Swaine & Moore represented Epic Games while Gibson, Dunn & Crutcher represented Apple.
Among aspects covered by the trial included:
- Epic Games and Apple discussed whether other apps such as Minecraft and Roblox should be defined as "games" or "metaverses." Though they agreed that Minecraft is a game, they disagreed over how to define Roblox. Epic argued that Roblox, like Fortnite, is a metaverse, while Apple argued that Roblox is a singular game and that games within it are "experiences," comparable to individual worlds within Minecraft. As a result, in May 2021, Roblox immediately altered its branding to remove the word "game" from its website, replacing it with "experience" in an effort to comply with Apple's app store policies.
- Apple defended its curation of content on the iOS app store, a restriction that had previously prevented cloud gaming services like GeForce Now or Google Stadia from offering a direct app on the iOS store, as each game would require approval by Apple under Apple's rules but would allow for these services to be offered through a progressive web application run through Safari or Chrome. Apple pointed to the recent addition of itch.io, an indie game storefront, to the Epic Game Store, stating that as itch.io lacked any type of moderation of content, this had allowed the Epic Game Store to effectively include a large amount of mature and adult content that was otherwise disallowed by Epic's own store guidelines, while Apple's policies require moderation of app-by-app content to prevent such a situation. Epic pointed out that it only distributed the itch.io client and was not responsible for any of the games that the client itself distributed or sold.
- Apple's anti-steering policies, which prevent any app from directing or informing its users to a different storefront outside of Apple's iOS one to make purchases, were brought into question as related to potential antitrust charges. Anti-steering policies had been deemed acceptable in practice in the 2018 U.S. Supreme Court case Ohio v. American Express Co. as long as no harm was shown to either side of the two-sided market in considering the absence of anti-steering policies. Epic attempted to argue that with Apple banned developers from directing users to alternative payment systems and storefronts, they were taking a larger share of app revenues, and thus that these anti-steering provisions should be eliminated from Apple's policies.
During the trial, a number of documents that were part of evidence collected by Epic and Apple were made public during proceedings, some containing confidential information related to third parties. Some of these documents were meant to be sealed but were instead misplaced into online public court records, and revealed some of the past inner workings of the video game industry, in addition to details on Epic's financials related to the Epic Game Store. This included Epic previously approaching Sony Interactive Entertainment in early 2018 to try to convince them to allow for cross-platform play on the PlayStation consoles, Epic approaching Microsoft to try to get them to allow free-to-play games to be played on the Xbox consoles without the need for an Xbox Live Gold paid subscription, and an unannounced game streaming service planned by Walmart. Judge Rogers took steps after the second day to try to make sure that appropriately sealed documents were kept out of the online public records.
Companies like Facebook, Spotify, and the Match Group supported Epic Games in their lawsuit and spoke of their own past issues with Apple's App Store policies related to their services. Digital Content Next, a non-profit trade group representing media outlets like The New York Times and The Wall Street Journal, also backed Epic's suit, asserting among other issues that Apple has given out uniquely favorable deals to some providers like Amazon but not to others.
After the initial ban, some users attempted to auction iPhones with Fortnite still installed with prices as high as tens of thousands of dollars. By the time the game was actually removed from the App Store, it did not surprise many users as most people were anticipating it from the beginning and it seemed that many players purely jumped "on board for the memes", according to Polygon. In September 2020, Epic Games, together with thirteen other companies launched the Coalition for App Fairness, which aims for better conditions for the inclusion of apps in the app stores.
On October 8, 2020, Microsoft announced a commitment to ten fairness principles in the operation of its Microsoft Store on Windows 10, which included promises of transparency over its guidelines, not blocking competing app stores from being used on Windows, and not removing apps from the store based on their business model, how they handle payments, or how their services are delivered.
In December 2020, Apple announced that they would be lowering the revenue cut Apple takes for app developers making $1M or less from 30% to 15% if app developers fill out an application for the lowered revenue cut.
Epic Games v. GoogleEdit
The events and initial actions on Epic's lawsuit against Google were brought on the same day as Epic's suit against Apple, but Google stressed the legal situation around their case is far different. Google asserted that the Android operating system does not have the same single storefront restriction as Apple's iOS, and thus allows different Android phone manufacturers to bundle different storefronts and apps as they desire. Google said they are negotiating with Epic Games far differently from Apple in their case.
Following a lawsuit filed by 36 states and the District of Columbia over antitrust violations related to the Play Store in early July 2021, Epic amended its claim in the Google suit later that month to reflect information supporting the states' case. Epic specifically focused on Google's actions when Epic had started working with Samsung to offer Fortnite through their own storefront, with evidence from the states that corroborated anti-competitive behavior.
In December 2020, Epic Games filed separate complaints against Apple and Google in the United Kingdom's Competition Appeal Tribunal related to the companies' anticompetitive behavior in both the UK and European Union, with similar charges as Epic asserted in their U.S. cases. They have also launched legal action in Australia, and the European Union. On February 22, 2021, the Competition Appeal Tribunal rejected Epic's lawsuit against Apple in the UK however allowed their lawsuit against Google to proceed. Epic Games later released a statement stating that they would reconsider pursuing their lawsuit against Apple in the UK following the resolution of the US lawsuit while also stated that they were "pleased" with the tribunal's decision regarding their case against Google.
Epic also filed similar charges against Apple in Australia. On April 9, 2021, Judge Nye Perram ordered a 3 month stay on Epic's lawsuit against Apple in Australia while stating that the stay would become permanent in the event Epic does not file in the U.S. but under the Australian Consumer Law within that time frame. Epic appealed Judge Perram's ruling, which was granted in a ruling in July 2021, allowing its case in Australia to go forward.
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