In September 2020, we discussed the Epic Games vs. Apple (and Google) case in our blog post. To cut a long story short, Epic Games introduced a new payment system for its best-selling mobile game, Fortnite, offering an alternative in-app purchase method. The new payment system bypasses the 30 % platform fee which Apple or Google receives when gamers make in-app purchases, allowing Epic to drop the prices for the players. Not surprisingly both Apple and Google strongly disliked the update. They claimed that the new system violated the App Store and Google Play terms of service and removed Fortnite from their platforms for good. Epic struck back by filing antitrust lawsuit against Apple and Google in the US.
Now, the situation has escalated even further as Epic has continued to file cases against Apple and Google around the world.
Chapter 1 – The US
During a preliminary hearing between Epic and Apple in the US, in September 2020, Epic sought a preliminary injunction against Apple that would have required Apple to bring Fortnite back to the App Store. Eventually the injunction was not granted, meaning that iPhone users will not be able to play Fortnite at least until the end of the trial, unless Epic agrees to remove its payment system (which it, obviously, it is not going to do).
However, Epic did win a temporary restraining order against Apple which prevents Apple from terminating Epic’s developer account or restricting developers’ use of Epic’s Unreal Engine on Apple’s platforms. Apple had previously threatened to ban Unreal Engine development tools, which would have meant ceasing updates for all apps and games developed with Unreal Engine, including third-party apps. Now the injunction prevents Apple from retaliating against Epic at least in this way.
The trial will be held in May, as a bench trial (i.e. without jury), although the federal judge Gonzalez Rogers would have preferred to have a jury decide the case. She did not seem very convinced with regard to Epic’s arguments and claimed that Epic had knowingly breached the App Store’s terms of service and that was a “security issue”.
Individual states in the US have also taken action regarding the app store question. In February, the North Dakota state Senate voted on a bill that would have required app stores to enable developers to use their own payment systems thus avoiding paying fees to Apple and Google. With votes 36 to 11, the bill did not pass, which was a victory for Apple. The Arizona state House of Representatives passed a similar bill this March, which, if adopted, would require platforms to allow app developers as well as users based in Arizona to choose their own payment systems.
Both ND and AZ bills are similar due to the fact that they are both promoted by the Coalition for App Fairness organization, whose members include, in addition to Epic Games, Spotify and ProtonMail, among others.
Chapter 2 – Australia
Epic filed a claim against Apple in Australia last November. On March 11, 2021, Epic announced that it had also taken legal actions against Google in the Australian courts. Epic alleges that Apple and Google have breached the Australian Competition and Consumer Act as well as Australian Consumer Law.
Apple, on the other hand, requested the Australian Federal Court to dismiss the case. Apple based its request on the fact that Epic has made a contractual promise to settle any disputes in the US. The Apple Developer Agreement contains an exclusive jurisdiction clause that prohibits legal action against Apple in any other jurisdiction than in California. As for Epic, the company claims that the Australian competition law should not be overridden by private agreements, and that the case is highly relevant in Australia as it concerns elimination of competition that specifically breaches Australian law.
The Australian Federal Court has temporarily suspended the case for a period of three months, as the trial has already been scheduled in the US. The case will also stay suspended if Epic continues to pursue it in the US, although depending on the outcome, the case could be brought back to the Australian court.
At the same time, the Australian Competition and Consumer Commission (“ACCC“) is already looking into App Store and Play Store policies as a part of the Digital advertising services inquiry it has been conducting. Epic has participated in the inquiry by making a submission. The inquiry is to be completed by the end of August.
Chapter 3 – Europe
In January, Epic expanded the fight to the European continent by submitting a complaint against Apple and Google before the UK’s antitrust tribunal. The tribunal had to consider whether it had jurisdiction to decide on the case as the companies are based in the US. The tribunal gave Epic permission to pursue Google due to the company’s corporate structure and Google’s Irish subsidiaries being involved in the case. On the contrary, Epic was not allowed to go after Apple in the UK, as Apple’s Irish subsidiary was not involved in the case.
However, the tribunal stated that if the US courts do not grant an injunction extending to the UK, the Apple case could be revisited. Thus, Epic will reconsider the Apple case in the UK after the trial in the US.
Meanwhile in the European Union the Fortnite developer has broadened the dispute further by filing an antitrust complaint against Apple to the European Commission in February 2021. In its complaint, Epic claims that Apple has eliminated competition in app distribution and payment processes through its restrictive practices, which gives Apple too much control over developers. Spotify has filed a similar complaint already in 2019 and Telegram in 2020, so the Commission is already investigating App Store policies and restrictions.
Bigger than Epic
Epic has stated multiple times that it is not after monetary compensation. Instead, it is seeking remedies to address practices it claims to be anti-competitive. Epic accuses Apple and Google of running a monopoly that harms gamers and developers alike. The primary target is Apple since the Android platform allows users to download apps directly from the internet and bypass the Play Store ban. However, downloading apps directly from the internet is, according to Epic, difficult and risky.
Apple, on the other hand, claims that any harm caused to Epic is only due to its own actions and that the dispute would be over if Epic stopped breaking the rules. In addition, Apple validates its tight rules by stating that they keep iOS users safe from malware and scams.
As earlier claims made against Apple and the coalition demanding ‘App fairness’ demonstrates, Epic is not the only developer who is unhappy with restrictive platform policies.
Nevertheless, the forthcoming US decision will potentially be a global landmark ruling that will defines the limits of antitrust law with regards to mobile platforms. If Epic wins, it could mean the reshaping of the whole app store ecosystem and how the platforms will function in the future.
The epic battle continues.
Text and additional information:
Juuso Turtiainen, Associate, +358 40 764 8910, [email protected]
Anni Kaarento, Legal Trainee, [email protected]