Epic Games V. Apple
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''Epic Games v. Apple'' is a lawsuit brought by
Epic Games Epic Games, Inc. is an American video game and software developer and publisher based in Cary, North Carolina. The company was founded by Tim Sweeney as Potomac Computer Systems in 1991, originally located in his parents' house in Potomac, M ...
against
Apple An apple is an edible fruit produced by an apple tree (''Malus domestica''). Apple fruit tree, trees are agriculture, cultivated worldwide and are the most widely grown species in the genus ''Malus''. The tree originated in Central Asia, wh ...
in August 2020 in the
United States District Court for the Northern District of California The United States District Court for the Northern District of California (in case citations, N.D. Cal.) is the federal United States district court whose jurisdiction comprises the following counties of California: Alameda, Contra Costa, Del ...
, related to Apple's practices in the
iOS App Store The App Store is an app store platform, developed and maintained by Apple Inc., for mobile apps on its iOS and iPadOS operating systems. The store allows users to browse and download approved apps developed within Apple's iOS Software Deve ...
. 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 ''Fortnite'' is an online video game developed by Epic Games and released in 2017. It is available in three distinct game mode versions that otherwise share the same general gameplay and game engine: ''Fortnite Battle Royale'', a free-to-p ...
'', 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. In a September 2021 ruling in the first part of the case, Judge
Yvonne Gonzalez Rogers Maria Yvonne Gonzalez Rogers (born February 1, 1965) is an American lawyer and jurist serving as a U.S. district judge of the District Court for the Northern District of California. She was previously a California state court judge on the Alamed ...
decided in favor of Apple on nine of ten counts, but found against Apple on its anti-steering policies under the California Unfair Competition Law. Rogers prohibited Apple from stopping developers from informing users of other payment systems within apps. Epic has appealed the ruling. Epic also filed another lawsuit, ''Epic Games v. Google'', the same day, which challenges Google's similar practices on the
Google Play Google Play, also known as the Google Play Store and formerly the Android Market, is a digital distribution service operated and developed by Google. It serves as the official app store for certified devices running on the Android (operating sys ...
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 as around Apple's.


Background

Since 2015, Epic Games' founder and CEO Tim Sweeney had questioned the need for digital storefronts like Valve's
Steam Steam is a substance containing water in the gas phase, and sometimes also an aerosol of liquid water droplets, or air. This may occur due to evaporation or due to boiling, where heat is applied until water reaches the enthalpy of vaporization ...
, Apple's App Store for iOS devices, and Google Play, to take a 30%
revenue sharing Revenue sharing is the distribution of revenue, the total amount of income generated by the sale of goods and services among the stakeholders or contributors. It should not be confused with profit shares, in which scheme only the profit is share ...
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 The Epic Games Store is a digital video game storefront for Microsoft Windows and macOS, operated by Epic Games. It launched in December 2018 as both a website and a standalone launcher, of which the latter is required to download and play gam ...
was to demonstrate that Epic could operate at a lower commission percentage (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 Free-to-play (F2P or FtP) video games are games that give players access to a significant portion of their content without paying or do not require paying to continue playing. Free-to-play is distinct from traditional commercial software, which ...
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
microtransaction Microtransactions, often abbreviated as mtx, are a business model where users can purchase virtual goods with micropayments. Microtransactions are often used in free-to-play games to provide a revenue source for the developers. While microtransact ...
s in the game. However, this resulted in a number of security concerns and numerous unscrupulous
clones Clone or Clones or Cloning or Cloned or The Clone may refer to: Places * Clones, County Fermanagh * Clones, County Monaghan, a town in Ireland Biology * Clone (B-cell), a lymphocyte clone, the massive presence of which may indicate a pathologi ...
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 Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
charges on Big Tech companies, including Google, and during similar investigations of Apple in the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
. Sweeney said in a July ''
CNBC CNBC (formerly Consumer News and Business Channel) is an American basic cable business news channel. It provides business news programming on weekdays from 5:00 a.m. to 7:00 p.m., Eastern Time, while broadcasting talk sho ...
'' 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 Cloud gaming, sometimes called gaming on demand or gaming-as-a-service or game streaming, is a type of online gaming that runs video games on remote servers and streams them directly to a user's device, or more colloquially, playing a game rem ...
services like
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
's
xCloud Xbox Cloud Gaming (formerly known as Project xCloud and colloquially known as xCloud) is Microsoft's Xbox cloud gaming service. Initially released in beta testing in November 2019, the service later launched for subscribers of Xbox Game Pass U ...
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 In science fiction, the "metaverse" is a hypothetical iteration of the Internet as a single, universal, and immersive virtual world that is facilitated by the use of virtual reality (VR) and augmented reality (AR) headsets. In colloquial usage, ...
. The principle they state, taken literally, would rule out all cross-platform ecosystems and games with user created modes: not just xCloud,
Stadia Stadia may refer to: * One of the plurals of stadium, along with "stadiums" * The plural of stadion, an ancient Greek unit of distance, which equals to 600 Greek feet (''podes''). * Stadia (Caria), a town of ancient Caria, now in Turkey * Stadi ...
, and
GeForce NOW GeForce Now (stylized as GeForce NOW) is the brand used by Nvidia for its cloud gaming service. The Nvidia Shield version of GeForce Now, formerly known as Nvidia Grid, launched in Software release life cycle, beta in 2013, with Nvidia official ...
, but also ''Fortnite'', ''
Minecraft ''Minecraft'' is a sandbox game developed by Mojang Studios. The game was created by Markus "Notch" Persson in the Java programming language. Following several early private testing versions, it was first made public in May 2009 before being ...
'', and ''
Roblox ''Roblox'' () is an online game platform and game creation system developed by Roblox Corporation that allows users to program games and play games created by other users. Created by David Baszucki and Erik Cassel in 2004 and released in 20 ...
''." Apple has argued that the 30% cut it takes though In-App Purchases (IAP) "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 action

In an interview with
CNN CNN (Cable News Network) is a multinational cable news channel headquartered in Atlanta, Georgia, U.S. Founded in 1980 by American media proprietor Ted Turner and Reese Schonfeld as a 24-hour cable news channel, and presently owned by ...
, 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. As determined through the course of the trial, Epic initiated "Project Liberty" by first introducing a standard patch to ''Fortnite'' that had to be approved by Apple and Google, but which had secretly contained code that would allow users to be able to purchase the in-game currency, "V-Bucks", directly from Epic. Epic did not make mention of this feature to Apple or Google, so the patch was approved. Then, on August 13, 2020, Epic released a
hotfix A hotfix or quick-fix engineering update (QFE update) is a single, cumulative package that includes information (often in the form of one or more files) that is used to address a problem in a software product (i.e., a software bug). Typically, hot ...
(which did not require prior approval) to the mobile versions, triggering visibility of this purchasing option. At the same time, Epic announced for all platforms that purchases of V-Bucks directly through Epic would be discounted by 20%. For iOS and Android users, Epic cautioned users that 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 of this hotfix going live, 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 The United States District Court for the Northern District of California (in case citations, N.D. Cal.) is the federal United States district court whose jurisdiction comprises the following counties of California: Alameda, Contra Costa, Del ...
. In 2019, Epic retained
Cravath, Swaine & Moore Cravath, Swaine & Moore LLP (known as Cravath) is an American white-shoe law firm with its headquarters in New York City, and an additional office in London. The firm is known for its complex and high profile litigation and mergers & acquisitions ...
and its tandem lawsuits were represented by
Katherine B. Forrest Katherine Bolan Forrest (born February 13, 1964) is a partner at New York law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and a former United States district judge of the United States District Court for the Southern District of New Yor ...
and led by the chair of its
antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
division, Christine A. Varney, former lead of the Antitrust Division of the U.S. Department of Justice under the
Obama administration Barack Obama's tenure as the 44th president of the United States began with his first inauguration on January 20, 2009, and ended on January 20, 2017. A Democrat from Illinois, Obama took office following a decisive victory over Republican ...
. Apple was represented in the suits by
Gibson, Dunn & Crutcher Gibson, Dunn & Crutcher LLP is an American multinational law firm headquartered in Los Angeles, California. Founded in 1890, the firm includes approximately 1,400 attorneys and 1,000 staff located in 20 offices around the world, including North ...
partner Mark Perry. During the suit against Apple, Epic released a video called "Nineteen Eighty-Fortnite", parodying Apple's "
1984 Events January * January 1 – The Bornean Sultanate of Brunei gains full independence from the United Kingdom, having become a British protectorate in 1888. * January 7 – Brunei becomes the sixth member of the Association of Southeast A ...
" 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 The Sherman Antitrust Act of 1890 (, ) is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author. Th ...
and the California Cartwright Act. In its suit against Google, Epic challenged Google's past mantra of "
Don't be evil "Don't be evil" is a phrase that was used in Google's corporate code of conduct, which it also formerly preceded as a motto. Following Google's corporate restructuring under the conglomerate Alphabet Inc. in October 2015, Alphabet took "Do the r ...
" 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. icWe 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 ''The Verge'' is an American technology news website operated by Vox Media, publishing news, feature stories, guidebooks, product reviews, consumer electronics news, and podcasts. The website launched on November 1, 2011, and uses Vox Media' ...
'' 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 Unreal Engine (UE) is a 3D computer graphics game engine developed by Epic Games, first showcased in the 1998 first-person shooter game ''Unreal''. Initially developed for PC first-person shooters, it has since been used in a variety of genres ...
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 Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
, 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 Maria Yvonne Gonzalez Rogers (born February 1, 1965) is an American lawyer and jurist serving as a U.S. district judge of the District Court for the Northern District of California. She was previously a California state court judge on the Alamed ...
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''.


Countersuit

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.


District court


Preliminary hearing

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 Epic conforms to the App Store policy, consistent with Apple's argument that Epic itself had created the situation leading to its removal, but otherwise ready to maintain the restraining order related to the Unreal Engine and Epic's developer accounts. Judge Rogers indicated that she was in favor of a jury trial when the case would be heard, then expected to be 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 argued that the case should be decided by a judge rather than a jury. Judge Rogers agreed, scheduling a bench trial to commence in May 2021. In October 2020, Judge Rogers denied Epic Games' request for a temporary injunction that would 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 could 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 would be Epic's contention that the App Store is unique and its 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 The Xbox network, formerly and still sometimes branded as Xbox Live, is an Internet, online multiplayer video game, multiplayer gaming and digital media delivery service created and operated by Microsoft. It was first made available to the Xbox ...
,
PlayStation Store The PlayStation Store (PS Store) is a digital media store available to users of Sony's PlayStation 3, PlayStation Vita, PlayStation 4 and PlayStation 5 game consoles via the PlayStation Network. The store offers a range of downloadable content ...
or the
Nintendo eShop The Nintendo eShop is a digital distribution service powered by the Nintendo Network for the Wii U and Nintendo 3DS, and by a dedicated online infrastructure for the Nintendo Switch. Launched in June 2011 on the Nintendo 3DS, the eShop was en ...
. 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 , commonly stylized as SONY, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan. As a major technology company, it operates as one of the world's largest manufacturers of consumer and professional ...
,
Nintendo is a Japanese Multinational corporation, multinational video game company headquartered in Kyoto, Japan. It develops video games and video game consoles. Nintendo was founded in 1889 as by craftsman Fusajiro Yamauchi and originally produce ...
and
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
and their video game platforms."


Pre-trial

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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 A valve is a device or natural object that regulates, directs or controls the flow of a fluid (gases, liquids, fluidized solids, or slurries) by opening, closing, or partially obstructing various passageways. Valves are technically fittings ...
related to several hundred games and their sales on
Steam Steam is a substance containing water in the gas phase, and sometimes also an aerosol of liquid water droplets, or air. This may occur due to evaporation or due to boiling, where heat is applied until water reaches the enthalpy of vaporization ...
, 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.


Trial

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 COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
. 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 Cravath, Swaine & Moore LLP (known as Cravath) is an American white-shoe law firm with its headquarters in New York City, and an additional office in London. The firm is known for its complex and high profile litigation and mergers & acquisitions ...
represented Epic Games while
Gibson, Dunn & Crutcher Gibson, Dunn & Crutcher LLP is an American multinational law firm headquartered in Los Angeles, California. Founded in 1890, the firm includes approximately 1,400 attorneys and 1,000 staff located in 20 offices around the world, including North ...
represented Apple. Among aspects covered by the trial included: * Epic Games and Apple discussed whether other apps such as ''
Minecraft ''Minecraft'' is a sandbox game developed by Mojang Studios. The game was created by Markus "Notch" Persson in the Java programming language. Following several early private testing versions, it was first made public in May 2009 before being ...
'' and ''
Roblox ''Roblox'' () is an online game platform and game creation system developed by Roblox Corporation that allows users to program games and play games created by other users. Created by David Baszucki and Erik Cassel in 2004 and released in 20 ...
'' 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 Cloud gaming, sometimes called gaming on demand or gaming-as-a-service or game streaming, is a type of online gaming that runs video games on remote servers and streams them directly to a user's device, or more colloquially, playing a game rem ...
services like
GeForce Now GeForce Now (stylized as GeForce NOW) is the brand used by Nvidia for its cloud gaming service. The Nvidia Shield version of GeForce Now, formerly known as Nvidia Grid, launched in Software release life cycle, beta in 2013, with Nvidia official ...
or
Google Stadia Stadia is a cloud gaming service developed and operated by Google. Known in development as Project Stream, the service debuted through a closed beta in October 2018, and publicly launched in November 2019. The service was to compete with Sony' ...
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 A progressive web application (PWA), commonly known as a progressive web app, is a type of application software delivered through the web, built using common web technologies including HTML, CSS, JavaScript, and WebAssembly. It is intended to wor ...
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 A two-sided market, also called a two-sided network, is an intermediary economic platform having two distinct user groups that provide each other with network benefits. The organization that creates value primarily by enabling direct interactions ...
in considering the absence of anti-steering policies. Epic attempted to argue that with Apple banning 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 Sony Interactive Entertainment (SIE), formerly known as Sony Computer Entertainment (SCE), is a multinational video game industry, video game and digital entertainment company wholly owned by multinational conglomerate Sony. The SIE Group is ma ...
in early 2018 to try to convince them to allow for
cross-platform play In video games with online gaming functionality, also called cross-compatible play, cross-platform play, crossplay, or cross-play describes the ability of players using different video game hardware to play with each other simultaneously. It is c ...
on the
PlayStation is a video gaming brand that consists of five home video game consoles, two handhelds, a media center, and a smartphone, as well as an online service and multiple magazines. The brand is produced by Sony Interactive Entertainment, a divisi ...
consoles; Epic approaching
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
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 The Xbox network, formerly and still sometimes branded as Xbox Live, is an Internet, online multiplayer video game, multiplayer gaming and digital media delivery service created and operated by Microsoft. It was first made available to the Xbox ...
paid subscription; and an unannounced game streaming service planned by
Walmart Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corporation that operates a chain of hypermarkets (also called supercenters), discount department stores, and grocery stores from the United States, headquarter ...
. 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.


Decision

Judge Rogers issued her first ruling on September 10, 2021, which was considered a split decision by law professor
Mark Lemley Mark A. Lemley (born c. 1966) is currently the William H. Neukom Professor of Law at Stanford Law School and the Director of the Stanford Law School Program in Law, Science & Technology, as well as a founding partner of the law firm of Durie Tang ...
. Rogers found in favor of Apple on nine of ten counts brought up against them in the case, including Epic's charges related to Apple's 30% revenue cut and Apple's prohibition against third-party marketplaces on the iOS environment. Rogers did rule against Apple on the final charge related to anti-steering provisions, and issued a permanent injunction that, in 90 days from the ruling, blocked Apple from preventing developers from linking app users to other storefronts from within apps to complete purchases or from collecting information within an app, such as an email, to notify users of these storefronts. In her decision, Rogers identified that the market of concern was neither games (Apple's stance) nor Apple's App Store (Epic's stance) but digital mobile gaming transactions. Rogers identified that the demographics for mobile games was far different from computer or console games, and mobile games most often use the
freemium Freemium, a portmanteau of the words "free" and "premium," is a pricing strategy by which a basic product or service is provided free of charge, but money (a premium) is charged for additional features, services, or virtual (online) or physical (o ...
payment model in which games are offered for free on the App Store but include additional features, such as cosmetic features or power-up bonuses, available for purchase, making this particular market sufficiently different from the overall video game market. Under this market definition, Judge Rogers concluded that Apple was not a monopoly and mostly a
duopoly A duopoly (from Greek δύο, ''duo'' "two" and πωλεῖν, ''polein'' "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market. It is the most commonly studied form of oligopoly due to its simplicit ...
alongside Google, with potential competition to come from
Nintendo is a Japanese Multinational corporation, multinational video game company headquartered in Kyoto, Japan. It develops video games and video game consoles. Nintendo was founded in 1889 as by craftsman Fusajiro Yamauchi and originally produce ...
and
Google Stadia Stadia is a cloud gaming service developed and operated by Google. Known in development as Project Stream, the service debuted through a closed beta in October 2018, and publicly launched in November 2019. The service was to compete with Sony' ...
, and while Apple "enjoys considerable market share of over 55% and extraordinary high profit margins", that type of success was not an illegal monopoly. In this light, Judge Rogers ruled that Epic had failed to show that Apple violated federal or state antitrust laws, but ruled that Apple did violate the California Unfair Competition Law through the anti-competitive behavior of disallowing any mention of other payment systems within apps. In line with Epic's arguments, Rogers identified that some of Apple's practices may be of concern due to the lack of competition in the digital game purchases market, but as having determined that Apple was not a monopoly, could not take immediate action to remedy. Rogers stated that the lack of competition in this area was of concern and that Apple only seemed to be motivated to innovate or change its App Store policies when subject to litigation. Rogers believed that the 30% revenue cut that Apple charges may be "unjustified" relative to the value they offer, but without significant competition to compare alternate schemes, she could not make any direct order on this. Rogers did write that "The point is that a third-party app store could put pressure on Apple to innovate by providing features that Apple has neglected." However, she disagreed with Epic's stance that Apple should not require apps to include the IAP feature for payment features, stating that Apple has a right to take some fee for licensing its intellectual property to developers. Rogers agreed with Apple that there was a valid interest in their policies to require oversight on app approval for the App Store for security purposes, which Epic had argued was used to shut down app approvals. However, Rogers did not fully accept Apple's argument that app review had to be tied directly to app distribution as the only means to prevent malware and other security issues, believing that more app reviewers would help separate these functions within the App Store. Judge Rogers also ruled against Epic, requiring them to pay Apple , 30% of the revenue that was withheld to Apple related to their attempts to bypass the App Store, and further stated that Epic did violate its contractual terms as a developer with Apple in how they deployed the update to ''Fortnite'' in August 2020 that instigated events, such that Apple may block Epic in the future from providing apps to the App Store. Rogers stated that Apple's single offense against California's law was not sufficiently severe to justify Epic's rulebreaking.


Appeals

On the day of Rogers' decision, a representative for Apple stated that "Today the Court has affirmed what we’ve known all along: the App Store is not in violation of antitrust law." However, in October 2021, Apple filed an appeal of the decision, seeking to overturn the preliminary injunction related to anti-steering practices which was due to go into effect in December 2021. Apple claimed the injunction was no longer necessary as they were planning on deleting the anti-steering provisions from their AUP as a result of the settlement from a separate lawsuit, ''Cameron v. Apple'', completed in August 2021. Judge Rogers denied a stay of the injunction related to the anti-steering provisions in November 2021, requiring Apple to comply by December 9, 2021, 90 days from the initial order. The
Ninth Circuit The United States Court of Appeals for the Ninth Circuit (in case citations, 9th Cir.) is the U.S. federal court of appeals that has appellate jurisdiction over the U.S. district courts in the following federal judicial districts: * District ...
issued a stay on the portion of Judge Rogers' order related to provide in-app links to alternate payment systems on December 8, 2021, ruling that Apple had shown likelihood to succeed on their appeal, though the order requiring Apple to allow apps to communicate to users about such payment systems outside of the app was upheld. Epic Games' Sweeney stated that the decision "isn't a win for developers or for consumers", that Epic would not be bringing ''Fortnite'' back to iOS until "Epic can offer in-app payment in fair competition with Apple in-app payment, passing along the savings to consumers", and that they would continue to litigate on this matter. Epic filed notice of its appeal to the
Ninth Circuit The United States Court of Appeals for the Ninth Circuit (in case citations, 9th Cir.) is the U.S. federal court of appeals that has appellate jurisdiction over the U.S. district courts in the following federal judicial districts: * District ...
on September 12, 2021, challenging Judge Rogers' conclusion that Apple was not a monopoly. Following their appeal on September 22, Sweeney stated that Apple had told Epic they would not let ''Fortnite'' back onto the App Store until the completion of all litigation related to the suit, which Sweeney later believed that this particular process would take “a minimum of five years, if not more”, thereby prolonging the lawsuit until 2026. A coalition of 35 states, Microsoft, the
Electronic Frontier Foundation The Electronic Frontier Foundation (EFF) is an international non-profit digital rights group based in San Francisco, California. The foundation was formed on 10 July 1990 by John Gilmore, John Perry Barlow and Mitch Kapor to promote Internet ci ...
, and several other groups filed amicus briefs in support of Epic's position, arguing that Apple held a monopoly and thus that Epic should prevail in its lawsuit. Court hearings for the appeals began on November 14, 2022, in the
Ninth Circuit The United States Court of Appeals for the Ninth Circuit (in case citations, 9th Cir.) is the U.S. federal court of appeals that has appellate jurisdiction over the U.S. district courts in the following federal judicial districts: * District ...
.


Reactions

Companies like
Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin M ...
,
Spotify Spotify (; ) is a proprietary Swedish audio streaming and media services provider founded on 23 April 2006 by Daniel Ek and Martin Lorentzon. It is one of the largest music streaming service providers, with over 456 million monthly active us ...
, and the
Match Group Match Group, Inc. is an American internet and technology company headquartered in Dallas, Texas. It owns and operates the largest global portfolio of popular online dating services including Tinder, Match.com, Meetic, OkCupid, Hinge, PlentyOfFi ...
supported Epic Games in its lawsuit and spoke of their own past issues with Apple's App Store policies related to their services.
Digital Content Next Digital Content Next (DCN) is a nonprofit international trade association for the digital content industry. DCN develops research, holds informational events and provides policy guidance. It was known as the Online Publishers Association (OPA) un ...
, a non-profit trade group representing media outlets like ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' and ''
The Wall Street Journal ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'', also backed Epic's suit, asserting among other issues that Apple has given out uniquely favorable deals to some providers like
Amazon Amazon most often refers to: * Amazons, a tribe of female warriors in Greek mythology * Amazon rainforest, a rainforest covering most of the Amazon basin * Amazon River, in South America * Amazon (company), an American multinational technology c ...
but not to others. After the initial ban, some people attempted to sell mobile iOS devices with ''Fortnite'' still installed for thousands of dollars. When the game was 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 geometry, a polygon () is a plane figure that is described by a finite number of straight line segments connected to form a closed ''polygonal chain'' (or ''polygonal circuit''). The bounded plane region, the bounding circuit, or the two toge ...
''. In September 2020, Epic Games, together with thirteen other companies, launched the
Coalition for App Fairness The Coalition for App Fairness (CAF) is a coalition comprised by companies who aim to reach a fairer deal for the inclusion of their apps into the Apple App Store or the Google Play Store. The organization's executive director is Meghan DiMuzio ...
, which aims for better conditions for the inclusion of apps in the app stores. On October 8, 2020,
Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...
announced a commitment to ten fairness principles in the operation of its
Microsoft Store Microsoft Store (formerly known as Windows Store) is a digital distribution platform operated by Microsoft. It started as an app store for Windows 8 and Windows Server 2012 as the primary means of distributing Universal Windows Platform apps ...
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 An apple is an edible fruit produced by an apple tree (''Malus domestica''). Apple fruit tree, trees are agriculture, cultivated worldwide and are the most widely grown species in the genus ''Malus''. The tree originated in Central Asia, wh ...
announced that it 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. Google''

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 The Samsung Group (or simply Samsung) ( ko, 삼성 ) is a South Korean multinational manufacturing conglomerate headquartered in Samsung Town, Seoul, South Korea. It comprises numerous affiliated businesses, most of them united under the ...
to offer ''Fortnite'' through their own storefront, with evidence from the states that corroborated anti-competitive behavior. Google countersued Epic in October 2021, asserting that by introducing a version of ''Fortnite'' that did not use
Google Play Google Play, also known as the Google Play Store and formerly the Android Market, is a digital distribution service operated and developed by Google. It serves as the official app store for certified devices running on the Android (operating sys ...
's payment systems, Epic had violated their contract with Google, and because this version still exists and can be obtained in other formats outside of Google Play, Epic "has alternatively been unjustly enriched at Google's expense", and seek to recover monetary damages from this version.


Related actions


By Epic Games

In December 2020, Epic Games filed separate complaints against Apple and Google in the United Kingdom's
Competition Appeal Tribunal The Competition Appeal Tribunal (CAT) of the United Kingdom was created by Section 12 and Schedule 2 to the Enterprise Act 2002 which came into force on 1 April 2003. The Competition Service is an executive non-departmental public body which ...
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 The Competition Appeal Tribunal (CAT) of the United Kingdom was created by Section 12 and Schedule 2 to the Enterprise Act 2002 which came into force on 1 April 2003. The Competition Service is an executive non-departmental public body which ...
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 U.S. 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 Nye Perram (born 1969) is an Australian judge. He has been a Judge of the Federal Court of Australia since his appointment in August 2008 at the age of 39. Prior to his appointment, Perram practised as a Senior Counsel in Sydney. Perram was edu ...
ordered a three-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. Epic had acquired
Bandcamp Bandcamp is an American online audio distribution platform founded in 2007 by Oddpost co-founder Ethan Diamond and programmers Shawn Grunberger, Joe Holt and Neal Tucker, with headquarters in Oakland, California, US. On March 2, 2022, Bandcamp ...
in March 2022. Bandcamp allowed music creators to sell music with a 10-15% revenue split, which was kept following Epic's acquisition. Google announced a planned change in its Google Play Store policy that required all apps to use its Play Store payment systems or face removal by June 2022. Bandcamp, supported by Epic, sued Google in April 2022 and sought a preliminary injunction to block this action by Google, arguing that the 30% revenue cut demanded by the Play Store payment system would destroy their financial model. Google responded that they have offered a Media Experience Program that for media apps that provide appropriate integration with Google's services, that they can use a 10% revenue cut through the Play Store instead. By May 2022, an agreement had been arranged that while Epic's suit continues, Bandcamp could continue to use its in-app purchasing system, though they will retain the 10% fee on each sale in
escrow An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacti ...
until the conclusion of the case. Additional filings by Epic assert that Google had paid competitors significant sums of money to dissuade them from making a competition app store to Google Play, with the highest being paid to Activision Blizzard. Epic Games said these payments helped Google to maintain its monopoly on storefronts via Google Play on the Android operating system.


Others

In the United States, forty states filed suit against Google in July 2021 arguing its app store practices, including its 30% revenue cut, were anti-competitive, similar to the factors that Epic sought in its case. Later, in August 2021, Senators
Richard Blumenthal Richard Blumenthal (; born February 13, 1946) is an American lawyer and politician who is the senior United States senator from Connecticut, a seat he has held since 2011. A member of the Democratic Party, he is one of the wealthiest members of ...
,
Marsha Blackburn Mary Marsha Blackburn (née Wedgeworth; born June 6, 1952) is an American politician and businesswoman serving as the senior United States Senate, United States senator from Tennessee, a seat she has held since 2019. She is a member of the Repu ...
, and
Amy Klobuchar Amy Jean Klobuchar ( ; born May 25, 1960) is an American lawyer and politician serving as the senior United States senator from Minnesota, a seat she has held since 2007. A member of the Minnesota Democratic–Farmer–Labor Party (DFL), Minne ...
introduced the
Open App Markets Act The Open App Markets Act (OAMA) is a proposed antitrust bill in the United States Congress. The Senate version of the legislation, S.2710, was introduced on August 11, 2021, by Richard Blumenthal ( D- CT), Amy Klobuchar (D- MN) and Marsha Blackbu ...
bill, which would prevent app stores from forcing developers from exclusively using the app store's payment system. The bill passed out of the Senate committee by February 2022. In August 2021, as part of a settlement to ''Cameron v. Apple'', a similar class-action lawsuit filed by app developers, Apple announced that it would allow developers to collect information within apps such as email addresses from users so that the developers can subsequently tell customers about ways to pay outside of the App Store.
South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
passed a law in August 2021 amending their Telecommunications Business Act that required app stores like Apple's and Google's to allow app developers to use alternative payment systems other than the storefront, in addition to giving the government more involvement in mediations over app store issues in conflicts between the operators and developers and users. This was the first such law passed at a national level. Epic asked Apple to allow ''Fortnite'' onto the Korean version of the store due to this policy in September 2021, but Apple rejected this as the law had yet to come into effect.


References

{{Epic Games Apple Inc. litigation Epic Games Google litigation United States lawsuits Fortnite Video game law